Washington D.C., May 28, 2024—IFC, a member of the World Bank Group, today launched a new initiative to help financial service providers deliver funds to small businesses in emerging markets, especially those owned by women and those focused on agriculture and climate.
The MSME Finance Platform (the Platform) will include a financing package of up to $4 billion from IFC's own account to banks, non-bank financial institutions, microfinance institutions, and innovative digital lenders that focus on micro, small, and medium enterprises (MSMEs). It will be available to both new and existing IFC clients.
The Platform will also utilize various forms of credit enhancement to mobilize private capital, including an innovative Catalytic First Loss Guarantee, which together aim to crowd in an additional $4 billion in financing from eligible financial service providers to expand lending to these businesses.
"Micro, small, and medium enterprises form the backbone of most developing economies, yet they face significant financial barriers that hinder their potential," explained Makhtar Diop, Managing Director of IFC. "Our new financing platform addresses these challenges head-on, empowering financial service providers to extend critical support to these businesses, particularly those that are women-led or environmentally focused."
MSMEs make up over 90% of all firms and account, on average, for 60-70% of total employment and 50% of GDP worldwide. Still, according to the SME Finance Forum, there is currently a roughly $5.7 trillion financing gap for MSMEs.
In emerging markets, MSMEs and the informal sector are essential to economic growth, job creation, and poverty alleviation. Recent crises have weakened financial service providers financially, constraining their ability to meet increasingly stringent lending requirements. As a result, businesses are seeing a credit contraction in emerging markets and developing economies due to tighter credit conditions, rising interest rates, and a limited appetite for risk. As the largest development finance institution supporting the private sector in emerging markets, IFC is well positioned to help financial service providers offer support.
IFC will leverage its risk capital to extend first loss protection to eligible financial service providers, which often have ample local currency liquidity but have limited exposure to MSMEs due to the segment's perceived high risk. Through this mobilization approach, the MSME Platform aims to create a financing solution through capital optimization structures and potentially redirect significant amounts of local currency financing to businesses.
The Platform will be supported by the International Development Association's Private Sector Window (IDA PSW) to help de-risk the credit and foreign currency exposures in projects in low-income countries. Up to $100 million will come from the IDA PSW Blended Finance Facility (BFF). In addition, resources from the Global SME Finance Facility (GSMEF) and the Women Entrepreneurs Opportunity Facility (WEOF) will be allocated to support and incentivize lending to businesses in the agriculture sector and women-owned MSMEs.
About IFC
IFC — a member of the World Bank Group — is the largest global development institution focused on the private sector in emerging markets. We work in more than 100 countries, using our capital, expertise, and influence to create markets and opportunities in developing countries. In fiscal year 2023, IFC committed a record $43.7 billion to private companies and financial institutions in developing countries, leveraging the power of the private sector to end extreme poverty and boost shared prosperity as economies grapple with the impacts of global compounding crises. For more information, visit www.ifc.org.
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About the IDA Private Sector Window
The International Development Association's (IDA) Private Sector Window was launched in 2017 to catalyze private sector investment in the poorest and most fragile countries. Recognizing the key role of the private sector in achieving IDA's objectives and the World Bank Group's vision to create a world free of poverty on a livable planet, the window provides a source of co-investment funding and guarantees to de-risk private investments supported by IFC and the Multilateral Investment Guarantee Agency (MIGA). The IDA PSW is an option when there is no commercial solution, and the World Bank Group's other tools and approaches are insufficient. For more information, visit: http://ida.worldbank.org/psw
About GSMEF
The Global SME Finance Facility, a blended-finance partnership funded by the UK Foreign, Commonwealth & Development Office (FCDO) and the Netherlands Ministry of Foreign Affairs, is focused on helping to close the financing gap faced by SMEs in emerging markets. Catalyzing access to finance for SMEs, the facility has a goal of generating one million new jobs in the SME sector. For more information, visit www.ifc.org/gsmef.
About Goldman Sachs 10,000 Women
Goldman Sachs 10,000 Women is an ongoing initiative to foster economic growth by providing women entrepreneurs around the world with a business and management education and access to capital. The initiative has reached over 200,000 women from over 150 countries. In partnership with the International Finance Corporation (IFC), Goldman Sachs 10,000 Women launched the first-of-its-kind global finance facility in 2014 to enable access to capital to more women entrepreneurs. The 10,000 Women in-person business education program was launched in 2008, reaching over 10,000 women across 15 countries around the world, and in 2018, the 10,000 Women curriculum was made available online through Coursera, further democratizing access to a business education in more corners of the world. For more information on Goldman Sachs' investment in female entrepreneurs, visit: https://www.goldmansachs.com/citizenship/10000women/
