MICROFINANCE Creating Opportunities in Emerging Markets AT A GLANCE WHAT IFC IS DOING • Microfinance is an important tool for improving • Nearly 3 billion people in developing countries have livelihoods at the base of the pyramid by increasing little or no access to formal financial services. access to finance to underserved households • Financial services for poor people are a powerful and microentrepreneurs, especially women. Yet instrument for reducing poverty, enabling them the sector still reaches less than 20 percent of its to build assets, increase incomes, and reduce potential market among the world’s 3 billion their vulnerability to economic stress. Formal poor people. financial services such as savings, loans, and • IFC is the World Bank Group’s lead investor money transfers enable poor families to invest in microfinance, and it is one of the leading in enterprises and improve their nutrition, living multilateral investors in terms of outreach to conditions, and the health and education of their microfinance institutions, working with 150 children. Microfinance is also a powerful catalyst institutions in more than 60 countries. As of for empowering women. December 2010, IFC’s investee clients had • The industry has evolved from specialized an outstanding portfolio of nearly 8 million nongovernmental organizations to an increasing microloans, worth nearly $12.6 billion. number of regulated and licensed microfinance • IFC’s goal for microfinance is to scale up access institutions (MFIs) that stress that sustainability and to a range of high-quality financial services for impact go hand in hand. underserved populations, maximizing development • This transition to regulated and licensed MFIs impact and ensuring institutional sustainability. has allowed providers to expand their product IFC achieves this goal by effectively combining offering to include noncredit products such as investment and advisory services to a range of savings, remittances, and insurance. Furthermore, financial intermediaries. the use of technology and innovation to develop • The World Bank Group works with private alternative distribution channels has allowed MFIs microfinance institutions and stakeholders to to increase customer convenience, reduce costs, incorporate responsible finance practices into and facilitate greater outreach. all aspects of business operations. When done • IFC is leading global investors in terms of volume. responsibly, private microfinance can have In fiscal 2011, IFC committed $382 million in significant development impact and improve 42 projects with financial institutions. Also, as people’s lives. of December 31, 2011, IFC had a committed • IFC takes an active role in advising microfinance microfinance portfolio worth $2 billion, and IFC’s institutions and developing credit bureaus, advisory services comprised $51.1 million in grant which are critical to avoid over-indebtedness and funding, representing 65 projects. support responsible lending practices. Through its • IFC’s focus is on creating and supporting Global Credit Bureau Program, IFC has created or commercially viable microfinance institutions that improved credit bureaus in more than 14 countries can attract the private capital needed to scale up and advocated for relevant laws in 31 countries. and respond to unmet demand. IFC is playing an important role by demonstrating the business case for commercial microfinance and promoting it as an asset class to private institutional investors. Since pioneering commercial microfinance in the early 1990s, IFC has continued to lead innovation in microfinance, using developments in technology, financial products, and policy to help financial institutions reach a greater number of people in a more cost-effective way. Project Examples Bandhan EB-ACCION Microfinance IFC has invested equity of up to $35 million in Bandhan, EB-ACCION Microfinance is a unique microfinance the fourth-largest microfinance institution in India. partnership between ACCION International, Ecobank Bandhan operates in 18 Indian states in the northern Group (ETI), and IFC providing financial services and eastern parts of the country, including some of the to excluded segments of society. IFC made equity poorest states, where population density is high and investments of $1.89 million in ACCION Microfinance microfinance penetration is low, such as Chhattisgarh, Bank in Nigeria, $1.2 million in EB-ACCION Ghana, and Jharkhand and Tripura. $1.1 million in EB- ACCION Cameroon. IFC has provided technical-assistance grants amounting to $800,000 This project will help promote a more balanced to EB-ACCION Ghana and $1 million to EB-Accion growth of microfinance in India as most of the Cameroon. As of June 30, 2011, the three institutions MFIs are concentrated in southern India. Bandhan had more than 20,000 borrowers with a total of $16.04 focuses primarily on providing microloans to women million in outstanding loans. microentrepreneurs in rural and urban areas through its network of 1,553 branches, and the project is expected EB-ACCION Microfinance has achieved great success to have a significant impact on poverty reduction and in mobilizing deposits valued at $9.82 million for job creation in these underserved areas. 105,000 depositors. The financial institutions offer several account options, some interest bearing to match Bandhan currently has 3 million borrowers, all of whom deposit and savings needs. EB-ACCION Ghana was also are women, and this is expected to grow to 12 million awarded, “Microfinance Institution/Project of the Year” by 2016. IFC also is working with Bandhan to strengthen at the 2011 African Banker Awards, held in September its management capacity and operations in a sustainable 2011 in Washington, D.C. and efficient manner and introduce international best practices in environment and social policies, corporate governance, and risk management. Portfolio Snapshot As at Dec 31 2010, microfinance institutions supported by IFC had a portfolio of 5 million loans with a volume of $5.24 billion. World – 13 clients, 25 projects, $358 million portfolio Middle East and North Africa – 9 clients, 16 projects, $54 million portfolio Latin America and Caribbean – 23 clients, 48 projects, $327 million portfolio Eastern Europe and Central Asia – 11 clients, 10 projects, $80 million portfolio Sub Saharan Africa – 23 clients, 48 projects, $96 million portfolio South Asia – 14 clients, 17 projects, $71 million portfolio East Asia and Pacific - 14 clients, 36 projects, $142 million portfolio *Above figures as of December 31,2011 Contact Martin Holtmann | Head, Microfinance | mholtmann@ifc.org | (202) 458-5348 Makanda Kioko | Advisory Program Manager | MKioko@ifc.org | (Kenya) + 254-572-511-400 Media Contact John McNally | Communications Officer | jmcnally@ifc.org | (202) 458-0723