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

The Multilateral Investment Fund (MIF), administered by the Inter-American Development Bank (IDB) is one of the largest public sector Development Finance Institutions (DFI) in the Americas. DFIs are government owned bilateral or multilateral development agencies whose investments include microfinance deals. DFIs make either direct or indirect investments. Direct investments are in microfinance institutions (MFIs) and indirect investments are in microfinance investment vehicles such as private investment funds. The majority of investments are direct and in hard currency (USD).

In March and April 2009 investment deals made by MIF totaled USD 10.1 million in Latin America and the Caribbean (LAC). This included microfinance projects, investment in the small and medium enterprise (SME) sector, small scale producers, social inclusion projects, environmental projects and agriculture and rural development, as detailed below. The investment in microfinance projects alone was small compared to the overall investment made in the LAC region by MIF for the two month period.

Microfinance project investment totaled only USD 1.6 million for March and April 2009. This included a Central American regional pilot project to develop and implement privately offered micropensions to microentrepreneurs and low-income populations through existing microfinance organizations totaling USD 915,000. These individuals are normally excluded from traditional pension and social security plans. In El Salvador USD 502,512 will be invested in the strengthening of microfinance institutions. Two microenterprise projects in Brazil and Colombia worth USD 149,994 and USD 80,000 respectively were approved in March. These projects will aim to improve the conditions of workers in the craftsmen (Brazil) and recycling (Colombia) businesses.

A total of USD 1,603,000 was invested in the SME sector in Brazil and Colombia. In Brazil (USD 603,000) the project’s objective is to facilitate the growth of microcomputer and small Brazilian businesses. The Colombian project (USD 1 million) will seek to improve the competitiveness of businesses in the textile and apparel sectors. In Jamaica USD 526,050 will be invested in increasing the sustainability and competitiveness of SME’s particularly through incorporating corporate governance and managerial practices.

Small scale producers in the Haiti and Dominican Republic border region will have an investment of USD 663,380 which seeks to improve economic activities through expanding linkages across the border. Further private sector development in Peru will see an investment of USD 1 million made to promote innovation in the supply chains of the textile/apparel and food/cuisine sectors.

In Brazil five social investment projects are aimed at improving the social inclusion of low-income populations. A total of USD 733,641 has been invested by MIF with an average of USD 145,000 for each project. Projects will focus on creating an economy for employment and revenue generation; responsible tourism; women in the fishing industry; recycling of garbage and used kitchen oil; creating a technical assistance network.

Other projects focus on the environment, agriculture and rural development, and tourism. In Colombia USD 622,613 will be invested on strengthening the technical, entrepreneurial and productive capacities of recycling associations. In Guatemala a USD 700,000 project will train villagers and subsistence farmers on best practices for sustainable development. A USD 1.7 million deal in Colombia will aim to increase the competitiveness of Colombian coffee for small coffee producers. USD 970,780 will be invested in Guatemalan tourism, specifically to include local communities and SME.

In the Consultative Group to Assist the Poor (CGAP) Microfinance Funder Survey 2008 the total committed amount to Latin America and the Caribbean was USD 1,625 million (from 54 responders to the survey, including MIF/IDB). This represented 14 percent of the worldwide commitment to microfinance during 2008. Committed funding is for active projects only, whether disbursed or not. 75 percent of the funding to LAC is directly targeted at MFIs. This is mainly through debt (62 percent), followed by grants (17 percent) and equity (12 percent).

The MIF was established in 1993 to encourage private sector development with a specific focus on microenterprise and small business. It only funds projects in Latin American and the Caribbean, through equity and loans. MIF uses the Small Enterprise Investment Fund (SEIF) to provide financing to local microenterprises and small businesses directly or through intermediaries, and to institutions which serve them. As at 31 December 2004 MIF had a total of USD 100 million in assets allocated to microfinance investments. No further information on MIF’s financial details is publicly available. MIF is taking a leading role in the USD 100 million ‘Microfinance Growth Fund’ for LAC recently announced by President Obama. For further details, refer to this MicroCapital story.

By Sally Levy, Research Assistant

Additional Resources:

Multilateral Investment Fund (MIF): Home

Inter-American Development Bank (IDB): Projects

Consultative Group to Assist the Poor (CGAP): Development Finance Institutions (DFIs); Results of the 2008 Funder Survey; Regional Snapshot for Latin America and the Caribbean (Nov. 2008).

Francisco, M, Mascaro, Y, Mendoza, JC and Yaron, J, Measuring the Performance and Achievement of Social Objectives of Development Finance Institutions (February 1, 2008). World Bank Policy Research Working Paper Series, Vol., 2008

Levere, A, Schweke, B, Woo, B, Development Finance and Regional Economic Development, July 2006

MIX Market: MIF

MicroCapital Story: US President Barack Obama Announces $100m Microfinance Growth Fund for Latin America and the Caribbean at Fifth Summit of the Americas