Social Entrepreneurship Program II (SEP II)

HISTORY

In 1982 the Bank approved the Operating Policy for the Small Projects Financing Program. The main purpose of this program was to give access to credit for those persons or groups of persons who wanted to execute projects that would allow them to improve their living conditions but who often lacked access to commercial credit or credit for business development under suitable conditions. Through this program the IDB became the first multilateral development bank to lend directly to private non-profit organizations without a government guarantee. The Small Projects Financing Program was one of the key programs through which the Bank supported the activities of the poorest groups in society.

In September 1998, the Bank replaced the Small Projects Financing Program with the Social Entrepreneurship Program (SEP) in order to make the program more effective and to adjust to a new context in Latin America and the Caribbean.

As part of the Bank’s realignment process, the administration of the Social Entrepreneurship Program (SEP), now known as the SEP II, was transferred to MIF in July 2007.

Over the last thirty years, the SEP, jointly with its predecessor the Small Projects Program, has financed 608 projects for a total amount of US$281 million, benefiting more than 600,000 poor people from marginalized populations, particularly small-scale producers, microentrepreneurs, women, indigenous people and people with disabilities.

GOAL

The goal of the Social Entrepreneurship Program II (SEP II) is to offer innovative and sustainable solutions that contribute to the reduction of poverty, exclusion and unemployment. The purpose of the SEP II is to promote the development and implementation of financing mechanisms that support initiatives focused on providing sustainable solutions to socioeconomic problems which affect poor and marginalized populations.

TYPES OF PROJECTS

The SEP II will support projects that finance entrepreneurial solutions to poverty through two main areas or types of projects (in order of priority).

Finance and Rural Business (including production, processing, marketing and value chains). The projects to be financed within this area will target rural micro and small producers from marginalized communities, with the purpose of providing: (a) access to finance with the support of innovative financing mechanisms; and (b) access to national and international markets through value chains that link small scale enterprises with larger ones. These projects preferably should be developed as integral parts of larger development initiatives (such as local economic development programs), which will permit the project to concentrate investments and impacts within a determined territory, in order to generate social and financial capital networks which have a greater sustainability in the medium term
Financing of Provision of Basic Services (including support to private alternative providers in the areas of education, health, potable water, electric and/or renewable energy, among others). The projects to be financed under this area will be pilot initiatives, and social projects with business approaches that can be scaled up, thus providing a demonstration effect in providing basic services, which can in turn serve as a “project incubator“ for other larger Bank funding windows such as the Opportunities for the Majority (OMJ).

FINANCING

The SEP offers financing and/or technical cooperation that directly benefit poor groups in society that lack access to financial, business development, and other support services needed for them to earn a better living.

The reimbursable (loan) component can be up to US$1 million. However, the average loan size is approximately US$500,000. The repayment period for these loans is up to 10 years, with a maximum grace period equivalent to the period of execution of the project (between 36 and 42 months). The interest rate on the loans and the level of counterpart depend on the characteristics of the project and the intermediary institution.

The technical assistance component provides nonreimbursable funds for strengthening the technical, operational, or administrative capacity of the executing agency, for training, and for technical assistance. In most cases, the maximum amount of funds for technical assistance in a project is US$250,000.

For more details on the SEP guidelines, consult SEP Guidelines.

ELIGIBILITY

Eligibility criteria for executing agencies:

Private companies, NGOs, foundations, cooperatives, producers’ associations, public private partnerships, with experience in providing financial or business development services targeted to the poor with an entrepreneurial focus;
Legally constituted to sign loan and technical cooperation contracts with the MIF, with at least three years of operating experience; with financial solvency (presentation of financial statements for the last three years) in order to assume and repay the loan; capacity to adequately administer MIF resources;
That their activities benefit the population of IDB’s member countries (even though they could have their headquarters in USA or Europe, for example);
Capacity for innovation and increasing the access of excluded groups to new financial and non-financial services;
Institutional and financial capacity to implement credit programs together with technical cooperation activities; or willing to separate the two types of programs to be handled by specialized institutions in each area.

Eligibility criteria for projects:

Projects should directly finance and benefit low-income groups (microentrepreneurs, small producers or other marginalized populations with growth potential);
The projects should be sustainable and have a clear capacity to repay the loan
Projects should clearly justify the need and pertinence of the combined use of the loan and technical cooperation components in the project.

HOW TO APPLY FOR FUNDS

Applying for financing from the SEP requires that the interested institution or organization contact the MIF Specialist in the IDB Country Office in their country, for guidance and assistance in filling out the Preliminary Application Form.

Upon receiving the Preliminary Application Form, the Country Office sends the Executing Institution a letter confirming receipt of the documents and requests information from the potential borrower about the organization’s legal and financial status. The Country Office sends the documentation to IDB/MIF Headquarters with its comments and recommendations for deciding whether to continue processing the application.

If the application is approved for processing, the IDB/MIF contacts the Executing Institution in order to prepare the Social Entrepreneurship Project Profile (five pages maximum). Then, the institution will be asked to present institutional information and financial statements from the last three years. These documents help provide a complete vision of the project profile and of the executing institution as they include: (i) a description of the applicant institution; (ii) a description of the problem to be addressed and of the project beneficiaries; (iii) a description of the project’s main objectives, components, and activities; and (iv) a general budget that includes the amount of counterpart funds to be contributed by the institution applying for the project.

For more information, please contact the appropriate IDB Country Office listed on the country offices page.