Microfinance: Investing in Women Transforming Lives

Just below SMEs in the private sector’s chain of development are microenterprises, the small, typically informal sector firms that enable vast numbers of lower-income women worldwide to escape poverty. The microfinance institutions (MFIs) that serve them have become a proven part of mainstream banking. They help hundreds of millions of disadvantaged people—mostly women—not only raise their incomes by building businesses, but also keep their pace of purchases stable, finance major expenses, and cope with sudden downturns.

Yet as effective as microfinance is, scale remains a problem. Only about 10 percent of its 1.2 billion potential clients worldwide are currently served, and 80 percent of existing MFIs lack the commercial viability that is one of the keys to sustained growth. 

IFC is one of the world’s largest investors in microfinance, holding a  $1.7 billion portfolio. To widen the industry’s impact, we help promising nonprofits become regulated financial institutions, then provide early equity investment to support future growth. 

In Colombia, the lack of a clear policy environment helped keep microfinance small until 2004, leaving considerable unmet demand. Our clients there are local partners of global NGO Women’s World Banking (WWB), which supports MFIs serving 25 million poor 

entrepreneurs in 40 countries. 

In 2006 we began financing and advising a local WWB affiliate in its planned transformation into a new commercial MFI in Bogotá. We are now a shareholder in this new entity, Bancamía, Colombia’s largest MFI today with more than 300,000 clients. Open since 2008, its broad product range now includes savings, microinsurance, working capital, and a set of agricultural loans that IFC helped it develop.

In this same period we have also financed and advised WWB Popayán, now the country’s number two microlender with approximately 200,000 clients. It too will soon be a full-scale commercial bank for microentrepreneurs.

Strong, well-regulated institutions today, Bancamía andWWB Popayán can nowgrow much faster than would have been possible as nonprofits, fueling women’s entrepreneurship with their affordable financing and integrated service packages. Their success has also attracted healthy competition from much larger banks in Colombia, where the microfinance market is now three times the size it was when we began in 2006.