Tunis, February 8, 2023 – The World Bank Board of Executive Directors has approved a US$120 million loan for Tunisia to fund the project "Support to Small and Medium Enterprises for Economic Recovery." The project aims to address the primary long-term liquidity constraints faced by Tunisian firms by financing long-term lines of credit that will be on-lent by the Ministry of Finance to participating financial institutions for lending to eligible small- and medium-sized enterprises (SMEs).
"SMEs play a key role in the Tunisian economy. The COVID-19 pandemic and the war in Ukraine have caused macroeconomic imbalances in Tunisia, which have exacerbated challenges faced by SMEs and weakened their performance and financial health," said Alexandre Arrobbio, World Bank Country Manager for Tunisia. "Through this project and other financial sector support programs, the World Bank, together with our partners, are pursuing support for the Tunisian government's recovery plan. This plan includes pivotal financial sector reforms that the authorities are undertaking to strengthen financial sector regulation and supervision, further develop financial infrastructure, and promote broader financial inclusion."
Tunisian SMEs' access to finance is insufficient. According to the World Bank's 2020 Business Surveys in Tunisia, SMEs have seen their access to financing deteriorate over the years. For instance, access to funding was considered a major constraint by 21.9 percent of firms in 2013 and by 43.9 percent of firms in 2020. SMEs that do have access to funding mainly obtain short-term credit due, in part, to a lack of long-term liquidity in the banking sector. Indeed, capital markets and contractual savings institutions, the main sources of long-term financing in many emerging markets, still need to be fully developed in Tunisia.
To address these challenges, the project will set up two lines of credit. The first facility of US$24.5 million will be used to reschedule existing loans of viable SMEs to longer maturities to ease their debt burden. The second line of credit of US$93.7 million will provide new long-term loans to viable SMEs. The third component, for $1.5 million, is dedicated to project implementation support, monitoring, and evaluation. The project also builds on the modernization of the public partial credit guarantee mechanism, SOTUGAR, which is supported by parallel technical assistance and through a memorandum of understanding between the Ministry of Finance and the Central Bank of Tunisia to strengthen SOTUGAR's governance and supervision.
The World Bank consulted with a broad range of stakeholders during the preparation of this project, who endorsed the lines of credit. This support to SMEs is realized in cooperation with other partners, including the Agence Française de Développement (AFD) and the European Investment Bank (EIB), which are planning to extend similar credit facilities by the summer, subject to satisfactory due diligence and board approval.