Germany’s Development Ministry and KfW Entwicklungsbank launched the MIFA Debt Fund for the award of microcredits to small enterprises and private households with a low income in the Asian region in late June 2012. It is the first fund that concentrates exclusively on the refinancing of Asian microfinance institutions that operate sustainably.
Via the MIFA Debt Fund, the microfinance sector in Asia is to be further strengthened with a total of 100 million euro over the next few years, Germany’s Federal Ministry for Economic Cooperation and Development (BMZ) stressed. The Ministry maintains that microcredits are a worthwhile instrument to provide people with what are frequently modest means to liberate themselves from poverty by starting up a business.
According to the BMZ, Asia’s microfinance sector is still strongly underdeveloped, with 80 percent of the people living below the poverty line there having no access to financial services. The BMZ and KfW expect the Fund to boost the financial sector and more people to be reached than so far. A wide range of financial products are to adequately fill the supply gaps depending on the level of development the respective country has attained. The Fund is accessible both for public and private investors, say BMZ and KfW. Via their banks, private households and businesses are to receive cheap but market-conform credits. The local banks and microfinance institutions refinance themselves for this purpose via the MIFA Debt Fund. As a so-called structured fund, the Fund is equipped with various risk shares, thus also offering private and parastatal investors opportunities to participate. These third-party and market funds as well as return flows and yields from interest yields multiply the financing potential.
According to information from the BMZ and KfW, the German contribution amounts to 28 million euro, including budget funds of up to 16 million euro. The European Union and the World Bank’s International Finance Corporation (IFC) are to participate as further investors, contributing 9 million euro and 16.25 million US dollars respectively. More potential investors are to follow in the next three years.