Government Creates Fund to Aid Small
And Medium Businesses Seeking Credit
By Fabián Borges
fborges@ticotimes.net

President Abel Pacheco yesterday signed a decree creating a ¢9 billion ($21.4 million) fund to provide credit assistance to small and medium businesses that lack the requirements needed to obtain credit from state-owned banks.

"This is one of the most sustainable ways to combat and reduce poverty because it permits the generation of jobs, activates the economy, increases national production and increases the number of goods and services the country offers for sale on the local and foreign markets," Pacheco said.

The fund is part of ongoing efforts by the Economy, Industry and Commerce Ministry (MEIC) to provide assistance for the country's small and medium businesses with the goal of making them more competitive and able to survive and thrive in an increasingly globalized marketplace (TT, Dec. 19, 2003).

MEIC estimates there are approximately 74,000 small and medium businesses in Costa Rica that employ more than 400,000 workers. About 98% of Costa Rican businesses are small or medium-sized, and 46% of these businesses export part of their products abroad.

"The fund will provide credit to small and medium businesses that meet two basic conditions," explained Gilberto Barrantes, Minister of Economy, Industry and Commerce. "First, they must not be eligible to receive credit from government-owned banks, because they lack the guarantees necessary to be awarded a loan. Second, they must offer viable projects that create jobs, innovate and increase production."

The fund will be financed using 0.25% of the 1% tax all employers must transfer from the salaries of their employees as part of the Worker Protection Law. The fund's money will not be used to provide direct credit for businesses, but rather as collateral businesses will be able to use to request credit from any of the state-owned banks.

Loans will be equal to an amount of up to 50% of a business' operating costs or ¢30 million ($71,400). Interest rates on loan payments will be defined according to the length of time during which the money will be lent, the type of activity the business engages in and the risks involved.

"The fund's goal is to provide a financial push for small and medium businesses that needed it to be able to grow and contribute the country's economic and social development," Barrantes explained. "The small and medium business sector is fundamental for the democratization of the economy and quality of life of Costa Ricans. The fund constitutes another step towards providing them with integral attention."

During the signing, Barrantes expressed his commitment to reforming and modernizing the ministry. Through the reforms, he aims to transform MEIC into an institution geared toward assisting small and medium businesses, protecting consumers and making the country more competitive through the simplification and reduction of unnecessary administrative procedures.

"The reforms will guarantee MEIC offers services that match the real needs of small and medium businesses in the areas of training, technical assistance, design and marketing of products," he concluded.