International Finance Corporation (IFC), a member of the World Bank Group, has approved investments of up to USD 50 million in Bank of Maldives (BML), which will be utilized to provide financing for private sector companies and small and medium sized businesses in the tourism sector, to help preserve jobs and combat the negative shocks of the coronavirus pandemic on the Maldivian economy.
According to a statement issued by BML, the investment is scheduled to be released in three tranches. The first tranche – comprising of USD 20 million – was committed this Wednesday.
The investment is part of IFC’s first phase of crisis support for countries. BML said it will provide the bank with much needed working capital finance, which is expected to benefit businesses, their employees and suppliers in tourism and related industries.
An additional facility of up to USD 50 million in loans to BML remains unconfirmed at this point.
BML noted that tourism, Maldives’ main economic driver, contributes over two-thirds of the country’s GDP, 80 percent of exports, 40 percent of revenue and has been the key factor behind the country’s rapid economic growth and improved standard of living in recent years.
With the cease in tourism activity due to the coronavirus pandemic, Maldives’s economic growth is projected to contract by 13 percent, making it likely the country will be one of the hardest hit countries in South Asia.
“As the largest bank in the country and the leading lender to the tourism industry, BML has already designed a short-term financing program to support severely affected businesses, providing working capital to resorts and guesthouses to help tide them through the pandemic,” said Timothy Sawyer, CEO and Managing Director of BML. “This injection of millions of dollars in support from IFC is extremely timely and will provide further support to our efforts to respond to the crisis.”
Tourist arrivals to Maldives began to decline from February onwards. The country recorded a 63 percent drop in arrivals in March before it dropped to zero with the suspension of the issuance of on-arrival visas and closure of borders on March 27.
BML noted that an estimated one-third of adult males and a quarter of women are engaged in tourism-related jobs, and referred to a recent UNDP and Ministry of Economic Development report which shows that 22,000 local resort employees have been directly affected as a result of coronavirus pandemic.
“We recognise that efforts to revive tourism, which is the backbone of the Maldivian economy, are now at a critical point and require a coordinated, flexible and fast response,” said Amena Arif, IFC Country Manager for Maldives and Sri Lanka. “IFC’s financing for the Bank of Maldives will help support the reopening of the country’s largest industry and fund the Bank’s small and medium sized enterprise value chain. We are prepared to do more to assist as the country moves from recovery to rebuilding. IFC stands with the Maldives at a time when it matters the most.”
IFC has supported Maldives’ private sector since 1983 - with over USD 200 million in investments so far.
BML has rolled out an USD 20 million lending scheme to support tourism sector businesses. Meanwhile, the EUR 20 million loan issued to the Maldivian government by the European Investment Bank (EIB) in June will be also be released through the bank.