Rio de Janeiro, November 20, 2002—The
World Bank Group President James D. Wolfensohn signed today an agreement
to provide a US$1.25 million to support the establishment of a pioneer
commercially-based microfinance institution in Brazil, Microinvest. The
funding is designed to expand access to financing for low income entrepreneurs,
helping them build their businesses and raise their standards of living.
The financing to Microinvest, made by the International Finance Corporation
(IFC), the private sector development arm of the World Bank Group, will
assist in institution building of one of the very few commercially oriented,
self-sustainable microfinance institutions in Brazil. Microinvest represents
IFC’s first investment in a Brazilian microfinance institution.
During the signing ceremony that took place in Rio de Janeiro as part of
his visit to Brazil, Mr. Wolfensohn noted: “This project represents
an important step towards improving financial intermediation, providing
sustainable financing mechanisms for small and microenterprises and increasing
income earning opportunities for the urban poor. It is also in line with
the World Bank Group strategy for smaller enterprises, which is underpinned
on expanding access to capital, building capacity in the locally-based
institutions that support these enterprises, and improving the business
environment.”
The investment in Microinvest will give IFC a 25 percent share purchase
of Microinvest, while the remaining share capital will be owned by the
Bank’s sponsor, Fininvest S.A.—one of the largest finance companies in
the low-income consumer and retail credit segment in Brazil. Fininvest
is a wholly-owned subsidiary of União de Bancos Brasileiros S.A. (Unibanco),
and has been working on microcredit, since 1998, through special purpose
branches, located in low income areas, in Rio de Janeiro. As a finance
company , Fininvest has been a pioneer, granting more than 4.000 credits,
on a total financed value of R$6.0 MM.
Mr. Pedro Moreira Salles, Chairman of Unibanco, added: “A large number
of indicators point to the fact that the microcredit segment in Brazil
is growing and attracting investments from the financial sector and from
several development and training institutions. Opportunities are being
constantly offered, and certainly the IFC’s partnership will contribute
to an improvement of the micro-finance market in our country, in which
process Microinvest intends to make an important contribution.”
Microentrepreneurs are an important engine of social development and economic
growth in most developing countries including Brazil. There are an estimated
9.5 million micro and small enterprises in Brazil. They account for over
90 percent of all firms in the country, and provide over 35 percent of
total employment in services, commerce, and industry.
IFC and the World Bank Group believe that well-managed microfinance institutions
can –and should - be commercially viable so that financial services can
be provided to the underserved over the long term, resulting in better
opportunities for the poor. Research shows that only four percent of the
potential global market for microfinance is currently being reached, often
by institutions that are not financially sustainable. The World Bank estimates
that there are more than 500 million microentrepreneurs around the globe,
almost all of them with no access to funding from traditional financial
institutions.
Although direct support for microcredit institutions represent a relatively
new business line, IFC has a growing pipeline of microlending projects
worldwide, in countries such as Bolivia, Bosnia, Bulgaria, Cambodia, Georgia,
Haiti, India, Mexico, Peru and the Philippines. Recently, IFC supported
the leading Peruvian microfinance institution Mibanco, as well as
a key microfinance project in Mexico, Financiera Compartamos. IFC
has also established strategic partnerships with ACCION Internacional to
finance four microlending institutions in Mozambique, Brazil, Guatemala
and South Africa, and with FINCA International, a leading U.S.-based microfinance
nongovernmental organization whose small loans help raise incomes of more
than 215,000 people in 20 different countries in Africa, Latin America
and Eastern Europe.
The investment in Microinvest supports IFC’s commitment to strengthening
Brazil’s financial sector to enable it to provide much-needed financing
to promote the development and growth of Brazil’s incipient microfinance
market and microentrepreneurs. It also braces IFC’s efforts to help reduce
poverty by reaching out to the low-income population with formal financial
products that support individual and collective initiatives and give poor
people the opportunity to sustain themselves and their families.
IFC’s mission (www.IFC.org)
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.
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