OPIC Board Approves $125 MN Microfinance Fund for Latin America

Microfinance Focus, November 22, 2009: The Board of Directors of the Overseas Private Investment Corporation (OPIC) approved $125 million for a microfinance growth fund that will provide much-need capital to microfinance institutions (MFIs) in Latin America and the Caribbean, said a statement. President Obama announced establishment of the fund at the Summit of the Americas in April, as a response to the impact of the global financial crisis on the availability of finance for micro and small businesses.

Proceeds of the OPIC loan, together with equity contributions from other sponsors, will be used by the fund manager, Blue Orchard Finance, to make loans to MFIs in the region, which in turn will expand their microfinance lending activity. The fund will have an initial capitalization of up to $156 million and a maximum capitalization of $250 million, and is expected to begin investing by the second quarter of 2010.

OPIC was established as an agency of the U.S. government in 1971. It helps U.S. businesses invest overseas, fosters economic development in new and emerging markets, complements the private sector in managing risks associated with foreign direct investment, and supports U.S. foreign policy.

U.S. sponsors of the fund include Accion International and Gray Ghost Microfinance Fund. Other sponsors include the Multilateral Investment Fund (MIF) of the Inter- American Development Bank (IDB), the Inter-American Investment Corporation (IIC) of the IDB, the Andean Development Corporation (CAF), Norwegian Microfinance Initiative (NMI), Netherlands Development Finance Company (FMO), and Desjardins Group of Canada. The sponsors signed a memorandum of understanding to establish the fund at the Inter-American Forum on Microenterprise in Arequipa, Peru, in September.

At the announcement in April, President Obama said, “The global credit crisis is having a significant and harmful impact on the availability of finance for micro and small businesses that provide a majority of the jobs in the hemisphere. This fund will provide stable medium and longer-term sources of finance to microfinance institutions to help rebuild their capacity to lend during this difficult period and to increase the supply of finance for micro and small businesses as recovery takes hold.”

OPIC Acting President Dr. Lawrence Spinelli said today, “Microfinance plays an important role in increasing economic opportunity in developing countries, particularly for people at the lower-income segments of society.  The industry’s rapid growth has been interrupted by the global financial crisis, however, slowing lending activity and putting portfolios at risk. This fund will provide a new source of finance to support the restoration of MFI lending throughout Latin America and the Caribbean.”

According to a recent report funded by IDB/MIF, there are an estimated 636 MFIs currently financing about 9.5 million microenterprises in the region, with an outstanding loan portfolio of $10.9 billion. Loan growth rates have averaged more than 35 percent per year since 2002, as MFIs had ready access to debt and equity financing, from both domestic and international sources, to meet their funding needs.

Blue Orchard Finance, S.A.,  is the world’s largest fund manager specializing in the microfinance industry.

Accion International is one of the premier microfinance organizations in the world, with a network of lending partners that spans Latin America, Africa, Asia and the United States. The Gray Ghost Microfinance Fund, created in 2003, is a fund of funds with a $50 million portfolio of microfinance investments.

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