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IDB fund to invest up to $10 million in microfinance institutions in Colombia, Dominican Republic, Honduras and Mexico

The Inter-American Development Bank’s Multilateral Investment Fund (MIF) today announced it will invest up to $10 million in a project to establish new microfinance institutions in Colombia, Dominican Republic, Honduras and Mexico.

The MIF, an autonomous fund administered by the IDB, promotes private sector development in Latin America and the Caribbean, with an emphasis on microenterprise. Since its establishment in 1992 the fund has supported the expansion of the leading microfinance networks in this region.

In this case the MIF will invest with ProCredit Holding, which runs 19 microfinance institutions in Africa, Eastern Europe and Latin America. ProCredit shareholders include the Germany-based firm IPC as strategic partner, multilateral agencies, major pension funds and private foundations that promote corporate social responsibility.

The MIF’s resources will support ProCredit plans to open banks focused on microenterprise and small business clients in Colombia, Dominican Republic, Honduras and Mexico. Besides offering a wide range of financial products and services tailored to the needs of such clients, the banks will also participate in the distribution of remittances.

Additionally, the MIF will provide some $7.2 million in technical cooperation grants to help strengthen the new microfinance institutions and train their staff so operations may achieve the largest scale possible as quickly as possible. Within four years the new ProCredit banks should be serving more than 380,000 clients in these four countries.

Following a long-standing MIF strategy to promote the participation of private sector capital in microfinance, its investments in the ProCredit banks will have an exit mechanism that will allow the fund to sell its shares after a five-year period.

The total cost of the project will be around $91 million, including capital investments and technical cooperation contributions from ProCredit, the MIF and other participating organizations.