The Inter-American Development Bank’s Multilateral Investment Fund has approved a USD 2 million loan and USD 150,000 in technical cooperation to help Centro de Investigación y Desarrollo Regional (CIDRE) to expand access to credit and other financial services for small producers, micro and small enterprises and rural communities in Bolivia. The funding will allow CIDRE to expand its loan portfolio, as well as assist in the transition into a regulated microfinance institution (MFI).
The Inter-American Development Bank (IDB), established in 1959 by the Organization of American States, lends money, provides grants and research, and offers technical assistance and advice to small businesses, central governments and city authorities in 26 countries throughout Latin America and the Caribbean (LAC). Since 1959, the IDB has approved USD 168 billion for projects, mobilizing more than USD 375 billion in investments. The IDB has 48 member countries, with the LAC countries holding 50.02 percent of the voting power. The single largest shareholder is the United States, with 30.01 percent. The IDB finances both public and private sector projects in the region.
The investment in CIDRE was made through the IDB’s Multilateral Investment Fund (MIF), which was established in 1993 to promote economic growth through private sector development, particularly microenterprises and small businesses. The MIF currently has 38 donating member countries from LAC, North America, Europe and Asia. MIF projects typically fund private financial institutions, such as banks, cooperatives, MFIs or NGOs, who can then on-lend the resources to the benefit of micro and small businesses. Since its inception, the MIF has approved more than 1,000 projects, primarily grants, with over 800 civil society, private sector, and government partners, putting USD 2.2 billion to work in all 26 developing countries of the IDB.
Read more about a recent initiative by the IDB and MIF to fund credit risk ratings and performance assessments for small MFIs in LAC in this MicroCapital story. For a review of the MIF’s investments in LAC in March and April 2009, see this MicroCapital article.
CIDRE is a Bolivian MFI, established in 1981, which works in the regions of Cochabamba, North Potosi, Oruro, Santa Cruz, Valles Alto, Bajo and Tarija. According to the MIX Market, the microfinance information clearing house, CIDRE had 4,198 active borrowers, a gross loan portfolio of USD 10.2 million, total assets of USD 13.4 million, a debt-to-equity ratio of 2.35, an ROA of 2 percent, and an ROE of 5.8 percent as of December 2008.
The USD 2 million loan from the MIF will allow CIDRE to expand and strengthen its loan portfolio. The USD 150,000 grant for technical assistance will go toward CIDRE’s transition into a regulated MFI under the supervision of the Bolivian Financial Superintendency (SBEF). The SBEF, created under the Bolivian General Law on Banking and Financial Institutions of 1993, issues periodic regulatory updates, including one on the “Regulation and Supervision of Microfinance Institutions in Bolivia.” This update outlined requirements for MFIs operating in Bolivia such as a specific credit rating scheme, mandated reporting to credit bureaus, and transparency on conditions of loans, interest rates, charges and fees. The SBEF monitors MFIs through financial records/indicators, as well as on-site inspections of the MFI with regard to quality of information, governance, risk assessment and loan portfolio.
By Jaclyn Berfond, Research Assistant
Additional Resources:
IDB Project: Rural Productive Credit and Microsavings in Bolivia
MIF: Homepage
MIX Market: Homepage
Center For Financial Inclusion: Summary of Client Protection in Bolivia
MicroCapital Story: Inter-American Development Bank’s Multilateral Investment Fund (MIF) and Corporation Andina de Fomento (CAF) Back Ratings For Microfinance Institutions
MicroCapital Story: The Multilateral Investment Fund (MIF) invests USD 10.1m, including USD 1.6m in Microfinance, in Latin America and the Caribbean during March and April 2009
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