The Inter-American Development Bank (IDB), a multilateral finance institution, approved a USD 1.9 million grant through its autonomous Multilateral Investment Fund (MIF). The grant is part of MIF’s Caribbean Microfinance Capacity-Building Project and will benefit the English-speaking Caribbean. This includes Bahamas, Barbados, Belize, Guyana, Jamaica, Suriname, Trinidad & Tobago, and the Organization of the Easter Caribbean states (OECS).
The project’s goal is to improve the financial performance and outreach of Caribbean microfinance institutions (MFIs). The MIF hopes to achieve this by focusing on five components: strengthening the trade association, Caribbean Microfinance Network (CMN); implementing capacity building plans; providing third party, objective assessments; creating incentives for good practices; and disseminating knowledge.
These components aim to address issues which have impeded microfinance success in the Caribbean as compared to Latin America. These issues were outlined in a proposal presentation at the 2007 Caribbean Microfinance Roundtable and included: the small scale of MFI operations; high delinquency rates; direct government intervention; and the minimal development of regional networks. The presentation also emphasized the limited access to funding in the Caribbean, which is partly due to poor transparency of MFIs. For instance, the MixMarket, the microfinance information clearinghouse, lists four English-speaking Caribbean MFIs, although MIF believes there are over 30 MFIs in the region.
Despite the smaller scale of MFI operations in the Caribbean as compared to Latin America, there is still significant demand for micro lending. An IDB paper showed the ratio of micro enterprises to population size in the Caribbean was roughly equal to that of Latin America at 12 percent (p 2). Furthermore, Jamaica and Guyana report a large percentage of their working population being employed by micro enterprises at 60 percent and 40 percent respectively, with much of the Caribbean reporting the same.
While undoubtedly helpful, this grant will be spread over a high demand and a large number of countries. Furthermore, an interest paper suggested up to 18 percent of the grant would fund management services, leaving only USD 1.6 million for actual loans, creation of a third party evaluator, and improved support to the CMN (pg 6). With eight regional states consisting of 16 countries, this would mean USD 195,000 of additional funding per region.
The MIF focuses on private sector development of small and micro enterprises in Latin America and the Caribbean and was founded in 1993. At the end of 2004, it had USD 100 million fund assets allocated over 19 investments. The project will be co-financed by the Caribbean Development Bank (CDB) and the European Commission (EC) through the African Caribbean Pacific (ACP) Microfinance Project.
By Jennifer Lee, Research Associate
Additional Sources:
Inter-American Development Bank (IDB) Press Release: “IDB fund approves US $ 1.9 million for capacity building in Caribbean microfinance”
“Microfinance in the Caribbean: How to Go Further”, by Glenn D. Westley. IDB Sustainable Devlopment Department Technical Paper Series: September 2005.
IDB and European Commission: “Strengthening Caribbean Microfinance Institutions” presentation, May 17, 2007, Jamaica.
Caribbean Net News: “Micro-enterprise: A Major Source of Employment in the Caribbbean” by Kit Nascimento.
Multilateral Investment Fund: MIF
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