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May 2010 page 1/2
In many countries, microenterprises and small businesses account for the major share of the private sector and employment. Yet, despite their size and importance, these businesses rarely have access to the savings, credit, and pay-ment services provided by formal finan-cial institutions.
Microfinance is a critical tool in the fight against poverty. Initiatives in microfi-nance foster a thriving private sector in developing countries, leading to sus-tained growth. Access to a range of microfinance services—savings, loans, and money transfers—enables poor families to invest in enterprise, improv-ing living conditions for themselves and their communities.
What We Do
MIGA—the Multilateral Investment Guarantee Agency—is a member of the World Bank Group. MIGA’s mission is to promote foreign investment into devel-oping countries to support economic growth, reduce poverty, and improve people’s lives. We do this by providing political risk insurance (or guarantees) against certain noncommercial (country or political risks) risks to investments in developing countries, as well as by providing dispute resolution services for guaranteed investments.
MIGa at Work
Our political risk insurance plays a key role in bolstering the confidence of investors and lenders, and in facilitat-ing investments with high development impact into underserved markets. This is crucial to the microfinance sector.
For example, MIGA has been active in microfinance in Pakistan. The country’s banking sector faces many challenges, including low banking penetration and limited access to finance, especially where small and medium-sized enter-prises and rural communities are con-cerned. To assist underserved yet pro-ductive segments of Pakistan’s economy, in 2009 MIGA issued guarantees total-ing $1.8 million for the establishment of the Kashf Microfinance Bank in con-junction with the Kashf Foundation, an organization that uses group lending to provide finance to micro and small busi-ness owners, especially women, across the country.
Our support in establishing a for-profit, national, and fully-regulated microfi-nance bank is helping to encourage new entrants and greater overall penetration to meet the vast need for financial ser-vices for Pakistan’s poor.
Microfinance — Critical to Development
MICroFINaNCING BRIeFINSURINg INVeSTMeNTS r eNSURINg OppORTUNITIeS
Through its investment guar-antees, MIGA offers protection against the following types of risks:
r Currency inconvertibility and transfer restrictions
r Expropriationr War, civil disturbance,
terrorism, and sabotager Breach of contractr Non-honoring of sovereign
financial obligations
MIGA provides dispute resolu-tion services for guaranteed investments to prevent disrup-tions to developmentally benefi-cial projects.
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WorLD BaNk GroUP MULTILaTeRaL INVeSTMeNT gUaRaNTee ageNCY May 2010 page 2/2
CoNtaCt
For information on how MIGA can support microfinance
Ileana [email protected]
For general information
World Bank GroupMultilateral Investment Guarantee Agency1818 H Street, NWWashington, DC 20433t. 1.202.458.2538f. [email protected]
www.miga.org
Another example of MIGA’s support to microfinance is its recent guaran-tee of nearly $2 million to Banco de la Microempresa S.A. (Mibanco) and Grupo ACP Inversiones y Desarrollo of Peru for their investments to estab-lish and operate Microfin, a microlend-ing organization in Uruguay. Microfin focuses on loans between $3,500 and $10,000, but also provides loans below that range. The bank targets entrepre-neurs with ten employees or less. With plans to establish an estimated 100 service points throughout the country, Microfin has a strong strategy to reach underserved segments of Uruguay’s market.
Importantly, Microfin also represents an example of a South-South (developing country to developing country) invest-ment. Targeting this kind of investment is a critical part of MIGA’s mission.
SMaLL INveStMeNt ProGraM aSSIStS MICroFINaNCe
In both the Pakistan and Uruguay examples, the covered investment was relatively small—as is often the case in the microfinance sector. MIGA offers a specific Small Investment Program that is used for many sectors, but is of particular applicability to microfinance. MIGA’s Small Investment Program is designed to grow the agency’s support for small and medium-sized investors by offering:
� a standardized package of risk cov-erages for currency transfer restric-tion, expropriation, and war and civil disturbance
� a quick and efficient underwriting process
� a single application form that can be completed online
� no application fee for eligible small and medium-sized investors
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