US President Barack Obama on Saturday announced the creation of a US$100 million microfinance growth fund to help small lenders in the Western Hemisphere continue making loans despite the global recession.
“The fund will provide stable medium and longer-term sources of finance to microfinance institutions and microfinance investment vehicles to help rebuild their capacity to lend during this difficult period,” the White House said in a statement.
The announcement was made while Obama was attending the Fifth Summit of the Americas in Trinidad and Tobago.
A recent report showed 565 microfinance institutions in the region were providing US$9 billion in loans to about 9 million microenterprises in the region. The lenders face a potential shortfall of US$750 million this year, it said. Micro and small businesses provide most of the jobs in the hemisphere, making it imperative to ensure that credit is available to small lenders, the White House said.
The microfinance growth fund would be a partnership of the Multilateral Investment Fund at the Inter-American Development Bank, the US Overseas Private Investment Corporation and the Inter-American Investment Corporation.
“Debt and equity financing of US$100 million, subject to each partner’s board approval, has already been identified as initial capital for the fund,” the White House said.
The Multilateral Investment Fund will take the lead role in the initiative and will seek statements of interest next month, it said. It will challenge private and public organizations to join the effort, with the aim of raising a total US$250 million for microfinance.
“While the region has a wealth of microfinance institutions, these lenders are now confronting a serious shortage of private finance from both international and local sources,” the White House said.