$ US 6 Million available for MSMEs’ loan
By Jerromie S. Walters
Mid-Wednesday, Wednesday, May 29, 2024, the Central Bank of Liberia held the signing ceremony for Participating Agreements for three financial institutions who will participate in a World Bank Line of Credit (LOC) under the LIFT (Liberia Investment Finance and Trade) Project in the tune of US$6 million to lend to eligible SMEs.
Authorities of the Central Bank of Liberia say the project endeavors to promote access to sustainable finance for Micro, Small, and Medium Enterprises (MSMEs) in Liberia. They were explicit about the three financial institutions ensuring that the project reflects on Liberian businesses (50 percent women inclusion), as it (LIFT project) is part of strives by this administration to actualize President Joseph Boakai’s ARREST Agenda.
Participating financial institutions of the World Bank Line of Credit (LOC) under the LIFT (Liberia Investment Finance and Trade) Project are Afriland Bank, Citi Trust Microfinance Company Limited, and the Liberia Enterprise Development Finance Company (LEDFC).
The signing ceremony took place at the Central Bank of Liberia (CBL) Board Room in central Monrovia, among Mr. Amin Modad, Minister of Commerce / Chair of the National Project Steering Committee (NPSC) – LIFT Project, Mr. J. Aloysious Tarlue, Jr. Executive Governor / Co-Chair NPSC, Heads of the various financial institutions along with their witnesses.
Earlier at the signing ceremony, Jay Gbleh-bo Brow, Head, Development Finance Section Central Bank of Liberia informed his audience that the Line of Credit (LOC) is part of the broader package of interventions under the World Bank-funded LIFT Project.
According to him, the LOC will provide lines of credit to participating financial institutions (PFIs) to the tune of US$6 million to lend to eligible SMEs, with an additional US$1 million allocated for technical assistance. The specific objective of the MSME Lending Scheme is to improve access to finance for underserved MSMEs through capacity building of selected financial institutions.
J. Aloysious Tarlue, Jr. Executive Governor of the Central Bank of Liberia Co-Chair NPSC, is of the opinion that the project will have an apt impact on President Boakai ARREST Agenda. “The President has an ambitious agenda and this project will have a great impact on the ARREST Agenda.”
He hailed the Commerce Ministry and World Bank for the initial 2.5 million of the six million available, to jumpstart the process. He anticipates that the process goes well, to enable the World Bank to do more. “Let the money go to women and I like the fact that it is not Monrovia-centric and it’s going to the dual areas and I’m happy that Mr. Modad and the World Bank were smart enough to give the 2.5 million for now as a test case.”
The Liberian Central Bank Governor believes Liberia needs an improved data tracking system, to follow the flow of funds where necessary. This is because he said since his ascendancy as Governor of the Central Bank of Liberia, the Bank has run several microfinance schemes that have ended up badly especially when it’s time to have the loans paid back. He anticipates that this will go well and reflect on Liberian businesses.
Like Governor Tarlue, Amin Modad, Minister of Commerce / Chair of the National Project Steering Committee (NPSC) – LIFT Project, applauded the financial institutions. for their participation in the process. Minister Modad rallied the financial institutions to appreciate the World Bank for the project and encouraged them to use it as an opportunity to strengthen the Liberian private sector.
He said, “I encourage you to use this as an opportunity to strengthen the Liberian private sector. The primary objective of this funding is not to empower commercial banks or the financial institutions. We believe the primary objective is to lift our people and empower them toward sustainable economic development.”
The Liberian Commerce Minister stressed: “Its a real honor to be participating at the end of what seemed to be a long journey predating my leadership at the Ministry of Commerce comes at a very critical point for this administration, where we are fomenting an aggressive agenda to lift the private sector to develop our economy and our under the President’s ARREST agenda, the private sector is a critical bedrock for our entire agenda.”
In a remark at the signing ceremony, World Bank Liberia Country Manager Georgia Wallen commended the Government of Liberia and selected financial institutions for their participation in the Line of Credit program under the Liberia Investment, Finance and Trade (LIFT) Project. She referenced the importance of SMEs in the economy and emphasized their role in job creation and economic diversification.
Madam Wallen noted that access to affordable finance is a key constraint for businesses in Liberia, and the Line of Credit program seeks to address this challenge by providing financial institutions with the resources to lend to SMEs.
In addition to the $6 million facility, with $2.5 million allocated in the agreements signed that day, she said the LIFT Project will also focus on capacity building for financial institutions, improving credit reference systems, and providing technical assistance to SMEs. Wallen stressed the importance of proper use and timely repayment of loans by SMEs for the sustainability of the facility.
The World Bank Liberia Country Manager thanked the participating financial institutions, Afriland Bank, Citi Trust Microfinance Company Limited, and the Liberia Enterprise Development Finance Company (LEDFC), for their partnership and commitment to serving SMEs. Madam Wallen also recognized the efforts of the Central Bank of Liberia and the Ministry of Commerce and Industry in making the program a reality. She reaffirmed the World Bank’s commitment to supporting Liberia in addressing development challenges and creating a better future for all.
Meanwhile, benefiting entities see the Line of Credit (LOC) under the LIFT (Liberia Investment Finance and Trade) Project as a departure from conventional lending. They believe It’s crucial for the Liberian economy.
Also, the financial institutions vowed to meticulously manage and ensure that the relevant reports are made. As the project requires, they assured to adhere to the 50 percent women inclusion. They are also looking forward to more opportunities to uplift Liberian businesses.
Key principles and design features of the LOC include loan amounts allocated during the due diligence process, interest rates based on market conditions plus a one percentage point markup, maturity periods of up to five years for PFIs and MSMEs, collateral requirements, geographic coverage across all regions of Liberia, and a focus on women-led or owned MSMEs.
Implementation arrangements involve the National Project Steering Committee providing oversight, the Central Bank of Liberia serving as the Apex to administer the scheme, and the Project Financial Management Unit managing day-to-day financial operations. The next steps include transferring funds to LOC accounts, processing disbursement requests from PFIs, monitoring disbursements, facilitating capacity-building support, and strengthening the implementation of the LOC.
The LOC aims to establish a permanent development financing vehicle based on market principles, target MSMEs managed or owned by women entrepreneurs, and encourage long-term financing by providing loans with favorable terms. By providing technical assistance and training, the project will help improve PFIs’ loan delivery systems and risk management, and support innovative products for MSMEs. Ultimately, the MSME Lending Scheme is expected to contribute to more affordable and sustainable rates of interest on loans for MSMEs in Liberia.
