- The objective is to allow microfinancial institutions to increase the services they offer in order to benefit more people without financial resources.
- 85% of Latin American microenterprises do not have access to the financial system despite accounting for 54% of the total jobs in the region.
International Finance Corporation (IFC), a member of the World Bank, and the BBVA Microfinance Foundation have reached an agreement for joint action in the promotion of the consolidation and future development of the microfinance industry in Latin America through a program of joint investment in microfinance institutions.
This collaboration will allow for the chosen entities to increase the services they offer in environments where they encounter obstacles to growth, technological development and risk management, in order to allow them to reach their maximum potential.
The BBVA Microfinance Foundation, a not-for-profit entity, is dedicated to the promotion of financial products and services for people with low resources and acts through the network of micro-finance institutions that it creates in support of the industry, reinforcing their capacity for operations, expansion and social endeavors. For their part, The IFC will contribute through investments in both equity and debt in those entities that meet the established transformability requirements
With these types of investments, The ISC and the Foundation will promote the adoption of best practices among select institutions, reinforcing their capital base in order to allow them to grow and diversify their offer of products and services for the underprivileged.
Lars Thunell, CEO and Executive Vice President of the IFC declared “Our partnership with BBVA Microfinance Foundation reflects IFC’s microfinance strategy for Latin America. It will allow us to promote access to finance to entrepreneurs in underserved areas”.
Manuel Méndez del Río, from the BBVAMF, with Lars Thunell, IFC
James Scriven, IFC Director for the Global Financial Markets in Latin America, had this to say: “We will combine the foundation’s deep understanding of the region’s retail banking and its focus on implementing a first-rate technological platform with our reach and leadership in the microfinance sector. This will offer investee companies an extensive range of tailored financial products and guidance on best practice in areas such as governance, as well as access to advanced technologies”.
Manuel Méndez del Río, CEO of the BBVA Microfinance Foundation highlighted his belief that “this alliance will provide important benefits for the development of the microfinance industry given that we both share the same objectives: Allow people who currently do not have access to the traditional financial system to undertake small productive activities that will provide a sustainable improvement in their standard of living and that of their families”.
Fostering financial inclusion
In Latin America and the Caribbean, IFC is working to expand access to high-quality financial services for underserved people, maximizing development impact and improving institutional efficiency. The IFC focuses on promoting collective investment programs, developing microfinance networks and associations and accompanying certain key financial institutions in the sector, as well as supporting advisory projects specifically geared towards reinforcing the efficiency of microfinance institutions.
IFC has supported the creation or development of 24 microfinance institutions in the region, with a cumulative investment of $213 million. In 2006, 17 microfinance clients surveyed in the region disbursed 5.9 million loans totaling $4.9 billion.
For its part, the BBVA Microfinance Foundation focuses its activities on promoting access to credit and financial activities for underprivileged people through microfinance. Their main activity is the construction of a microfinance network, initially in Latin America, that is already under development in Colombia, Peru and Puerto Rico. This network of entities, in which the Foundation will always be a shareholder of a reference, will be governed by a common culture and corporate governance system with a coherent strategy, which will provide them with the technological and management capacity, growth potential and, in general, the economy of scale that only a project of these characteristics can offer.
About IFC
IFC, a member of the World Bank Group, fosters sustainable economic growth in developing countries by financing private sector investment, mobilizing private capital in local and international financial markets, and providing advisory and risk mitigation services to businesses and governments. IFC’s vision is that people should have the opportunity to escape poverty and improve their lives. In FY07, IFC committed $8.2 billion and mobilized an additional $3.9 billion through syndications and structured finance for 299 investments in 69 developing countries. IFC also provided advisory services in 97 countries.