The IDB does not make direct equity investments itself, but the Multilateral Investment Fund (MIF) and the Inter-American Investment Corporation (IDB Invest), both members of the IDB Group, do invest in private businesses.
The MIF invests in equity funds and microfinance institutions that in turn, provide assistance to micro and small businesses in Latin America and the Caribbean. MIF investments are development tools, evaluated not just for financial results, but also for development characteristics. Examples include innovation, demonstration effect, job creation, technology transfer, promotion of foreign direct investment, entrepreneurial development, fostering the culture of equity ownership, savings mobilization, and contribution to the development and deepening of capital markets.
Most microfinance intermediaries that have received MIF investment funding are private sector institutions. The creation of a network of stable intermediaries is a major goal of MIF investments.
The Inter-American Investment Corporation (IDB Invest), a multilateral investment institution that is an independent affiliate of the IDB Group, invests in small and medium-size private projects, either directly or through equity funds.
The IDB Invest makes equity investments of up to 33 percent of a company's capital. It does not take on managerial or administrative roles in the companies in which it invests, but it may request representation on the board of directors.
The IIC will exit its shareholding through either:
- Sale on the local stock market
- Private placement with interested third parties
- Sale to the project sponsors under a pre-negotiated put option agreement
- Redemption by the company.
The IDB Invests in equity funds, as well. It channels these investments to national, regional, and sector equity funds that invest in medium-size Latin American and Caribbean companies that have no other appropriate source of capital.