Micro, small, and medium enterprises (MSMEs) make up 99 percent of businesses in Ecuador and employ about 60 percent of the formal workforce, or 1.8 million people. Despite their importance to the economy, MSMEs have long faced difficulties accessing finance due to limited financial instruments and interest-rate caps that restrict capital allocation. Political instability and energy crises have further strained credit provision.
A project supported by the World Bank is now in its fifth year of implementation, with two years remaining. The initiative has provided financial access to 24,522 MSMEs—more than three times its original target. According to an impact evaluation, each beneficiary firm created an average of 1.5 new jobs. Firms without previous access to credit saw even greater benefits: they doubled their sales and created an average of 2.5 jobs per company.
The program also helped reduce the gender gap in business growth; both female- and male-led firms experienced similar increases in jobs and sales. Of all beneficiary firms, 59 percent are women-led or women-owned.
The National Finance Corporation (CFN), a development bank in Ecuador, issued 26,169 loans to these MSMEs—a significant rise from just 3,000 firms receiving credit at the project's start in 2020. CFN was awarded a AAA- credit rating by a leading bank rating agency, placing it on par with Ecuador’s largest commercial banks.
As part of broader reforms supported by the World Bank Group (WBG), CFN shifted its mandate to focus solely on second-tier operations and modernized regulations for partial credit guarantees. This change enabled larger banks to participate in the scheme and encouraged more private capital investment in productive sectors.
Institutional changes included amending CFN’s statute through an Executive Decree to confirm its status as a second-tier lender. The organization also completed an Asset Quality Review and suspended all first-tier lending operations.
The project contributed significantly toward WBG targets related to gender equality and job creation: “Gender Equality target: the project benefited 14,410 women-led/owned firms (59% of all beneficiaries). Thanks to the project, these firms grew in terms of sales, assets and employees.” In addition: “Jobs agenda: The project created on average 1.5 new jobs for each beneficiary and 2.5 new jobs among firms that had no previous access to finance. Similar impact for female and male led firms. The project benefited 24,522 MSMEs.”
Roberto Campoverde from Arsenia Restaurant said: "I think the role of CFN is important because it seeks partners to help entrepreneurs fulfill their dreams."
Project leaders noted that strong ownership from Ecuadorian authorities was essential for institutional transformation. Collaboration between local authorities and the World Bank allowed for reforms addressing deep-rooted issues within CFN's operations.
Looking ahead, plans include leveraging CFN’s second-tier lending capacity to support other sectors facing credit constraints and increasing partial credit guarantees for more MSMEs.
For further information about SME growth lessons from Ecuador's loan program can be found on the World Bank Let's Talk Development Blog. Additionally, CFN received international recognition with ALIDE’s award for supporting women’s entrepreneurship—highlighting contributions from the World Bank—and further details are available via Bankwatch Ratings SA report.