Liberia is one of the lowest-income countries in Africa and most of the labor force is employed in the informal economy, in smallholder farming, itinerant mining, and daily commerce. While Liberia has a large and growing base of small and medium enterprises that are a promising source of jobs and opportunity, many of these businesses lack sufficient capital to make long-term investments. Because Liberia’s banking sector lacks consistent access to long-term capital, most small business loans have tenors of less than 18 months which makes it difficult to make the investment needed to recover from a series of challenges including a prolonged civil war, Ebola, and more recently, COVID-19.
Solution and Impact
DFC financing is helping Liberia’s oldest bank, International Bank of Liberia Ltd., increase lending to its growing base of SME clients. DFC’s commitment of $20 million in financing extends an existing partnership with the bank, which previously used $20 million in financing from DFC’s predecessor, the Overseas Private Investment Corporation, to provide loans ranging from $500,000 to $3 million with tenors of up to three years to a group of SME borrowers in key industries including food value chains, logistics, and manufacturing.
This latest financing will enable the bank to continue to support the country’s small and medium enterprises that will play a pivotal role in the country’s economic recovery. The bank plans to focus its lending with tenors of up to five years on sectors including construction, services, manufacturing, import/export, fishing, and transportation, many of which were directly impacted by the COVID pandemic and need near-term liquidity. As part of the loan agreement, International Bank of Liberia will also plan to increase lending to women and other underserved communities including people living in rural areas.
In addition to expanding lending to the businesses that form the backbone of Liberia’s economy, the project will also support a local bank that has women in senior management, advancing two core DFC goals — to support more local businesses in the host countries where DFC invests, and to support businesses that are owned by and managed by women. Women comprise three-quarters of the bank’s senior management.