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The International Finance Corporation, IFC, a part of the World Bank Group, has initiated a new program to assist financial service providers in distributing funds to small businesses in developing markets, particularly those led by women and those focused on agriculture and climate.
The MSME Finance Platform will offer a financing package of up to $4 billion from IFC’s own account to banks, non-bank financial institutions, microfinance institutions, and innovative digital lenders that cater to micro, small, and medium enterprises (MSMEs).
This initiative is open to both new and existing IFC clients.
The platform will also employ various forms of credit enhancement to attract private capital, including an innovative Catalytic First Loss Guarantee, with the goal of attracting an additional $4 billion in financing from eligible financial service providers to expand lending to these businesses.
Managing Director of IFC, Makhtar Diop,stated, “Micro, small, and medium enterprises are the backbone of most developing economies, yet they encounter significant financial obstacles that impede their growth.”
“Our new financing platform directly addresses these challenges by empowering financial service providers to offer crucial support to these businesses, especially those led by women or focused on environmental sustainability,” Diop added.
MSMEs represent over 90 percent of all firms and contribute, on average, to 60-70 percent of total employment and 50 percent of GDP globally.
However, according to the SME Finance Forum, there is currently a financing gap of approximately $5.7 trillion for MSMEs.
In developing markets, MSMEs and the informal sector are vital for economic growth, job creation, and reducing poverty.
Recent crises have weakened the financial position of financial service providers, limiting their ability to meet increasingly stringent lending requirements.
As a result, businesses in emerging markets and developing economies are experiencing a reduction in credit availability due to tighter credit conditions, increasing interest rates, and a limited supply of credit.
