Support for financing and competitiveness of SMEs in northern Peru

The Andean Development Corporation (CAF) announced a set of activities to support the financing and competitiveness of small- and medium-sized enterprises (SMEs) in northern Peru.

In a ceremony in the consistorial room of Trujillo Municipality, CAF representative in Peru Germán Jaramillo explained the objectives and support activities that the multilateral lender offers, backed by joint efforts to strengthen productive decentralization in the country.

The CAF signed two agreements: a line of credit for US$500,000 in favor of the Trujillo Savings and Loan (Caja Municipal de Ahorro y Crédito, CMAC), and non-reimbursable technical cooperation for US$50,000 to promote business networks in the north of Peru with the support of the MINKA, NGO.

Line of credit for savings bank

Jaramillo explained that the decision to grant of a line of credit for US$500,000 considered the fact that the CMAC is the third largest municipal savings bank in the country and the largest non-banking institution in the region in deposits and placements. The institution also has some of the best indicators of asset quality, profitability and reserves in the municipal savings bank system, as well as one of the best executive and management teams, he added.

The CAF representative said that the Corporation’s support for the activity of microfinancing entities in the south of the country was also taken into account in the decision which was an excellent opportunity to start a presence in northern Peru. The savings bank will use the approved line of credit to help the growth of SMEs in the region.

Business networks in northern Peru

The non-reimbursable technical cooperation is part of the strategy that the CAF is implementing through its Andean Competitiveness Program (PAC). The purpose of the operation, Jaramillo said, is to promote business networks in the north of Peru, and to develop an assistance plan for productive conglomerates in four localities in the region, efficiently linking and associating them.

The SMEs can now take joint action to find markets, develop products, cut costs and implement innovations, overcoming obstacles that are insurmountable for individual companies, especially the challenge of exporting.

Jaramillo said that the technical cooperation provided by the PAC will serve as seed capital for starting the project in localities where there is a critical mass of enterprises with potential: shoe industry in Trujillo, ceramics in Chulucanas, dairy products in Cajamarca and vegetables in Lambayeque. The idea is to organize these firms into networks to achieve tangible results: 30% increase in annual sales, 10% cost cuts, and creation of 200 jobs.

The CAF representative said that the many experiences in Latin America reveal enormous potential for business linkage. MINKA, NGO with experience in promoting associativity, will execute the project and act as linking unit for work with local counterparts in each locality. The linkage also extends to the formation of strategic alliances with leading local organizations to ensure support and integration into the economic activity of the region.