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
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.