Challenge
As one of the largest and fastest-growing economies in the Caribbean, the Dominican Republic is key to regional stability, but faces many challenges in unleashing its full potential. Almost one-quarter of its population lives below the poverty line, and that rate is even higher in the Southwest corridor region near the Haitian border. Hundreds of thousands of people work in micro, small, and medium-sized enterprises (MSMEs) that lack access to financing, and women are particularly challenged. The World Economic Forum estimates that women own fewer than 5 percent of the country’s MSMEs. The impacts of climate change represent another challenge. World Bank research shows the Dominican Republic is highly vulnerable to changes such as rising temperatures and forest degradation, along with flooding from hurricanes, all which threaten to reduce crop yields and water supplies.
Solution and Impact
A $42 million DFC loan portfolio guaranty in collaboration with USAID/Dominican Republic will help the country’s largest bank, increase small business lending with a focus on some of the country’s most urgent lending needs, including women-owned MSMEs, women micro-entrepreneurs in the Southwest corridor, and green loans.
The guaranty will cover up to 70 percent of the bank’s losses for women micro-entrepreneurs in the Southwest corridor to help address a greater perceived risk of lending in the region. Banreservas has the largest branch network and geographic reach of banks in the country and has a specific interest in expanding its microfinance portfolio. The DFC guaranty is expected to support loans to an estimated 3,500 MSMEs with an average loan size of less than $5,000. The DFC guaranty will advance many goals of the Americas Partnership for Economic Prosperity (APEP) that President Biden announced in 2022 to tackle economic inequality and foster regional economic integration.
During the inaugural APEP Leaders’ Summit in 2023, President Biden announced several initiatives to bolster regional competitiveness and mobilize quality investment. DFC and the Inter-American Development Bank will establish a joint investment platform to channel financing for sustainable infrastructure and critical economic sectors, and USAID will establish an Accelerator program to support early-stage entrepreneurs in the Americas with training and access to larger networks. USAID is providing $5 million to catalyze the Americas Partnership Accelerator.