BMZ and KfW bolster the Asian Microfinance Sector with USD 100 million
Asia, June, 28 2012 -
The Federal Ministry for Economic Cooperation and Development and the KfW Entwicklungsbank business area today launched the MIFA Debt Fund in Frankfurt am Main. It is the first fund which exclusively focuses on the refinancing of Asian microfinance institutions that operate sustainably.
According to KFW, in the coming years up to USD 100 million will be available for granting small loans to micro, small and medium-sized enterprises and low-income private households.
"Microloans are a proven instrument that we are further strengthening in Asia with the MIFA Debt Fund. Microloans provide people the - often modest - funds they need to free themselves from poverty through their own initiative, namely by starting a business and building up an economic basis," said Dirk Niebel, Federal Minister for Economic Cooperation and Development.
"We are convinced that financing offers for small enterprises and the development of the still weak banking sector in the countries of Asia, such as Afghanistan, Kyrgyzstan, Laos, Mongolia, Nepal, Pakistan, Tajikistan and Vietnam will lead to significant reductions in poverty and to economic stability," said Dr Norbert Kloppenburg, Member of the Executive Board of KfW Bankengruppe.
The microfinance sector in Asia is in many countries still very underdeveloped. In Asia 80 per cent of the people living below the poverty line have no access to financial services. The Fund is designed to strengthen the financial sector and thereby reach more people. A wide range of financial products will help adequately close the supply gaps depending on the level of development in the respective country. The Fund will concentrate on financings in the local currency, subordinated loans and on reaching young microfinance institutions. It is accessible to both public as well as private investors.
Private households and enterprises receive favourable loans at market conditions via their regular bank. These local banks and microfinance institutions refinance themselves through the MIFA Debt Fund. The Fund is organised as a so-called structured fund with different risk tranches, thus also offering investment options to private and quasi-government investors. These third-party and market funds as well as return cash flows and interest income multiply the financing potential.
The German contribution amounts to up to EUR 28 million, including budget funds of up to EUR 16 million. Further investors include the European Union with EUR 9 million and the IFC with USD 16.25 million. Other potential investors will follow in the next three years.