Washington, D.C. July 29, 2002—
Continuing in its commitment to expanding commercial microfinance in the world’s poorest countries, IFC has signed a new partnership agreement with FINCA International, a leading U.S.-based microfinance nongovernmental organization whose small loans help raise incomes of more than 215,000 people in 20 different countries.
The new agreement was signed following a meeting between World Bank Group President James D. Wolfensohn and FINCA Executive Director Rupert Scofield. It significantly expands IFC’s relationship with FINCA, which began in 2001 with the provision of US$200,000 in technical assistance funding (*) and $1 million in combined equity/quasi-equity investment to support FINCA Kyrgyzstan during its transformation to a commercial, regulated microfinance institution.
Founded in 1984, FINCA is a respected leader in an industry whose promotion of self-reliance and grassroots empowerment is an essential force in the fight against poverty. Research shows that only four percent of the potential global market for microfinance is currently being reached, often by institutions that are not financially sustainable. The World Bank estimates that there are more than 500 million microentrepreneurs around the globe, almost all of them with no access to funding from traditional financial institutions.
“Far too few people benefit from microfinance today. This is why leading global technical assistance networks such as FINCA—that can transfer good practices in microfinance from one country to another—are critical,” said IFC Executive Vice President Peter Woicke. “Their work helps more potential borrowers access the capital they need to start income-generating businesses. We are glad to team with these leading organizations in finding new ways to bring the proven success of microfinance to a much larger market.”
FINCA is one of three such organizations to become an IFC partner in this work, part of a group that also includes International Projekt Consult of Germany and ACCION International of the U.S. The various local microfinance institutions these groups support collectively serve more than 900,000 borrowers worldwide, and are growing rapidly with the resources IFC is helping them mobilize.
Under the partnership structure, outside organizations receive initial technical assistance grant funding from IFC’s SME Capacity Building Facility (CBF), then work with IFC to consider larger potential investment projects based on the new models developed jointly.
“This grant signifies a new level in the partnership between FINCA and IFC”, stated Rupert Scofield, FINCA International’s executive director. “By strengthening FINCA’s regional hub structure, this project it supports gives FINCA’s affiliates the ability to reach self-sufficiency more rapidly. It may also pave the way for a future global facility that could involve IFC and other investors, providing access to the volumes of loan capital necessary for FINCA’s affiliates to reach many more low income entrepreneurs by acting as commercially viable, regulated institutions.”
Each year, FINCA makes more than 600,000 loans, lending more than $100 million with a 97 percent repayment rate. One of its biggest constraints is accessing enough loan capital to meet demand—a problem that can be solved in part by transforming its country affiliates into commercial institutions that operate profitably while maintaining their strong social mission. In moving in this direction, FINCA will use its $500,000 grant from IFC to strengthen its
regional hubs in Guatemala City, Kampala, and Moscow, that support country affiliates. This funding is considered the
first step in an eventual multi-donor funding package allowing FINCA to strengthen its infrastructure to help affiliates move towards self-sustainability. One key goal of the initiative is to help FINCA reach more than 300,000 clients.
IFC’s mission 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, and provides technical assistance and advice to governments and businesses. Since its founding in 1956 through the close of the last fiscal year on June 30, 2001, IFC committed more than $31 billion of its own funds and arranged $20 billion in syndications for 2,636 companies in 140 developing countries. IFC’s committed portfolio at the end of FY01 was $14.3 billion.
* Including $100,000 from IFC’s Technical Assistance Trust Funds (TATF) program for market analysis as part of a feasibility study on converting the nonprofit microfinance institution FINCA Kyrgyzstan into a full-fledged banking institution.