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IFC To Launch New Multidonor SME Facility in Latin America


Rob Wright
SME department

Tel: (202) 4737997

Email:
rwright@ifc.org

Adriana Gomez

Tel: (202) 458 5204

Email:
AGomez@ifc.org


Washington D.C, June 19, 2003—As part of its ongoing commitment to small and medium enterprise (SME) development, the International Finance Corporation today announced plans to launch a new multidonor facility to provide technical assistance and other forms of nonfinancial support to SMEs and institutions that serve them in selected countries in Latin America and the Caribbean (LAC).
The new venture will be led and managed by IFC, and funded jointly by IFC and other donors. While initially covering Bolivia, Peru, Honduras, and Nicaragua, it will also undertake some limited outreach activities in nearby nations and will subsequently consider expansion into other countries in the region. IFC is the private sector arm of the World Bank Group.


While all four countries have enacted structural reforms, they continue to face widespread poverty. Their commercial sectors are dominated by a few large firms, and because a vast number of businesses continue to operate informally, there is a “missing middle” with the potential to become a thriving SME segment. The new Latin America SME Program’s mission will be to support robust SME growth, thus complementing the World Bank’s regional strategy to promote the private sector expansion necessary for sustainable job creation and poverty reduction.


“There are many good models of SME development that have proved effective in other challenging environments worldwide that we are looking forward to transferring to Latin America through this new initiative,” said SME Department Director Harold Rosen. “We hope IFC’s strong network of partnerships with leading small business development organizations and its close relationship with other donors can be useful assets in helping local entrepreneurs to reach their potential.”


“We are excited about this initiative,” added IFC’s Director of the Latin America and the Caribbean Department Bernard Pasquier. “With its large number of SMEs and strong entrepreneurial spirit, the region offers many areas where IFC can focus on generating employment effects thru SME support. We will be working to reach many of these smaller firms, as stronger SMEs bring more employment opportunity, higher growth and ultimately, less poverty."


SMEs in these Latin American countries struggle against many obstacles limiting their competitiveness, especially in export markets. These include limited access to capital and markets, lack of quality business support services, poor business associations, and frequent changes in the regulatory framework. The new program will work to ease these constraints, in particular by linking small-scale producers to both domestic and export markets. It will also build on existing IFC linkage work and the SME Department’s existing activities with a wide range of leading external micro/SME development organizations, especially in Bolivia and Peru.


Core activities will include:


·Supporting development of industry clusters to increase production of high value-added exports

·Building capacity of local SMEs to sell goods and services to large companies initially through linkages with IFC investment projects

·Building the capacity of  financial institutions  to better serve the SME market

.Improving the business enabling environment by supporting selected Government red tape reduction initiatives
·Special initiatives with innovative NGOs, universities, foundations and other unconventional partners


The program will have a five-year budget of up to $30 million—including a proposed $2 million contribution from IFC for each year of operation, for a total of $10 million over five years. The total target donor contribution will, on average over five years be $4 million per year up to a total of $20 million over five years, with the organizational structure adopting some models used in IFC’s Private Enterprise Partnership (PEP) in the former Soviet Union.


The LAC Program will be the ninth IFC-managed multidonor SME facilities and joins a family of similar initiatives in developing regions around the world including the Africa Project Development Facility, the Mekong Project Development Facility, the China Project Development Facility, Southeast Europe Enterprise Development, the SouthAsia Enterprise Development Facility, the South Pacific Project Facility, North Africa Enterprise Development and the Indonesia Project Development Facility. Together these facilities have a combined annual budget of more than $30 million. In Africa IFC also supports a related initiative, the African Management Services Company (AMSCO).


IFC's mission is to promote sustainable private sector investment in developing countries, helping to reduce poverty and improve people's lives. IFC finances private sector investments in the developing world, mobilizes capital in the international financial markets, and provides technical assistance and advice to governments and businesses. Since its founding in 1956 through FY02, IFC has committed more than $34 billion of its own funds and arranged $21 billion in syndications for 2,825 companies in 140 developing countries. IFC's worldwide committed portfolio as of FY02 was $15.1 billion for its own account and $6.5 billion held for participants in loan syndications. More information is available at
www.ifc.org and www.ifc.org/sme.