Africa-Press – Liberia. The government, through the Ministry of Commerce, Central Bank of Liberia, Afriland Bank, Citi Trust, and the Liberian Enterprise Development Finance Company (LEDFC), signed the participating agreements for a Line of Credit (LOC) under the World Bank Liberia Investment Finance and Trade (LIFT) Project.
Jay Gbleh-bo Brown, Head of the Development Finance Section at the CBL, said the project also aims to strengthen the CBL’s ability to implement the scheme through training and advisory services.
“Today marks an important moment as part of concerted efforts to promote access to sustainable finance for Micro, Small, and Medium Enterprises (MSMEs) in Liberia,” Brown stated. “We are delighted to be part of this significant event that ushers in the implementation of the LOC under the LIFT project.”
According to him, the LOC is a key component of the World Bank-funded LIFT Project, which aims to support an MSME lending scheme.
“This scheme, he said, will provide US$6 million to participating financial institutions (PFIs) for on-lending to eligible SMEs, alongside an additional US$1 million for technical assistance to PFIs and the CBL.”
Funding sources for the LOC include government funds, donor contributions, grants, loan repayments, interest on loans, and other related sources.
Brown, who provided the overview, explained that the MSME Lending Scheme’s primary goals are to improve access to finance by building the capacities of selected financial institutions, providing sub-loans to MSMEs on sustainable terms, and enhancing the capacities of local financial institutions to lend profitably to MSMEs.
“The Line of Credit is designed to support MSMEs across all regions of Liberia, not just urban areas. Loans will be in US dollars, Liberian dollars, or both, based on the cash flows of the proposed portfolio. At least 50% of the loans will be on-lent to women-led or women-owned MSMEs,” he said.
“Eligible MSMEs are defined as registered enterprises employing one to fifty adults. The LOC will focus on new loans, with limited refinancing of existing loans.”
Brown detailed the structure of the loans: for PFIs, the repayment period is up to five years, including a one-year grace period. For MSMEs, the loans will have a duration of between 15 months and five years, including a grace period of up to one year.
PFIs will use sub-loans as collateral, with banks’ balances at the CBL serving as security. MSMEs will provide collateral in line with the lending policies of PFIs.
The National Project Steering Committee (NPSC) will provide strategic direction and oversight for the LOC component. The CBL, acting as the apex institution, will handle the administration of the MSME Lending Scheme, including disbursement projections, technical training coordination, and reporting on portfolio performance.
The Project Financial Management Unit (PFMU) at the Ministry of Finance and Development Planning will manage day-to-day financial operations.
Significant milestones achieved thus far include the completion of a comprehensive LOC Operations Manual, the signing of a Subsidiary Agreement between MFDP and CBL, and the evaluation and due diligence of twelve financial institutions that applied for the LOC.
Next steps involve transferring funds to LOC accounts, processing disbursement requests from PFIs, monitoring disbursements, facilitating allocation decisions on unallocated LOC amounts, and strengthening LOC implementation.
In a special remark, J. Aloysius Tarlue, Executive Governor of the Central Bank of Liberia and Co-chair of the National Project Steering Committee (NPSC), expressed gratitude to the World Bank for their support.
He stressed the importance of ensuring that the funds benefit those in need, particularly single mothers, and affirmed the project’s significance in the context of COVID-19 economic recovery and the President’s ambitious agenda.
Tarlue underscored the need for the project’s success to secure future funding and urged commercial banks to remain sensitive to Liberia’s social and economic conditions while implementing the program.
He emphasized the obligation of beneficiaries to repay the loans, highlighting the project’s focus on empowering SMEs and fostering sustainable economic development.
For his part, Amin Modad, Minister of Commerce and Chair of the National Project Steering Committee, said the signing of the line of credit comes at a very critical point for the Joseph Nyuma Boakai administration.
“We are currently formulating an aggressive agenda to boost the private sector and develop our economy,” Minister Modad said.
According to him, under the President’s ARREST agenda, the private sector is a critical bedrock for their entire agenda. “So, this really comes at a good moment and in time.” He further thanked the commercial banks for their participation and financial institutions.
“To the commercial banks, I admonish you to truly appreciate the support from the World Bank and encourage you to use this as an opportunity to strengthen the Liberian private sector.”
He said the primary objective of the funding is not to capacitate the commercial banks or the financial institutions. We believe the primary objective is to lift our people and empower them towards sustainable economic development.
“So, we hope that in this process, as you implement this program, you understand that you are taking the credit risk. We also hope that you will remain sensitive to the social and economic conditions of Liberia at this time,” the Commerce Minister explained.
He cautioned commercial banks that, although they do not want to be discriminatory, he begged them to use the funding as much as possible towards the Liberian private sector in strategic areas in line with the ARREST agenda and national development goals.
“Our focus remains on value addition, self-sustainability, self-sufficiency, and independence. So, I encourage you to be sensitive to our goals and where we are as you begin your risk profiling,” he added.
“To the would-be beneficiaries, please note that this is not a grant; the commercial banks and financial institutions are obligated to be paid back. You must maintain and cultivate a culture of accountability, starting with yourselves. Please pay back this loan.”
Minister Modad concluded: “This is a test for us, as we know that the World Bank has carried out many projects in Liberia, but this is the first time we are directly impacting the small and medium enterprises in the private sector. When you take out these loans, please ensure that you pay them back so that we can help other people in the long run.”
Madam Georgia Wallen, the World Bank Liberia Country Manager, expressed her delight at the signing ceremony of the Participating Agreements between the Government of Liberia and the first three selected financial institutions under the LIFT Project.
She emphasized the significance of this milestone for SMEs across Liberia, highlighting their vital role in the economy as generators of jobs and contributors to GDP.
Wallen commended the joint leadership of the government officials in steering the project to fruition, underscoring the importance of linking SMEs to the financing and support necessary for their growth and scalability.
She reiterated the World Bank’s commitment to addressing the constraint of access to finance for SMEs through the provision of the Line of Credit, which allows for longer loan maturity periods and aims to address underlying factors limiting access to finance.
Wallen emphasized the importance of proper use and timely repayment of loans for the sustainability and credibility of the facility, thanking the participating financial institutions for their partnership and willingness to take on the risk to serve SMEs.
She concluded by acknowledging the efforts of the technical teams at the Central Bank of Liberia and the Ministry of Commerce and Industry, expressing confidence in their commitment to project implementation.
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