Tuesday Jun 19, 2007
(AXcess News) Houston - U.S. Treasury Secretary Henry Paulson announced today a three-part plan to provide the ways and means to encourage market-based bank lending to small businesses in Latin America based on a directive from President Bush earlier this year.
"A thriving small business community can reduce poverty and inequality, as well as create jobs," said Paulson. "We want to help Latin American countries create the same mobility for their citizens."
The first two elements of the Treasury Department's plan will provide support to banks willing to commit to specific and ambitious targets for small business lending. The third will address the regulatory environment.
"It's in our interest that businesses flourish in our own neighborhood," Bush said. "Flourishing business will provide jobs for people at home."
The President said March 5, 2007 that he was directing Secretary of State Condoleezza Rice and U.S. Treasury Secretary Henry Paulson to develop a new initiative that will help U.S. and local banks improve their ability to extend good loans to small businesses in Latin America .
The Treasury Department said it will introduce new lending models that fit the unique characteristics of smaller firms. One key barrier to credit is that banks lack information about, and experience with, smaller companies, Paulson explained. Banks are often more comfortable lending to larger companies that have collateral, formal financial statements and documentation. Small companies may not yet have these resources.
"Banks need the tools necessary to assess the value and risk of these smaller companies," said Paulson. "We will promote the spread of new lending models that fit the unique characteristics of smaller companies. We will help banks build capacity to quickly and accurately assess the credit quality of small companies."
Subject to approval from its donor committee, the Inter-American Development Bank's Multilateral Investment Fund (MIF) will engage with selected interested and eligible banks to provide tailored technical assistance to work with banks to expand small business lending.
The MIF is offering $1 million per bank for training, software and computer equipment, credit scoring systems, and other relevant assistance required to implement a successful small business lending program and minimize per-loan costs. The anuual MIF budget for the program is $10 million and will extend over a five-year term, the Treasury Department said.
The Overseas Private Investment Corporation (OPIC), the U.S. government agency responsible for promoting social and economic development by mobilizing U.S. private capital, will offer risk-sharing guarantees and loans to eligible banks to extend/catalyze their financing activity for small and medium-sized businesses in the region.
A bond guarantee program will also be instituted to provide smaller banks with a means of raising the matching capital needed to make these small business loans, the Treasury Department explained.
A total of $150 million will be allogated to guaranteeing these bond financings by OPIC.
Paulson said the Treasury Department realized that many of these small Latin American banks lack uniform regulations and so his office plans on introducing best practice regulatory models that ensure prudentially sound lending while avoiding requirements more suited to lending to larger firms.
In plain speak, what Paulson outlined was that the loans are participatory by the Latin American banks, that they will have a way of raising their matching funds through OPIC guarantees and that the banks must use the software and lending practices instituted by the U.S. Treasury under this program if they expect to receive the loan guarantees and participation as a means of managing the overall program while avoiding fraud.
Source:
http://www.axcessnews.com/index.php/articles/show/id/11252
|
