WASHINGTON, D.C., March 13 -- The International
Finance Corporation (IFC) has approved an equity participation of up to
US$3 million for 15 percent of the equity in Profund Internacional, S.A.,
the first private investment fund targeting financial institutions that
lend to micro- and small-scale business in Latin America and the Caribbean.
Through this operation IFC will help finance expansion of institutions
with a proven track record in microfinance, a critical catalyst of job
creation and private sector development among the region's low-income groups.
Profund is a 12-year closed-end fund that will seek long-term capital appreciation.
It will be incorporated in Panama with authorized share capital of US$25
million. Its founders are leading private non-profit organizations long
active in microfinance such as ACCION International of the U.S., the Calmeadow
Foundation of Canada, Fundes of Switzerland, and Societe d'Investissment
et de Developpement International of France.
Other investors expected to participate include the Corporacion Andina
de Fomento (CAF) of Venezuela; the Multilateral Investment Fund (MIF),
an independent entity related to the Inter-American Development Bank in
Washington, DC; the Calvert Group of the US; and the Swiss Government.
Microenterprises employ at least 150 million people in the region overall,
including more than half of the population of some major cities. The microlending
institutions that finance them provide a sustainable route out of poverty,
giving low-income entrepreneurs their first small loans that support self-employment
in various activities ranging from sewing, shoe repair and jewelry making
to taxi cabs, auto repair shops, fruit and vegetable stands, and other
kinds of businesses. "We are pleased to take this step to support
the growth of microenterprise.
This is a new and important area for IFC because of its demonstrated effectiveness
in reducing poverty in developing countries, especially among women,"
said IFC Executive Vice President Jannik Lindbaek. "We expect Profund
to play a vital development role by providing credibility and management
as well as financial support to financial institutions providing microlending
services. This should in turn strengthen the emerging for-profit microlending
industry and help it attract additional private capital for further expansion."
For more than 20 years microfinance in Latin America and the Caribbean
has primarily worked on a non-profit basis with the backing of aid donor
funds. But as these official resources have become increasingly scarce,
it has become clear that microlenders must evolve into viable, commercial
for-profit institutions if they are to meet the growing demand for credit
in the informal sector. In order to help catalyze this process, Profund
will invest in microfinance institutions with sound management and market-based
business plans as well as a demonstrated capability of reaching clients
in the informal sector.
The fund's portfolio currently consists of investments in BancoSol, S.A.
in Bolivia and FinanSol, S.A. in Colombia, and a solid pipeline of investments
in other microlending projects around the region has already been established.
The IFC investment in Profund will complement another recent World Bank
initiative for micro- and small-scale enterprise, the Consultative Group
to Assist the Poorest (CGAP), a multidonor effort launched in June, 1995
whose activities include funding microfinance institutions, sharing knowledge
worldwide, and coordinating policy.
IFC is a member of the World Bank Group and is the largest source of equity
and loan financing for private sector projects in developing countries.