WASHINGTON, D.C., March 31, 2026 — The World Bank Group has approved $100 million in financing aimed at bolstering access to credit for Micro, Small, and Medium Enterprises (MSMEs) in El Salvador, a move officials say is critical for job creation and sustainable economic growth. The funding, extended to the Development Bank of the Republic of El Salvador (BANDESAL) with a sovereign guarantee, will be disbursed over five years and focuses on sectors with high potential for employment, including tourism. This initiative comes as El Salvador continues to navigate economic challenges and seeks to strengthen its private sector.
The project, formally titled the Enhanced Financial Intermediation for Jobs Project, isn’t simply about providing loans. It’s designed to address systemic barriers that prevent MSMEs – the backbone of many emerging economies – from accessing the capital they need to expand and create jobs. Approximately 5,000 MSMEs are projected to receive loans through the program, with an anticipated creation of 8,300 novel or improved jobs, and nearly 30 percent of those jobs are expected to be filled by women.
El Salvador’s Minister of Finance, Jerson Posada, emphasized the importance of this collaboration. “This collaboration represents concrete support for expanding credit access to MSMEs, which serve as an engine of employment and growth,” Posada said. “Strengthening their capacity is key to enabling them to expand, formalize, and create quality jobs.” The project’s structure aims to move beyond simply offering funds. it includes a partial credit guarantee facility designed to reduce risk for lenders and encourage greater integration of El Salvador’s MSMEs into global value chains.
Addressing a Critical Gap in Financing
Access to finance remains a significant hurdle for MSMEs globally, and El Salvador is no exception. These businesses often lack the collateral, credit history, or established relationships with financial institutions required to secure traditional loans. This limits their ability to invest in growth, innovate, and compete effectively. The World Bank’s intervention seeks to bridge this gap by providing BANDESAL with a line of credit specifically earmarked for MSME lending.
The project will likewise work to improve financial intermediation – the process by which funds flow from lenders to borrowers. This includes strengthening BANDESAL’s capacity to assess risk, manage loans, and provide technical assistance to MSMEs. A key component is the partial credit guarantee, which essentially acts as insurance for lenders, reducing their exposure to potential losses and encouraging them to extend credit to businesses they might otherwise deem too risky.
Leveraging Private Sector Investment
The World Bank’s involvement isn’t intended to replace private sector lending, but rather to catalyze it. The project is designed to facilitate complementary private capital mobilization, building on the work of the International Finance Corporation (IFC), the World Bank Group’s private sector arm. The IFC focuses on promoting financial inclusion and productive expansion for job creation, and its efforts will complement the Enhanced Financial Intermediation for Jobs Project.
Carine Clert, World Bank Country Manager for El Salvador and Costa Rica, underscored this point. “We reaffirm our commitment to working with the public and private sectors to advance business development that generates more and better jobs,” Clert stated. “This effort seeks to invigorate El Salvador’s economy through an integrated approach to credit access for micro, small, and medium enterprises.”
Focus on Tourism and Beyond
While the project doesn’t restrict lending to specific sectors, tourism is highlighted as an area with significant job-creation potential. El Salvador has been actively promoting tourism in recent years, and increased access to finance could aid small businesses in the tourism sector – such as hotels, restaurants, and tour operators – expand their operations and attract more visitors. However, the funding is available to MSMEs across a range of industries, reflecting the broad-based need for financial support.
The project’s success will depend on effective implementation by BANDESAL and close collaboration with the private sector. Monitoring and evaluation will be crucial to ensure that the funds are reaching the intended beneficiaries and that the project is achieving its objectives. The World Bank will be tracking key indicators, such as the number of loans disbursed, the number of jobs created, and the impact on MSME revenue, and profitability.
The $100 million investment from the International Bank for Reconstruction and Development (IBRD) represents a significant commitment to El Salvador’s economic development. As the project unfolds over the next five years, its impact on the country’s MSME sector and overall job creation will be closely watched. The next major checkpoint will be the release of the first progress report by BANDESAL, scheduled for December 2026, which will detail the initial disbursement of funds and the first set of beneficiaries.
We encourage readers to share their thoughts on this important development and its potential impact on El Salvador’s economy in the comments below.
