Liberia’s private sector gets a bailout from US$6 million LIFT project initiative

The government, through the Ministry of Trade, the Central Bank of Liberia, Afriland Bank, Citi Trust and the Liberian Enterprise Development Finance Company (LEDFC), has signed Participating Agreements on a Line of Credit (LOC) under the World Bank’s Liberia Investment Financing and Trade (LIFT).

Jay Gbleh-bo Brown, head of the Development Finance Section at CBL, said the project also aims to strengthen CBL’s capacity to implement the program through training and advisory services.

“Today marks an important moment in our collective efforts to promote access to sustainable finance for micro, small and medium-sized enterprises (MSMEs) in Liberia,” Brown said. “We are happy to be part of this important event that kicks off the implementation of LOC as part of the LIFT project.”

According to him, LOC is a key element of the World Bank-funded LIFT project, which aims to support a loan program for small and medium-sized enterprises.

“This program, he said, will provide $6 million to participating financial institutions (PFIs) to continue lending to eligible SMEs, as well as an additional $1 million in technical assistance to PFIs and CBLs.”

LOC financing sources include government funds, donor contributions, grants, loan repayments, interest on loans, and other related sources.

Brown, who presented the overview, explained that the main objectives of the MSME Lending Program are to improve access to finance by building the capacity of selected financial institutions, providing subordinated loans to SMEs on sustainable terms and increasing the lending capacity of local financial institutions. profitable for small and medium-sized enterprises.

“The line of credit aims to support small and medium-sized enterprises in all regions of Liberia, not just urban areas. Loans will be made in US dollars, Liberian dollars or both, depending on the cash flow of the proposed portfolio. At least 50% of the loans will be lent to small and medium enterprises led or owned by women,” he said.

‘Eligible SMEs are defined as registered enterprises employing between one and fifty adults. LOC will focus on new loans, with limited refinancing of existing loans.

Brown detailed the structure of the loans: For PFI, the repayment period is up to five years, including a one-year grace period on repayment. In the case of small and medium-sized enterprises, loans will be granted for a period of 15 months to five years, with a grace period of up to one year.

The PFIs will use subordinated loans as collateral and the banks’ CBL balances will serve as collateral. SMEs will provide security in line with PFI’s lending policy.

The National Project Steering Committee (NPSC) will provide strategic direction and oversight of the LOC component. CBL, in its role as parent institution, will administer the MSME lending program, including disbursement forecasts, technical training coordination and portfolio performance reporting.

The Project Financial Management Unit (PFMU) in the Ministry of Finance and Development Planning will manage day-to-day financial operations.

Significant milestones achieved to date include the completion of a comprehensive LOC operational manual, the signing of a subsidiary agreement between MFDP and CBL, and the evaluation and due diligence of twelve financial institutions that have submitted an LOC application.

The next steps include transferring funds to LOC accounts, processing PFI withdrawal requests, monitoring withdrawals, 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 its support.

He stressed the importance of ensuring that funds reach those in need, in particular single mothers, and confirmed the importance of the project in the context of the economic recovery related to the Covid-19 pandemic and the president’s ambitious agenda.

Tarlue stressed the need for the project to be successful to secure future financing and urged commercial banks to remain sensitive to Liberia’s social and economic conditions while implementing the program.

He highlighted the beneficiaries’ obligation to repay the loans, stressing that the project focuses on empowering SMEs and supporting sustainable economic development.

For his part, Amin Modad, Minister of Trade and Chairman of the National Project Steering Committee, said that the signing of the credit line comes at a very critical time for the administration of Joseph Nyuma Boakai.

“We are currently formulating an aggressive program to stimulate the private sector and develop our economy,” said Minister Modad.

According to him, in line with the president’s ARREST agenda, the private sector is the key backbone of their entire agenda. “So this really comes at a good time and on time.” He then thanked commercial banks and financial institutions for their participation.

“I urge commercial banks to truly appreciate the World Bank’s support and encourage them to use it as an opportunity to strengthen the Liberian private sector.”

He said the main purpose of financing is not to increase the capacity of commercial banks or financial institutions. We believe that the main goal is to elevate our people and enable them to achieve sustainable economic development.

“We therefore hope that as you implement this program, you will understand in the process that you are taking on credit risk. We also hope that you will remain sensitive to the current social and economic situation in Liberia,” explained the Minister of Trade.

He warned commercial banks that while they do not wish to be discriminatory, he implored them to make maximum use of funds to benefit the Liberian private sector in strategic areas in line with the ARREST program and national development goals.

“Our goal remains to add value, be self-sufficient, self-reliant and independent. Therefore, I encourage you to pay attention to our goals and where we are at when you start risk profiling,” he added.

“Future beneficiaries please remember that this is not a grant; commercial banks and financial institutions are obliged to repay. You must maintain and cultivate a culture of accountability, starting with yourself. Please repay this loan.”

Minister Modad concluded: “This is a test for us because we know that the World Bank has implemented many projects in Liberia, but this is the first time we are directly impacting small and medium-sized enterprises in the private sector. By taking out these loans, we are asking for them to be repaid so that we can help other people in the long run.

Madam Georgia Wallen, World Bank Country Director in Liberia, expressed her delight at the signing ceremony of the Participation Agreements between the Government of Liberia and the first three selected financial institutions under the LIFT project.

She stressed the importance of this milestone for SMEs across Liberia, highlighting their key role in the economy as job creators and contributors to GDP.

Wallen praised the collective leadership of government officials in driving the project to fruition, emphasizing the importance of ensuring SMEs have access to the financing and support necessary for their growth and scalability.

She reiterated the World Bank’s commitment to address constraints to access to finance for SMEs by providing a credit line that enables longer loan maturities and aims to address the underlying factors limiting access to finance.

Wallen stressed the importance of proper utilization 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 risks in serving SMEs.

She concluded by commending the efforts of the technical teams at the Central Bank of Liberia and the Ministry of Trade and Industry, expressing confidence in their commitment to the project.