Up to $55 million in financing for institutions to develop and implement innovative and inclusive lending models
The Inter-American Development Bank (IDB) and the Multilateral Investment Fund (MIF), a member of the IDB Group, will provide up to $55 million to help financial intermediaries in Latin America and the Caribbean implement lending models that support growth in women’s businesses.
The initiative, called women enterpreneurshipBanking, aims to provide incentives to banks and other financial intermediaries to test innovative, inclusive lending models for women-owned small and medium enterprises (SMEs).
The IDB’s Structured and Corporate Finance Department (SCF), as part of its financial markets strategy’s beyondBanking program, will offer up to $50 million in A/B loans, risk-sharing facilities and partial credit guarantees. The MIF, through its Line of Activity for Promoting Small Enterprise Financing, will provide up to $5 million in grants to transfer knowledge of effective lending models for women-owned SMEs and to train loan officers and credit managers in these products and services.
Under traditional lending models, women can be rejected for credit because of informality, lack of credit histories and collateral, not fitting bank’s marketing strategies or client profiles, low education levels, lack of formal work experience and exclusion from entrepreneurial networks. Microfinance has strengthened women’s access to finance, but despite strong repayment records, women entrepreneurs often cannot access larger business loans to grow their businesses beyond the micro level.
“This combination of capital and know-how will support efforts by financial intermediaries to reach creditworthy women entrepreneurs,” said MIF General Manager Nancy Lee. "From a growth and development perspective, we cannot afford not to make these high-return investments in entrepreneurial women."
The goal of this initiative is to provide an array of incentives to help financial intermediaries fund the costs of finding and implementing strong models and share some of the initial risk. To achieve this, the MIF and SCF will tap their regional experience, as well as their knowledge of relevant models in other regions, to bring the best ideas to interested financial intermediaries.
“The IDB will utilize its expertise in innovative financial instruments and regional experience to connect financial intermediaries to an untapped yet important client base – women-owned SMEs,’’ said Hans Schulz, General Manager, Structured and Corporate Finance Department. “Through this initiative, we will be able to provide tailored financing and technical assistance to bring these critical economic players into the financial system.”
- Romina Tan Nicaretta