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IFC Partners with Germany’s KfW, Expanding Access to Finance for 5 Million Microenterprises and Low-income Households in Asia
In Washington
Cynthia Case
Phone: +1 (202) 473 6287
Email: CCase@ifc.org
In Phnom Penh
Ann Bishop
Phone: +855 (23) 210 922
Email: ABishop1@ifc.org
Washington, April 14, 2007 – IFC,
the private sector arm of the World Bank Group, in collaboration with KfW,
Germany’s development bank, today signed a strategic partnership agreement
to support microfinance institutions through the new Microfinance Initiative
for Asia. Over the next three years, IFC, KfW, and other partner institutions
will support microfinance institutions throughout Asia by committing up
to $1 billion for debt and equity investments, structured finance, and
advisory services. This bold strategic partnership, the first microfinance
initiative of its size to target the poor in Asia exclusively, will also
have a catalytic impact.
Asia has been at the forefront of establishing
microfinance institutions, in large part due to the groundbreaking work
of pioneers such as Nobel Peace Prize winner Muhammad Yunus. But the financing
needs of low-income households and microentrepreneurs in the region still
remain largely unmet. Demand for financial services among entrepreneurial
poor people is extensive. But the supply of microfinance, estimated at
$4 billion and serving 22 million borrowers, is limited and concentrated
in just a few countries and institutions, with an overall market penetration
rate of only 6 percent.
Speaking at the signing, Heidemarie
Wieczorek-Zeul, German Minister for Development Cooperation, said, “This
initiative will establish the necessary financing mechanisms to link microfinance
institutions to the domestic and global capital markets, helping them expand
their outreach to the poor. I am convinced that the strategic direction
by IFC and KfW will increase access to finance and contribute to poverty
alleviation.”
Lars Thunell, head of IFC, said, “The
primary constraints on increasing financial access are a lack of institutions
and the absence of adequately structured risk capital. The Microfinance
Initiative for Asia will tackle both constraints, achieving another landmark
in promoting commercial microfinance. By offering long-term local currency
loans and equity participation, together with advisory services, the initiative
aims to increase microfinance outreach by over 5 million new clients by
2009.”
A report recently copublished by IFC,
The Next 4 Billion: Market Size and Business Strategy at the Base of
the Pyramid, discusses the market opportunities for serving the 4 billion
people at the bottom of the economic pyramid—those with annual incomes
below $3,000 in local purchasing power. Asia’s 2.86 billion people
in this category represent 83 percent of the region’s population, the
vast majority of whom lack access to financial services. The findings
show the importance of the joint IFC-KfW investment strategy, which will
seize market-based opportunities that better meet the needs of those at
the base of the pyramid, increase their productivity and incomes, and empower
their entry into the formal economy.
About IFC
IFC, the private sector arm of the World
Bank Group, promotes open and competitive markets in developing countries.
IFC supports sustainable private sector companies and other partners
in generating productive jobs and delivering basic services, so that people
have opportunities to escape poverty and improve their lives. Through FY06,
IFC Financial Products has committed more than $56 billion in funding for
private sector investments and mobilized an additional $25 billion in syndications
for 3,531 companies in 140 developing countries. IFC Advisory Services
and donor partners have provided more than $1 billion in program support
to build small enterprises, to accelerate private participation in infrastructure,
to improve the business enabling environment, to increase access to finance,
and to strengthen environmental and social sustainability. For more information,
please visit www.ifc.org.
IFC works closely with KfW in other
regional microfinance initiatives covering Sub-Saharan Africa and Eastern
Europe. Cooperation between the two institutions has been beneficial in
the sharing of both knowledge and resources.
About KfW
KfW Entwicklungsbank finances investments
and accompanying consulting services in developing countries. It functions
on behalf of the German Federal Ministry for Economic Cooperation and Development.
Its primary goal is to promote sustainable improvement of the economic
and social conditions of people in developing countries. Through its Financial
Cooperation, it contributes to the global reduction of poverty, the protection
of natural resources, and the attainment of peace.
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