MIGA Enhances Financing Opportunities for Small Businesses, Housing Sector, and Women in Paraguay

WASHINGTON, D.C., August 22, 2022 — The Multilateral Investment Guarantee Agency (MIGA) of the World Bank Group has issued guarantees to Citibank, N.A. and Commerzbank AG against the risk of non-payment of a loan of up to $100 million to Agencia Financiera de Desarrollo (AFD), a state enterprise owned by the government of Paraguay, for a period of seven years.

The loan to AFD will support the government of Paraguay’s COVID-19 response initiatives aimed at ensuring financing to micro, small, and medium enterprises (MSMEs) and to the housing sector. In addition, AFD will implement a gender action plan to set the foundation for further financing to women-owned MSMEs.

AFD is a government-owned and controlled financial institution that provides long-term financing through financial intermediaries, including banks, non-banking financial institutions, and cooperatives, to support the Paraguayan economy. The agency promotes economic development, job creation, education and vocational training, and social protection with an emphasis on the country’s vulnerable populations, through funding and specialized services to these financial intermediaries.

“With MIGA’s support, AFD will provide access to credit to MSMEs and the housing sector, two priority areas of Paraguay’s economy, which will contribute toward closing the country’s long-term financing gap,” said Hiroshi Matano, MIGA Executive Vice President. “MIGA is pleased that a gender action plan to strengthen credit opportunities for women-owned MSMEs is an important part of this project.”

Access to longer-term housing loans via financial intermediaries is crucial for Paraguay’s economic development. The country has a housing deficit estimated at 1 million people. Currently, housing finance is limited, with mortgage loans accounting for 3.6 percent of total credits of the financial system. The vast majority of the impacted population are middle-income Paraguayans, as 43 percent live in inadequate housing.

In addition, Paraguay has an MSME financing gap estimated at $3.9 billion, 14 percent of gross domestic product as of 2019. This figure is estimated to have increased during the COVID-19 pandemic as a result of financial intermediaries decreasing loan origination and avoiding higher credit risks. Improving access to credit and the productivity of MSMEs is essential for Paraguay. MSMEs are a key driver of economic growth and job creation representing 97 percent of businesses in the country and generating 62 percent of jobs in the economy. 

“Our new charter is the realization of a long-held dream that has today become a reality. This transaction is proof of that. It is an important milestone for AFD for two reasons. It is the first credit operation without a state guarantee and the largest such transaction in the history of our institution. These funds will allow us to finance 16 different credit product lines and to provide support to key sectors such as MSMEs, housing, industry and livestock. Finally, it fills us with pride that we were able to achieve this milestone with the help of reputable international institutions, such as Citibank N.A., Commerzbank AG, and MIGA,” said Teresa de Velilla, President of AFD.

The funds from this loan will enable AFD to help reduce Paraguay’s large overall financing gap and improve competitiveness of the financial sector by providing longer term tenors at a cheaper cost of funds to financial intermediaries.

“With this transaction we continue to reaffirm our support for Paraguay’s public sector, especially the institutions that support the growth and development of the economy such as AFD. This is in line with Citi's global commitment to support operations with sustainable and social projects,” said Antonieta Perez, Chief Country Officer of Citi Paraguay.“With more than 64 years of uninterrupted presence in Paraguay, Citi is a strategic partner for private and public sector clients seeking to generate a social and environmental impact in the community.”

AFD will support access to financing for women and women-owned MSMEs, addressing the gender finance gap in the country. Only 20 percent of MSMEs are women-owned enterprises. Access to finance is challenging for women, as only 29.2 percent have an account in a financial intermediary, compared with 32.9 percent of men. In addition, only 4 percent of women have borrowed from a financial intermediary to start or expand a business, compared to 10 percent of men.

AFD’s gender action plan will include the development of new products or services targeted at women retail clients and/or women-owned MSMEs as well as training to enable gender capacity building and raising organizational gender awareness on financial inclusion for women, while supporting the transfer of gender knowledge among AFD client institutions.

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About MIGA

MIGA was created in 1988 as a member of the World Bank Group to promote foreign direct investment in emerging economies by helping mitigate the risks of restrictions on currency conversion and transfer, breach of contract by governments, expropriation, and war & civil disturbance; and offering credit enhancement to private investors and lenders.

Since its creation, MIGA has issued over $70 billion in guarantees across 122 developing countries.

Contacts:

In Washington:  

Elizabeth Howton, (202) 458-5922, ehowton@worldbankgroup.org

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