IFC launches US$4 billion platform to support small firms in developing markets
THE World Bank’s private finance arm on Tuesday (May 28) launched a programme to provide up to US$4 billion to small businesses in emerging markets, with a focus on women-owned firms and those in the agriculture and climate sectors.
The International Finance Corporation (IFC) said it would advance the funds to banks, non-bank financial institutions, microfinance institutions, and innovative digital lenders that loan to micro, small and medium-sized businesses.
The MSME Financing Platform would aim to attract a further US$4 billion by using credit enhancements to attract private sector capital.
“Micro, small, and medium enterprises form the backbone of most developing economies, yet they face significant financial barriers that hinder their potential,” said IFC managing director Makhtar Diop in a statement.
MSMEs make up more than 90 per cent of all firms and account, on average, for 60 to 70 per cent of total employment and 50 per cent of GDP worldwide, the IFC said, yet the SME Finance Forum puts the annual financing gap at around US$5.7 trillion.
Access to finance has been hampered by tighter credit conditions, rising interest rates and a decline in risk appetite among mainstream lenders, the IFC said, something it hoped to reverse by offering to take the first loss on loans.
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Up to US$100 million of finance to help the platform de-risk the credit and foreign currency exposures will come from the International Development Association, it added.
“Our new financing platform addresses these challenges head-on, empowering financial service providers to extend critical support to these businesses, particularly those that are women-led or environmentally focused.” REUTERS
