Washington, December 14, 2004—
As part of its increasing commitment to microfinance, the International Finance Corporation has become a member of the industry’s leading coordinating body, the Consultative Group to Assist the Poor (CGAP).
IFC, the private sector arm of the World Bank Group, has long worked with CGAP on a project-by-project basis without being an official member. Strengthening these ties is expected to bring many mutual benefits and support a steady rise in IFC’s microfinance activities. Financing and advising microfinance institutions has become a core part of IFC’s business, and joining GGAP is expected to help scale up this work and lead it in important new directions.
IFC has invested roughly $245 million in commercial microfinance institutions since entering the field in 1996. Their small loans, savings accounts, and other financial services support the business activity of vast numbers of low-income entrepreneurs—many of them women—who otherwise would lack access to mainstream banks.
CGAP is a Washington-based consortium of 28 public and private development agencies working together to expand delivery of a broad range of financial services to poor people in developing countries. It serves as a resource center, thought leader, and advisory body for the microfinance community, providing technical assistance, research, operational tools, training, and best practice information. In everything it does, it partners with its member donors, investors, service providers and the entire spectrum of financial institution involved in microfinance. All its members share the same objective: improving the lives of the poor by helping them weather risk, build assets, and move out of poverty.
“We fully support CGAP’s vision of microfinance as an integral part of a competitive and diverse financial system, one that fosters innovation and growth in all segments of society,” said Laurence Carter, director of the Small and Medium Enterprise Department. “Our closer involvement will help us increase our number of microfinance investments and technical assistance projects. This will be through learning more about new microfinance products and technologies, and by being able to analyze results of innovative projects involving our fellow CGAP members.”
IFC’s existing microfinance portfolio includes several projects whose earlier-stage work was done at CGAP and then referred to IFC, including:
ACCION International:
Several transactions with this leading US-based microfinance group, including equity and technical assistance commitments for its investment fund, and direct financing of two its partners that are the largest microfinance institutions in Latin America, Financiera Compartamos (Mexico) and MIBANCO (Peru).
Afghanistan:
A $1 million IFC investment and more than $4 million in Norwegian/Japanese/German/US/European Union technical assistance for the First Microfinance Bank of Afghanistan, the country’s first commercial microfinance institution. This complements a $25 million CGAP/World Bank-organized debt and grant vehicles for others institutions that do not yet have commercial status, the Microfinance Investment Support Facility-Afghanistan.
Mongolia:
A $450,000 investment and $275,000 in combined Dutch/IFC-funded technical assistance for X.A.C Bank. It now finances 30,000 microentreprenuers—up from 2,000 when the technical assistance began five years ago.
Sub-Saharan Africa
:
IFC is investing up to $20 million in Africa International Financial Holdings (AIFH), a vehicle seeking to acquire majority stakes in privatized banks with potential to offer financial services to the poor on a large scale. CGAP has participated in pre-acquisition marketing and analysis of banks being considered by AIFH.
Like IFC, CGAP is a catalyst, playing a key role in bringing microfinance expertise to the private sector through partnerships with commercial banks and private service providers. Earlier this year, for example, it launched the Retail Advisory Service to provide tailor-made technical and strategic assistance to formal banks that are committed to reaching poorer retail clients. Millions of poor people are gaining access to financial services because of such public-private partnerships, making use of new technologies to discover new ways to access isolated areas and poorer clients.
“Joining CGAP makes sense for IFC, as both our institutions share the common vision of deepening financial markets and working with the broadest possible range of financial institutions,” noted CGAP CEO and World Bank Director Elizabeth Littlefield. “CGAP and IFC have very complementary roles: IFC is one of the leading debt and equity investors in commercial microfinance, while CGAP is a leading standard-setter, industry builder, and center of knowledge.”
The mission of IFC (
www.ifc.org
) is to promote sustainable private sector investment in developing countries, helping to reduce poverty and improve people’s lives. IFC finances private sector investments in the developing world, mobilizes capital in the international financial markets, helps clients improve social and environmental sustainability, and provides technical assistance and advice to governments and businesses. From its founding in 1956 through FY04, IFC has committed more than $44 billion of its own funds and arranged $23 billion in syndications for 3,143 companies in 140 developing countries. IFC’s worldwide committed portfolio as of FY04 was $17.9 billion for its own account and $5.5 billion held for participants in loan syndications.
