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Microfinance institutions

Doing business with the IDB Group

Multilateral Investment Fund (MIF) grants and investments finance the expansion and modernization of micro lending institutions that provide micro and small production companies with access to credit.

Within the IDB Group, the Opportunities for the Majority Initiative (OM) promotes and finances business models to develop and deliver quality products and services, create jobs and help low-income producers and consumers participate in the formal economy.


Instruments available

  • Direct and indirect, investment through financial intermediaries to deliver loans and capital investments.
  • Non-reimbursable funds,such as those that the Line of Activity for Promoting Small-Enterprise Financing (LASEF) provides to financial intermediaries that promote loans tailored to the needs of SMEs. These are technical assistance resources for adapting business plans, acquiring information systems, developing credit technology, training staff and developing management capacities, among other purposes.
  • Through these non-reimbursable funds, MIF plays an important role in strengthening microfinance institutions by financing the expansion of the operational and management capacities of institutions that demonstrate a willingness to operate with criteria of efficiency and sustainability.

Selection criteria

  • Innovative projects that introduce new and efficient approaches to promoting private sector development and poverty reduction.
  • Should meet the need for a demonstration effect, with potential to be replicated in other sectors and/or countries.
  • Viable operating plans and strong potential for financial sustainability.
  • Local partners are responsible for contributing 30-50% of project costs
  • Must show that MIF financing is essential to the project’s execution and is the most appropriate funding source.

For a more complete description of the selection criteria, click here.


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Sectors

MIF operates on a demand basis, focusing its financing on three main areas:

Business Framework. Support is provided to projects aimed at improving the environment in which microfinance institutions operate, for example, reducing the regulatory barriers to increasing microloan placements.

Enterprise Development. MIF grants focus on creating new businesses and jobs, boosting the competitiveness of micro lenders and supporting business models that emphasize worker skills certification and training, human capital development and greater use of technology.

Financial Democracy. These projects aim to provide micro- and small entrepreneurs and low-income groups with increased access to financial services.


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Projects

Greater Efficiency, Better Access

The MIF Project “Administrative and Operating Efficiency” sought to improve the efficiency and competitiveness of five non-regulated financial institutions affiliated with Women’s World Banking (WWB) in Colombia, reducing operating costs, adopting new technologies and developing new, innovative products.

Launched in 2000 as part of the MIF Line of Activity for Strengthening Microfinance Institutions, the project began in an unfavorable regulatory environment. High interest rates made it difficult for microfinance institutions to be profitable and companies had no access to bank loans. This made it difficult for these five NGOs in Bogotá, Bucaramanga, Cali, Medellín and Popayán to improve access to finance for their clients.

With the support of the program, these institutions developed new financial products, such as rural credit with repayment corresponding to agricultural cycles, healthcare and home improvement loans. At the same time, interest rates have fallen, new branches of these WWB affiliates have opened in rural areas, and the technical capacity of these institutions has improved, with enhanced computer networks and software for risk assessment. All five affiliates have seen increases in their lending portfolios and in the number of clients by over 200% and 170% respectively.

Since the end of the project, the regulatory environment has improved and now four of the five institutions, in Medellín, Popayán y Cali are either regulated, or are in the process of doing so, thanks to initial MIF support.

Remittances and Rural Development in the Dominican Republic

In partnership with the Banco de Ahorro y Crédito (ADOPEM), this MIF project seeks to extend the Dominican Republic’s financial system into the low-income rural areas, by developing a mechanism to bring senders and recipients of remittances into the formal banking system.

The goal is to leverage remittance flows into production-oriented projects undertaken by poor rural women. ADOPEM has Banco ADOPEM has entered into partnership with several remittance transfer companies in order to be able to receive and pay remittances in the country. The Bank has developed eight specialized savings and credit products based on remittance flows and specifically geared to the needs of remittance senders and receivers, e.g., initial business start-up loans and savings plans for education.

From December 2007 to December 2008, 1,646 remittances transactions totaling US$964,000 were executed by ADOPEM, and this dollar value considerably exceeds the 3-year project goal. In addition, sixteen training sessions have been held for the project’s beneficiary families (4,000 individuals so far) in business development, the use of banking facilities and products, community development and job creation. Entrepreneurship training for women has also begun on a pilot basis for 79 individuals.


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