Six MIF projects signed during Foromic will enhance access to micro credit, promote enterprise development and foster innovation in financial services
SAN JOSÉ, Costa Rica – The Multilateral Investment Fund (MIF), a member of the IDB Group, signed contracts to invest nearly $7 million in three projects to increase and improve the offering of microfinance services to microentrepreneurs and small farmers in rural areas in Honduras, Guatemala, Costa Rica, and Nicaragua.
The contracts were signed by IDB President Luis Alberto Moreno before the inauguration of the XIV Inter-American Microenterprise Forum (Foromic 2011), the most important annual microfinance and microenterprise development event in Latin America and the Caribbean. Costa Rica’s Economy, Industry and Commerce Minister, Mayi Antillón Guerrero, also attended the signing ceremony.
Moreno signed a contract for the MIF to provide $4.9 million in financing to Root Capital, a nonprofit social investment fund that is pioneering finance for cooperatives, producers’ associations, and small and medium-sized enterprises in rural areas producing under sustainable agricultural schemes in Honduras, Guatemala and Nicaragua.
Moreno also signed contracts for the IDB’s Social Entrepreneurship Program administered by the MIF to provide $1 million in financing to the Association of Rural Integrated Development in Guatemala and another $1 million to Costa Rica’s Fundación Integral para el Desarrollo del Pacífico Central (FIDERPAC).
These two projects will allow each institution to diversify their financial products and expand credit to over 1,000 microentrepreneurs and small farmers in the rural areas of southwestern Guatemala and the south central region of Costa Rica.
Besides investments related to microfinance in rural areas, Moreno also signed three additional contracts that will pave the way for the MIF to:
- Provide up to $7 million in equity investment to CoreCo Central America I Fund. This venture capital fund will use MIF resources to support the development of small and medium-sized companies in fast-growing service industries in Central America, such as business services, healthcare, information technology, financial services, telecommunications, consumer goods, retail and logistics.
- Invest $1 million to foster innovation and improve the competitiveness of micro and small enterprises in the agricultural and tourism sectors in Costa Rica’s Huétar Norte region. The project will promote the inclusion of the low-income population in value chains and support the development of the country’s first carbon footprint management model at the enterprise level.
- Provide a $1 million grant for Fundación Carulla to increase the access of high-quality early childhood development services for low-income households in Colombia.
Financial Innovation
Nancy Lee, general manager for the MIF, will sign on Oct. 11 a contract that will pave the way for the rollout of a new model of financial risk assessment for financial institutions that could improve access to credit for small and medium-sized companies in Latin America and the Caribbean.
This new tool, known as psychometric testing, is an automated screening tool that takes into account entrepreneurs’ honesty, intelligence, personality, among other personal qualities to gauge ability and willingness to pay back debt. This model, which goes beyond the traditional methods that just focus on collateral and future cash flows to assess financial risk, will be implemented in four financial institutions in the region and it is expected to prove access to credit to at least 2,000 small and medium-sized companies.