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Washington, April 14, 2007
– IFC, the private sector arm of the World Bank Group, in collaboration with KfW, Germany’s development bank, today signed a strategic partnership agreement to support microfinance institutions through the new Microfinance Initiative for Asia. Over the next three years, IFC, KfW, and other partner institutions will support microfinance institutions throughout Asia by committing up to $1 billion for debt and equity investments, structured finance, and advisory services. This bold strategic partnership, the first microfinance initiative of its size to target the poor in Asia exclusively, will also have a catalytic impact.
Asia has been at the forefront of establishing microfinance institutions, in large part due to the groundbreaking work of pioneers such as Nobel Peace Prize winner Muhammad Yunus. But the financing needs of low-income households and microentrepreneurs in the region still remain largely unmet. Demand for financial services among entrepreneurial poor people is extensive. But the supply of microfinance, estimated at $4 billion and serving 22 million borrowers, is limited and concentrated in just a few countries and institutions, with an overall market penetration rate of only 6 percent.
Speaking at the signing, Heidemarie Wieczorek-Zeul, German Minister for Development Cooperation, said, “This initiative will establish the necessary financing mechanisms to link microfinance institutions to the domestic and global capital markets, helping them expand their outreach to the poor. I am convinced that the strategic direction by IFC and KfW will increase access to finance and contribute to poverty alleviation.”
Lars Thunell, head of IFC, said, “The primary constraints on increasing financial access are a lack of institutions and the absence of adequately structured risk capital. The Microfinance Initiative for Asia will tackle both constraints, achieving another landmark in promoting commercial microfinance. By offering long-term local currency loans and equity participation, together with advisory services, the initiative aims to increase microfinance outreach by over 5 million new clients by 2009.”
A report recently copublished by IFC,
The Next 4 Billion: Market Size and Business Strategy at the Base of the Pyramid,
discusses the market opportunities for serving the 4 billion people at the bottom of the economic pyramid—those with annual incomes below $3,000 in local purchasing power. Asia’s 2.86 billion people in this category represent 83 percent of the region’s population, the vast majority of whom lack access to financial services. The findings show the importance of the joint IFC-KfW investment strategy, which will seize market-based opportunities that better meet the needs of those at the base of the pyramid, increase their productivity and incomes, and empower their entry into the formal economy.
About IFC
IFC, the private sector arm of the World Bank Group, promotes open and competitive markets in developing countries. IFC supports sustainable private sector companies and other partners in generating productive jobs and delivering basic services, so that people have opportunities to escape poverty and improve their lives. Through FY06, IFC Financial Products has committed more than $56 billion in funding for private sector investments and mobilized an additional $25 billion in syndications for 3,531 companies in 140 developing countries. IFC Advisory Services and donor partners have provided more than $1 billion in program support to build small enterprises, to accelerate private participation in infrastructure, to improve the business enabling environment, to increase access to finance, and to strengthen environmental and social sustainability. For more information, please visit
www.ifc.org
.
IFC works closely with KfW in other regional microfinance initiatives covering Sub-Saharan Africa and Eastern Europe. Cooperation between the two institutions has been beneficial in the sharing of both knowledge and resources.
About KfW
KfW Entwicklungsbank finances investments and accompanying consulting services in developing countries. It functions on behalf of the German Federal Ministry for Economic Cooperation and Development. Its primary goal is to promote sustainable improvement of the economic and social conditions of people in developing countries. Through its Financial Cooperation, it contributes to the global reduction of poverty, the protection of natural resources, and the attainment of peace.
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