MICROCAPITAL BRIEF: The Inter-American Development Bank (IDB) Approves $10m Credit Guarantee for Banco de Crédito e Inversiones (BCI), a Commercial Bank in Chile, for Lending to 80,000 Small Entrepreneurs

The Inter-American Development Bank (IDB), which provides multilateral financing in Latin America and the Caribbean, has approved a USD 10 million credit guarantee as part of a program from Banco de Crédito e Inversiones (BCI), a Chilean commercial bank, to provide loans to 80,000 small entrepreneurs [1,2,3]. The program will be carried out by BCI Nova Banca Emergente, BCI’s microfinance arm [1]. BCI will utilize credit histories and background information from some of its corporate clients that have microentrepreneurial client bases [1]. It will also utilize new management and credit technologies including electronic payments and online collection [1]. Additionally, the IDB’s Multilateral Investment Fund (MIF), an autonomous fund administered by the IDB, has provided a USD 600,000 grant to BCI to support training for lending staff [1]. The program will focus on Santiago, the Chilean capital, where an estimated one million people are unbanked [1].

By Christopher Maggio, Research Assistant

About:
Inter-American Development Bank’s (IDB) Multilateral Investment Fund (MIF)

Description:
The Inter-American Development Bank’s (IDB) Multilateral Investment Fund (MIF) is an autonomous fund that is administered by the IDB. It was created in 1993 to provide funding to micro and small enterprises in Latin America and the Caribbean. It has 38 member countries that donate to the fund from Latin America and the Caribbean, North America, Europe and Asia. It also receives financing from private investors including the Latin American Challenge Investment Fund S.A, the Emergency Liquidity Facility, and ACCION Investments.

Microfinance Information Exchange (MIX) Profile
http://www.mixmarket.org/funders/mif

Organization’s Website
http://www.iadb.org/mif/projects.cfm?lang=en

Just the Facts:
– Country of Incorporation: United States
– Year Founded: 1993
– Legal Status: Multilateral Investment Fund
-Total Disbursements in 2008: USD 112 million
– Area of Operation: Latin America and Caribbean
– Participant(s)/Backer(s)/Investor(s): IDB, Fucac, The Latin American Challenge Investment Fund S.A, Emergency Liquidity Facility, Bangente, Findesa, Profund International, ACCION’s Gateway Fund, Solidus
– Instruments:  Loans and Debt Securities, Grants,  Equity Investments
– Fund Currency: EUR, PEN, USD
– Investment Horizon: 1-5 years for loans a debt securities, 5 for equity
– Unit Chief: Sandra Darville

Contact Information:
Sandra Darville
sandrad@iadb.org

IDB Headquarters
1300 New York Avenue, N.W.
Washington, D.C. 20577, USA
Tel: +1 202 623 1000

Additional Resources:
MICROCAPITAL.ORG STORY: The Inter-American Development Bank’s (IDB) Multilateral Investment Fund (MIF) Provides $4m Grant for Microfinance Technology Projects in Latin America and Caribbean: https://www.microcapital.org/microcapitalorg-story-the-inter-american-development-bank%E2%80%99s-idb-multilateral-investment-fund-mif-provides-4m-grant-for-microfinance-technology-projects-in-latin-america-and-caribbean/

Bibliography:
[1] IDB press release entitled ‘Chilean bank expands financing for microenterprise with IDB assistance’: http://www.iadb.org/news-releases/2009-12/english/chilean-bank-expands-financing-for-microenterprise-with-idb-assistance-6141.html
[2] IDB: http://www.iadb.org/?lang=en
[3] BCI (in Spanish): http://www.bci.cl/personas/
[4] IDB MIF: http://www.iadb.org/mif/home/index.cfm?language=English

Source Press Release:
Dec 18, 2009
Chilean bank expands financing for microenterprise with IDB assistance
A $10 million boost for an innovative program created by Chile’s Banco de Crédito e Inversiones for unbanked microentrepreneurs

The Inter-American Development Bank has approved a $10 million credit guarantee to help up to 80,000 small entrepreneurs get access to loans under an innovative program provided by Chile’s Banco de Crédito e Inversiones (BCI).

BCI will apply new management and credit technologies for the program. It will partner with some of its own corporate clients who have large distribution networks and micro entrepreneurial client bases. It will also provide training to extend financial services to businesses operated by owners with low incomes who typically are excluded from the country’s financial system.

BCI Nova Banca Emergente, a separate unit, will carry out the program.

The program will focus primarily on the Chilean capital, Santiago, where one quarter of Chile’s microenterprises are located, and provide 40 percent of the metropolitan area’s employment. Around one million people in Santiago remain unbanked. More than 60% of Chile´s microentrepreneurs are estimated to lack access to bank credit.

The IDB’s credit guarantee, with resources from the Bank’s Opportunities for the Majority initiative, will be denominated in Chilean pesos. A $600,000 grant from the IDB’s Multilateral Investment Fund will support the training component of the program and the formation of strategic alliances with corporate and other partners.

“BCI, with IDB support, will contribute to extend financial democracy to an underserved market through the full use of modern technologies and the development of new business tools, applied in conjunction with strategic partners,” said Luiz Ros, manager of the Opportunities for the Majority initiative. “This will have a real impact on the lives of thousands of small businesses.”

BCI will work with corporate suppliers to obtain credit histories and background information needed to decide loan applications by small business owners.

The project includes several other innovative tools, such as electronic payments, online collection, specialized training for bank personnel and mobile classrooms to extend financial literacy to borrowers.

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