News from 2021-08-27 / KfW Development Bank
Supporting small businesses during and after the Corona pandemic
The Corona pandemic has affected the economies of many poorer countries - including Côte d'Ivoire, where the repeated restrictions on public life caused businesses to lose orders and suffer a drop in sales. And for the most part, costs remained the same. Small businesses in Côte d'Ivoire, most of which have no financial reserves, were and are particularly affected. They are now struggling with liquidity bottlenecks, can no longer guarantee employment for their staff - and some even have to give up completely.
In order to curb this downward spiral, KfW is supporting the Ivorian national Corona aid programme on behalf of the German federal government. Among other instruments, the programme includes four funds by means of which the Ivorian government hopes to mitigate the economic and social consequences of the crisis. One example is the COVID-19 Fund for small and medium-sized enterprises, which provides access to funding and liquidity for these businesses to bridge the bottleneck and avoid a major wave of insolvencies that would lead to further cuts and greater unemployment.
To support this fund, KfW provides EUR 30 million as budget financing. The contract for this was concluded between KfW and the local Ministry of Finance in mid-August. The funds will first flow into the Ivorian budget, where they will be subject to the general procedures of state budget control, and from there into the SME COVID-19 Fund, which is to reach a total of around EUR 230 million and will also be fed from international sources due to a growing budget deficit caused by the Corona pandemic.
In particular, the support is being granted within the framework of the so-called reform partnership between Germany and Côte d'Ivoire, which was concluded in 2017 and aims to improve the basic conditions for private-sector involvement and to create jobs and income.
Response to the crisis and impetus for the economy
The SME Fund supports enterprises and self-employed persons with an annual turnover of up to EUR 1.5 million who suffer from liquidity problems during the crisis. This is done through the direct granting of loans and subsidies, but also through partial guarantees for loans from commercial banks to enterprises and, finally, as refinancing of microfinance institutions that grant loans to micro and small enterprises and self-employed persons. In this way, a total of 600 businesses are to be supported and maintained and 6,000 jobs directly secured. In addition, the programme also has indirect positive effects, because the aid provides security for the households and families involved.
On the one hand, the fund is intended as a response to the crisis, but on the other hand, it is also meant to promote the recovery of the economy after Corona. According to the Ivorian Ministry of Finance, the fund serves to "provide SMEs with the necessary support to maintain their means of production and resume their activities in the post-COVID environment". Germany is thus helping to mitigate the crisis and accompany the subsequent economic recovery.
KfW portfolio manager Esther Drumm, who is in charge of the project, described the SME fund as an important instrument to keep economic activity going in Côte d'Ivoire and to reduce the social impact on the population. "The German contribution fits in with Côte d'Ivoire's Corona programme and matches the ambition of our reform partnership with the country."