Rio de Janeiro, November 20, 2002—
The World Bank Group President James D. Wolfensohn signed today an agreement to provide a US$1.25 million to support the establishment of a pioneer commercially-based microfinance institution in Brazil, Microinvest. The funding is designed to expand access to financing for low income entrepreneurs, helping them build their businesses and raise their standards of living.
The financing to Microinvest, made by the International Finance Corporation (IFC), the private sector development arm of the World Bank Group, will assist in institution building of one of the very few commercially oriented, self-sustainable microfinance institutions in Brazil. Microinvest represents IFC’s first investment in a Brazilian microfinance institution.
During the signing ceremony that took place in Rio de Janeiro as part of his visit to Brazil, Mr. Wolfensohn noted:
“This project represents an important step towards improving financial intermediation, providing sustainable financing mechanisms for small and microenterprises and increasing income earning opportunities for the urban poor. It is also in line with the World Bank Group strategy for smaller enterprises, which is underpinned on expanding access to capital, building capacity in the locally-based institutions that support these enterprises, and improving the business environment.”
The investment in Microinvest will give IFC a 25 percent share purchase of Microinvest, while the remaining share capital will be owned by the Bank’s sponsor, Fininvest S.A.—one of the largest finance companies in the low-income consumer and retail credit segment in Brazil. Fininvest is a wholly-owned subsidiary of União de Bancos Brasileiros S.A. (Unibanco), and has been working on microcredit, since 1998, through special purpose branches, located in low income areas, in Rio de Janeiro. As a finance company , Fininvest has been a pioneer, granting more than 4.000 credits, on a total financed value of R$6.0 MM.
Mr. Pedro Moreira Salles, Chairman of Unibanco, added: “
A large number of indicators point to the fact that the microcredit segment in Brazil is growing and attracting investments from the financial sector and from several development and training institutions. Opportunities are being constantly offered, and certainly the IFC’s partnership will contribute to an improvement of the micro-finance market in our country, in which process Microinvest intends to make an important contribution
.”
Microentrepreneurs are an important engine of social development and economic growth in most developing countries including Brazil. There are an estimated 9.5 million micro and small enterprises in Brazil. They account for over 90 percent of all firms in the country, and provide over 35 percent of total employment in services, commerce, and industry.
IFC and the World Bank Group believe that well-managed microfinance institutions can –and should - be commercially viable so that financial services can be provided to the underserved over the long term, resulting in better opportunities for the poor. 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.
Although direct support for microcredit institutions represent a relatively new business line, IFC has a growing pipeline of microlending projects worldwide, in countries such as Bolivia, Bosnia, Bulgaria, Cambodia, Georgia, Haiti, India, Mexico, Peru and the Philippines. Recently, IFC supported the leading Peruvian microfinance institution
Mibanco,
as well as a key microfinance project in Mexico,
Financiera Compartamos
. IFC has also established strategic partnerships with ACCION Internacional to finance four microlending institutions in Mozambique, Brazil, Guatemala and South Africa, and 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 in Africa, Latin America and Eastern Europe.
The investment in Microinvest supports IFC’s commitment to strengthening Brazil’s financial sector to enable it to provide much-needed financing to promote the development and growth of Brazil’s incipient microfinance market and microentrepreneurs. It also braces IFC’s efforts to help reduce poverty by reaching out to the low-income population with formal financial products that support individual and collective initiatives and give poor people the opportunity to sustain themselves and their families.
IFC’s mission (
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, and provides technical assistance and advice to governments and businesses. Since its founding in 1956 through FY02, IFC has committed more than $34 billion of its own funds and arranged $21 billion in syndications for 2,825 companies in 140 developing countries. IFC’s worldwide committed portfolio as of FY02 was $15.1 billion for its own account and $6.5 billion held for participants in loan syndications.
