DILI, July 1, 2020 — IFC, a member of the World Bank Group, is providing a loan facility of up to $5 million to Timor-Leste's largest microfinance institution, Kaebauk Investimentu no Finansas, S.A. (KIF), which is expected to lead to over 10,000 more people gaining access to finance by 2024, of which over 75 percent will be women.
The move is aimed at helping to develop Timor-Leste's agricultural sector and expand the country's scarce agri-financing market. Subsistence farming is the main source of employment for 70 percent of the country's rural population. Access to finance is an issue, with only nine percent of adults having access to formal credit. Only 32 percent of women are in the workforce and are often unable to borrow from financial institutions because of a lack of credit history and proof of income.
"This funding will allow KIF, as a market leader in providing financing to micro borrowers, to expand our ability to offer access to finance for more people, especially women and those working in agriculture," said Angelo Soares, CEO of KIF. "We are growing our agri-financing business, in line with the country's priority to develop the agricultural sector and ensure more farmers and agri-enterprises, including those owned by women, can gain access to the funding they need to grow and sell their crops."
IFC, through its investment and advisory services, has been working with KIF on a new farming to finance model, to a focus on cashflows in a bid to improve financing available for rural farmers and women. Under the plan, KIF hopes to expand the financing it provides to full-time farmers by assessing the monthly cashflows from farmers' crops in making loans.
"With thousands of more farmers able to access funding, we hope this new farming to finance approach will become a model for other financial institutions to follow in the country," said Azam Khan, IFC Country Manager for Indonesia, Malaysia, and Timor-Leste. "Increasing access to finance for farmers and agribusiness, especially women borrowers, should help spur Timor-Leste's agricultural sector at a time when the country is feeling the impacts of the COVID-19 pandemic."
The senior loan facility will have a tenor of up to four years and includes a concessional loan from the International Development Association's Private Sector Window (IDA PSW) of up to 50 percent of the facility, with IFC providing the 50 percent balance on its own account. The support from the IDA PSW Blended Finance Facility will enable KIF to provide financing to rural farmers and women at viable rates in a low-income country, where commercial agri-financing remains scarce.
IFC has been working with KIF since 2013, playing a pioneering role in helping set up the microfinance institution. With a presence in all of Timor-Leste's 13 districts through 22 branches, KIF has a 67 percent market share in microloans averaging $1,100. The company serves more than 14,000 clients, and 71 percent of the customers are women.
About IFC
IFC—a sister organization of the World Bank and member of the World Bank Group—is the largest global development institution focused on the private sector in emerging markets. We work in more than 100 countries, using our capital, expertise, and influence to create markets and opportunities in developing countries. In fiscal year 2019, we invested more than $19 billion in private companies and financial institutions in developing countries, leveraging the power of the private sector to end extreme poverty and boost shared prosperity. For more information, visit www.ifc.org .
About the IDA Private Sector Window A
s part of the record $75 billion IDA18 replenishment, the World Bank Group created the $2.5 billion IDA Private Sector Window to catalyze private sector investment in the poorest and most fragile countries. Recognizing the key role of the private sector in achieving IDA18 objectives and the Sustainable Development Goals, the window provides concessional funds for co-investment alongside IFC and Multilateral Investment Guarantee Agency (MIGA) private investments. Concessional funds help to mitigate risk and reduce barriers, which unlocks and crowds in private investment in emerging markets. For more information, visit: https://ida.worldbank.org/psw
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