CSE Microfiance Institution Building Facility

completed

Summary Of Project Information (SPI)Project NameGlobal Microfinance Capacity Building FacilityRegionPan-regionalSectorProject No009970Projected Board DateMay 25, 2000Company NameGlobal Microfinance Capacity Building FacilityTechnical Partner and/or Major ShareholdersThe technical service provider is Internationale Projekt Consult GmbH (IPC), a German firm specializing in providing technical and management services to for-profit microfinance institutions in emerging markets. The Global Microfinance Capacity Building Facility (the Facility) is based on a global strategic partnership between IFC and IPC, and will include an investment by IFC in IMI, a company established by IPC to make equity investments in for-profit microfinance institutions in emerging markets. In addition to IPC, IMI''s current shareholders include: (i) IPC Invest, a group of private investors who are either current or former members of IPC''s professional staff; (ii) Deutsche Investitions -und Entwicklungsgesellschaft mbH (DEG), a government finance and consulting corporation for German development policy; (iii) Pro Credito, a Bolivian foundation; and (iv) the DOEN Foundation, funded from the Netherlands National Postal Lottery. Microfinance companies to be established under the Facility will have varying shareholder structures. It is expected, however, that the following multilateral and bilateral institutions will be potential shareholders in selected projects under the Facility: (i) the DOEN Foundation; (ii) EBRD; (iii) DEG; and (iv) Nederlandse Financierungs Maatschappij Voor Ontwikkelingslanden (FMO, a Dutch semi-government owned development financing agency).Project Cost Including proposed IFC investmentThe proposed project, Global Microfinance Capacity Building Facility, consists of IFC investments of up to US$13.4 million, and IFC trust funds for co-financing technical assistance of up to US$1.4 million, for the creation of microfinance institutions in selected member developing countries over a three-year period. The proposed package encompasses a strategic investment of DM4.0 million (US$2.0 million) in the equity capital of Internationale Micro Investitionen (IMI), a German investment firm dedicated to acquiring equity participations in microfinance institutions in emerging markets. The overall cost of the Facility (US$85.0 million) includes an equity component (US$51.7 million) and a component of grant funds for technical assistance (US$20.0 million). IFC''s equity investment (US$13.4 million) would represent around 20% of the total equity financing and 7.0% (US$1.4 million) of the total trust funds component. International institutional investors, including multilateral and bilateral financial institutions, donors and foundations would be approached to fund the remaining 80% equity investment (US$ 51.7 million) and 93% grant funds (US$18.6 million). Location of project and Description of siteThe Facility has identified the following countries for the creation of commercially oriented microfinance institutions over a three-year period: Bulgaria, Czech Republic, Macedonia, Moldova, Romania, southeastern Turkey, Kazakhstan, Ghana, Peru and the Philippines as well as Kosovo Description of Company and Purpose of ProjectsThe rationale of the project is to promote micro lending institutions in member developing countries to help populations with little or no access to formal credit institutions transition from unemployment to economic growth and employment generation through participation in the market economy. The proposed Facility is the first step in a planned series of global and regional initiatives planned to promote the development of commercially sustainable credit and other financial services for micro and small enterprises. Other global and regional initiatives will rely on a series of strategic partnerships between IFC and other technical partners to expand the investment and human capital available to pioneer and replicate successful models of delivering credit and other financial services to micro and small businesses with limited access to the formal financial system.This multi-project program is expected to provide a basis for a more efficient and strategic approach to augmenting the supply of credit and other financial services to micro and small enterprises. By creating strategic alliances for fund raising, management support services, and strengthening capacity for standardized project documentation and project processing procedures, the cost of putting very small micro-finance investments on the books can be significantly reduced. A mid-term planning horizon will also let the technical partner, IPC, start building its capacity to accommodate the increased level of activities associated with creating eleven microfinance institutions over a short period of three years. The developmental impact of commercially-run microfinance institutions, particularly on populations with little or no access to formal credit institutions, has been well demonstrated by IFC''s model microfinance institution, Micro Enterprise Bank, Bosnia-Herzegovina, and by the internationally-recognized microfinance institutions such as Bank Rakyat Indonesia and Bancosol. IFC''s developmental strategy for the sector is to attract significant private sector investment in microfinance by demonstrating that properly structured and organized microfinance institutions can be a viable commercial proposition.A key objective of the Facility is to generate a significant international demonstration effect to catalyze the replication of the IFC model microfinance institutions in emerging markets. Following its successful implementation in Bosnia and Herzegovina (MEB), the IFC "model" microfinance institution has been replicated in Albania, Georgia, Haiti, and Kosovo. By demonstrating the commercial viability of micro-lending institutions and the anticipated replication of the model in emerging markets, IFC''s microfinance strategy aims to catalyze private investment in the micro and small enterprise sector.Environmental Category and IssuesThis is a category FI Type 1 project according to IFC’s environmental and social review procedure. IPC/IMI have agreed to develop an environmental management framework to ensure that each financial institution in which IMI invests will have an environmental management system (EMS). The EMS for each institution will provide that activities financed must comply with the applicable environmental, health and safety legislation and standards of the host country and be consistent with IFC’s Microfinance Exclusion List. IPC has agreed to appoint a person in a management role to act as IMI’s environmental advisor. IPC has agreed to provide to IFC an annual environmental performance report on IMI investments, which will be a consolidated report on environmental management and will be based on the environmental performance reports provided to IMI by the investee companies.Date SPI sent to InfoShop April 14, 2000“This Summary of Project Information is prepared and distributed to the public in advance of consideration of the proposed transaction by the Corporation’s Board of Directors. It is provided for the purpose of enhancing the transparency of IFC’s activities and should not be construed as presuming the outcome of IFC Board consideration.”For Additional Information contact: Corporate Relations Unit -telephone: (202) 473-7711facsimile: (202) 974-4384