MICROFINANCE PUBLICATION ROUND-UP: Assessment of Deutsche Bank’s VG Microfinance Fund, SMEs in Latin America and the Caribbean, Bridging the Entrepreneurship Gender Gap

“VG Microfinance – Invest Nr. 1 GmbH Fund Assessment Study;” by Rocio Cavazos and Melanie Meslay; 2015; 33 pages; available at https://www.db.com/usa/content/en/vg-microfinance-invest-1.html

This study presents a quantitative and qualitative analysis of VG Microfinance-Invest Nr. 1 GmbH, a fund launched by Germany’s Deutsche Bank in 2007 with the support of the German government’s Kreditanstalt für Wiederaufbau Entwicklungsbank (KfW) that provided subordinated debt to 21 microfinance institutions (MFIs) in 15 different countries. The EUR 60 million (USD 67.2 million) fund focused on increasing client outreach and product diversification, while attracting further debt and equity investors. Since the fund’s inception, the total number of borrowers served by its investees increased from 2.2 million to 5.5 million, and seven investee MFIs have become regulated and licensed to mobilize savings. On average, the MFIs increased their numbers of shareholders by 60 percent, and the report indicates that they believe Microfinance-Invest Nr. 1 is one of the main factors explaining this increase. The fund’s MFIs have continued serving mostly female borrowers, while increasing the percentage of their borrowers based in rural areas from 38 to 58 percent. The number of depositors in the portfolio increased from 2 million to 12 million in the lifespan of the fund. The MFIs’ average loan sizes relative to GDP per capita have declined, indicating continued efforts to target the lower segments of the economic pyramid. The fund closed in December 2014.

“SMEs in Latin America and the Caribbean: Closing the gaps for the banks in the region;” by the Small and Medium Enterprise (SME) Finance Team of the Access to Finance unit of the Multilateral Investment Fund (MIF); 2013; 70 pages; available at http://www.iic.org/sites/default/files/documents/pub/en/iicdocs-390253-v1-survey_closing_the_gap_for_banks_in_the_region.pdf

This report presents the results of sixth annual banking survey on small and medium-sized enterprise (SME) finance issued to 100 banks in 21 countries by the Inter-american Development Bank Group’s Multilateral Investment Fund. The survey indicates that financing to SMEs will continue to increase, as 96 percent of banks surveyed perceived it is a strategic segment of their business, and 92 percent are already targeting these enterprises with specific financing policies. The informality of SMEs was identified as the main barrier to improving financial services to this segment, followed by difficulties regarding the performance of due diligence. To overcome these problems, banks are increasingly looking for innovative methodologies to reduce risk. For example, almost half of the banks were interested in learning more about new credit scoring models. The authors also caution that women entrepreneurs may be underserved because half of the banks surveyed do not collect sex-disaggregated data.

“Bridging the Entrepreneurship Gender Gap: the Power of Networks;” by the Boston Consulting Group; 2014; 13 pages; available at http://villageenterprise.org/wp-content/uploads/2014/11/Bridging_the_Entrepreneurship_Gender_Gap.pdf

This research paper addresses the difference between the numbers of men and women that “start, sustain, and grow their own businesses.” Based on interviews with 13 organisations that promote female entrepreneurship around the globe, the report highlights the impact of social capital on women’s entrepreneurship. Social capital, specifically in the form of networks, leads to “growth; improved business skills and new ideas; credibility; access to funding; and emotional support.” For the networks to have a positive and sustainable effect in female entrepreneurs, the authors argue that they need to comply with the “three I” framework: intent, inclusion and interaction. The authors state that women own 40 percent fewer businesses than men and facilitating the access of women to the traditional economy through entrepreneurship would increase the empowerment of women, increasing global GDP to rise approximately 2 percent.

By Julia Marín, Research Associate

[1] Multilateral Investment Fund, SMEs in Latin America and The Caribbean: Closing the gaps for the banks in the region 

[2] Deutsche Bank, VG Microfinance – Invest Nr. 1 GmbH Fund Assessment Study 

[3] Boston Consulting Group, Bridging the Entrepreneurship Gender Gap: the Power of Networks 

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