Press Releases

IFC SIGNS ONTO PARTICIPATION IN LATIN AMERICA MICROENTERPRISE FUND -- EVP Lindbaek Hails Model Support For Microfinance on Commercial Basis

Michael Stopford
Phone: (202) 458-4698
Fax: (202) 676-0365

WASHINGTON, D.C., June 19 -- International Finance Corporation Executive Vice President Jannik Lindbaek has signed the Profund shareholders agreement on behalf of IFC.

Profund Internacional S.A. is the first private investment fund targeting for profit financial institutions lending to micro- and small-scale enterprises (MSEs) in Latin America and the Caribbean. The International Finance Corporation (IFC) has approved an investment of up to US$3 million for 15 percent of the fund's equity. Through this operation IFC will help finance the expansion of commercially oriented microfinance institutions in the region.

IFC Executive Vice President Jannik Lindbaek noted that "Through Profund IFC seeks to demonstrate the viability of microlending based on commercial principles and thereby help to leverage additional sources of private capital for the microenterprise sector. Microfinance effectively advances our development goal of poverty reduction and supports job creation and employment growth in the region. We are actively seeking to develop models to support microfinance on a commercial basis, and I am particularly pleased by the Profund approach. We will also look to replicate the Profund example in other regions."

IFC played a key role in helping structure Profund as a market-driven investment vehicle and will serve on the fund's Board of Directors and Investment Committee. IFC is committed to supporting microenterprises and microfinance: micro and small enterprise employment accounts for as much as half of the labor force in some countries of the region.

For more than 20 years microfinance in Latin America and the Caribbean has primarily worked on a non-profit basis with the backing of 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 to be sustainable and meet the growing demand for credit in the informal sector. Profund will catalyze this process by investing in microfinance institutions and providing management support to help them adopt and maintain commercial principles.

Profund seeks to raise US$20 million. Since commencing operations in August 1995, it has invested about $3.5 million in three microlenders: Bancosol S.A. (Bolivia), Finanso, S.A. (Colombia) and AFP (Peru).

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.

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.