The International Finance Corporation (IFC) and Burundi's Banque de Crédit de Bujumbura (BCB) have announced a partnership to boost trade and growth by expanding access to financing for thousands of micro-businesses and small and medium-sized enterprises (SMEs) in the country, including informal businesses.

The private sector arm of the World Bank Group is providing a loan, half of which is mobilised from institutional investors, alongside a trade financing facility through the IFC's Global Trade Finance Program (GTFP), which can offer letter of credit (L/C) confirming banks cover against payment risk on banks in emerging markets.

Growing SME portfolio

IFC is providing BCB with a US$20 million loan, of which US$10 million is mobilised from institutional investors, to support the third largest bank in Burundi's strategy to significantly grow its SME portfolio.

The bank aims to be the leading bank serving small and informal businesses in Burundi, where micro-businesses and SMEs represent over 90 per cent of firms in the country.

GTFP benefits

IFC is also providing a trade financing facility through its GTFP for US$5 million to increase access to international trade financing for local exporters and importers.

The GTFP facility offers confirming banks partial or full guarantees covering payment risk on banks in emerging markets for trade related transactions.

These guarantees are transaction-specific and may be evidenced by a variety of underlying instruments, including L/Cs, trade-related promissory notes, accepted drafts, bills of exchange, guarantees, bid and performance bonds and advance payment guarantees.

Partnership aims

The IFC's partnership with BCB aims to help bridge the large financing gap in Burundi and provide smaller businesses with better access to the funding they need to grow and create jobs.

The IFC-managed SME Finance Forum estimates that the financing gap for Burundi's micro-businesses and SMEs is approximately US$491 million, equivalent to about 16 per cent of the country's GDP.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.