WASHINGTON, D.C., June 22, 2000
- IFC and the German firm Internationale Projekt Consult (IPC) today announced an US$85 million initiative to start up microcredit banks in 11 developing countries using a model that is designed to build microfinancing capacity throughout the developing World.
The Global Microfinance Capacity Building Facility provides a package of financing that will be used to build commercially viable microcredit banks in countries such as Romania, Bulgaria, Moldova, Kazakhstan, Macedonia, Philippines and Ghana. Along with the financing, IPC will provide centralized services to the start-ups, for fund-raising, management support services, and training.
The initiative includes $65 million equity investment, including $13.3 million from IFC, and $20 million, including $1.4 million from IFC, to be used for grants to help new micro-credit banks set up operations.
The support for microfinance institutions builds on the success of an earlier IFC/IPC-supported project in Kosovo, Micro Enterprise Bank. In just six months of providing financial services to low-income clients, Micro Enterprise Bank - the first licensed financial institution in Kosovo - is already showing a profit. Despite operating in one of the world's most difficult business environments, strong repayment rates have taken the bank's initial portfolio of $500,000 of small loans to an expected $5 million by the end of the year.
"Micro Enterprise Bank's successful startup confirms a growing global trend," said IFC Executive Vice President Peter Woicke. "When properly structured, specialized financial institutions targeting the poor can make an important contribution to development while, at the same time, earning the profits needed to ensure long-term sustainability. Banks that cater to the smallest businesses are an antidote to the economic marginalization that comes from lack of access to credit."
IFC and IPC have teamed up to start similar banks under difficult conditions in Haiti, Bosnia and Herzegovina, Albania, Moldova, and Georgia.
The model, which can serve as a prototype much more broadly, consists of an initial period when the new start-up uses donated funds for training and other set-up operations. During this time, strong links are built with the formal financial sector and proven management systems put in place, allowing each microcredit bank to move rapidly toward commercial viability.
"The banks are profit-oriented, but do not aim for short-term profit maximization," said Dr. Claus-Peter Zeitinger, managing director of IPC. "They seek a reasonable balance between social and economic goals."
IPC, based in Frankfurt, is a world leader in commercial microfinance and the manager of IMI, an equity investment fund for microfinance institutions in developing countries.
The mission of IFC, part of the World Bank Group, is to promote private sector investment in developing countries, which will reduce poverty and improve people's lives. IFC finances private sector investments in the developing world, mobilizes capital in the international financial markets and provides technical assistance and advice to governments and businesses.
This initiative is the first by a new World Bank Group department to promote the development of commercially sustainable credit and other financial services for micro, small and medium-sized enterprises in developing countries.
