The NDB’s loan (Loan) was to support the recovery of the Brazilian economy by providing resources for the GoB to capitalize the FGI-PEAC Fund that provided guarantees to participating Financial Institution (FIs) on loans provided to SMEs. FGI was created in 2010 and is managed by the Banco Nacional de Desenvolvimento Economico e Social (BNDES). FGI, in partnership with FIs, provides fast and less costly guarantees on SME loans availed from FIs. The Fund was expanded in 2020 under PEAC, as a response from the GoB to the COVID-19 impact on the economy. The Fund provides guarantees to participating FIs for 80% of the loans provided to SMEs, limited to BRL 10 million (USD 1.8 million) per SME per FI. No premium rate is charged and only minimum personal guarantees are required in accordance with the respective FIs’ policies.

The Emergency Program (Program) was proposed to address the adverse economic impact of COVID-19 pandemic and enable economic recovery. Its objective was to improve SMEs’ access to credit by providing guarantees to help them overcome any temporary liquidity problem, ensure the continuity of their operations, and strengthen their financial sustainability, thereby preventing significant loss of jobs.

FGI-PEAC was operational from June 2020 and eligible SMEs obtained loans guaranteed by the fund until December 31, 2020. The GoB utilized the Loan to partially finance its contribution to the FGI-PEAC Fund. BNDES as the Fund manager was responsible for operating the guarantees, underwriting and overall coordination of the participating FIs. BNDES also monitored and reported on the Program’s performance. As of November 2020, the Fund had already provided more than USD 15 billion in guarantees. The disbursement was concluded in one tranche of the full Loan amount with 100% retroactive financing.

The Program was categorized as Category FI-B in line with the NDB’s Environmental and Social Framework (ESF), considering the existing eligibility criteria for SMEs to participate in the Fund and the use of credit proceeds for working capital and other necessary investments to support the SMEs. The guarantees were provided for activities not included in the NDB’s E&S Exclusion List and in adherence to country systems requirements, resulting in material compliance with NDB ESF.