The Multilateral Investment Fund today announced the approval of a pilot project designed to both reduce the costs of remittances by Ecuadorans living abroad and at the same time provide more resources for microenterprise in Ecuador.
MIF will provide a $200,000 grant to assist the transference, distribution, and management of remittances sent by Ecuadorans living in Spain, as well as a $2 million line of credit to Banco Solidario in Ecuador to increase its loan portfolio for microenterprises.
The operation is the second of several expected MIF projects to channel into productive investments part of billions of dollars of remittances sent home by Latin Americans working in developed countries.
In the first such project, the MIF in May authorized an investment of up to $5 million in a Brazilian fund to provide financing for small businesses established by migrants who have returned from temporary employment in Japan.
Ecuador has one of the fastest-growing rates of remittances in the region. Currently, remittances account for approximately 10% of the country’s gross domestic product and represent the second-largest source of foreign currency, after oil exports.
Banco Solidario S.A. was created in 1996 to help provide financial services to the country’s microenterprise sector and to groups excluded from Ecuador’s traditional financial system.
Among the goals of the MIF projects on remittances is to promote agreements between financial institutions in countries where remittances originate and corresponding institutions with similar and complementary objectives in remittance-receiving countries. To that end, this project seeks to promote partnerships among Banco Solidario, the Confederación Española de Cajas de Ahorro, and the Madrid and Murcia Cajas de Ahorro, which will allow Ecuadorian migrants living in Spain and their families in Ecuador to have access to a package of new financial services that will reduce the transference costs of remittances and encourage the senders and recipients to make deposits in savings accounts.
The line of credit offered through this project will allow Banco Solidario to issue annually about 2,000 microloans, each averaging about $1000. Over the six-year life of the line of credit, the beneficiary microenterprises will be able to increase productivity through financing provided for working capital.
The Multilateral Investment Fund, an autonomous fund administered by the Inter-American Development Bank, provides grants and investments to accelerate private sector development and help improve the climate for investment in Latin America and the Caribbean.