MICROCAPITAL STORY: International Finance Corporation (IFC) Microfinance Investment Deals from January to April 2009 in Latin American and the Caribbean

The International Finance Corporation (IFC), a member of the World Bank, is one of the top five investors in Latin America and the Caribbean. The IFC contributed 11 percent of total LAC funding according to a 2008 survey. Development Finance Investors (DFIs) such as the IFC are government owned bilateral or multilateral development agencies with investments in microfinance. The IFC makes direct and indirect investments and also has an advisory arm. Direct investments may establish microfinance institutions (MFIs) and indirect investments are in microfinance investment vehicles such as private investment funds. In their advisory role the IFC provides training and technical support, partners with organizations such as the World Bank and the Consultative Group to the Poor (CGAP) and supports innovative technology.

Microfinance is a subsection of the IFCs Global Financial Markets Department. Latin America and the Caribbean (LAC) is the largest region supported by this department which aims to expand finance to the poorer and less developed areas. Total committed funds within the microfinance area to the region by IFC were USD 42.3 million in 2008. A benchmark report created by the MIX Market, the microfinance information clearing house, suggests that Latin America has some of the most experienced, diverse and developed microfinance institutions (MFIs) in the world. For further details refer to this MicroCapital story.

From January to April 2009 the following microfinance investment deals were made by the IFC to the LAC region. The IFC signed an agreement with Sogebank S.A. of Haiti to improve financing of microenterprises and small and medium enterprises (SMEs). This is aimed at improving access to financial services for 2,500 SMEs over a five year period. At this stage the role of the IFC is advisory, however they are considering a USD 4 million investment. The IFC will make a USD 20 million investment in Paraguay’s Banco Continental through the IFC Recapitalization Fund. The IFC Recapitalization Fund was founded in February 2009 to support banks during the current financial crisis. The investment in Banco Continental will be in the bank’s stock and ensure continued lending to SMEs. In February a USD 20 million investment in Jamaica’s First Global Bank Ltd is intended to help the bank expand financial services to SMEs. SMEs employ the majority of local jobs. The IFC invested in a microinsurance company in Peru, Protecta, in an effort to complement the IFC’s microinsurance investments. The size of the investement is unclear from the press release on February 18. Recently the IFC announced loans of USD 450 million to Colombia, Peru and Ecuador, which includes increased support for microfinance institutions (MFIs); for further details refer to this MicroCapital Story.

Created in 1956, the IFC aims to foster sustainable economic growth in developing countries by supporting private sector development, mobilizing private capital, and providing advisory and risk mitigation services to businesses and governments. According to the organization’s 2008 Annual Report, the IFC made new investment commitments of USD 11.4 billion in the 2008 fiscal year.

By Sally Levy, Research Assistant

Additional Resources:

International Finance Corporation (IFC): Home

World Bank Group: Home

CGAP: Home, Regional Snapshot for Latin America & the Caribbean

IFC Press Release: IFC Recapitalization Fund made $20 million investment in Paraguay’s Banco Continental; IFC to Help Boost Financing for Smaller Businesses in Haiti; IFC Financing to Help First Global Bank Serve Needs of Jamaican Businesses; IFC Supports Peru’s First Specialized Micro-insurance Company Targeting Low-income Segments

MIX Market: Home

MicroCapital Story: Expanding Microfinancing in Latin America