Micro, Small and Medium Enterprises (MSMEs) are considered the backbone of the economy in most emerging markets and developing economies (EMDEs). MSMEs typically represent a significant fraction of the private sector activity and account for a sizeable share of employment in EMDEs – however they face a financing gap of more than $US5.7 trillion.
Over the last five years, IFC improved its originating capacity for new clients by offering working capital solutions, base on the pyramid lending and risks-haring facilities on MSME portfolios.
IFC is now looking to develop a comprehensive global multi-year MSME finance program of up to US$5 billion, under which IFC’s Own Account funding of up to US$2.5 billion will be supplemented by innovative credit-enhanced mobilization instruments. This MSME Finance Program aims to create more usable capital, mobilizing financial markets as sources of development finance and potentially freeing billions of dollars in additional financing.
This additional investment by IFC and partner private sector investors, whom IFC will crowd in for this effort, seeks to increase lending to priority sectors such as women entrepreneurs, MSMEs contributing to food security, first-time MSME borrowers, and MSMEs in vulnerable regions affected by climate change.
Furthermore, IFC, with IDA-PSW and EC funded EFSD+ program support, expects also to address the financing needs of MSMEs, informal entrepreneurs, and low-income households whose income streams continue to be affected by persisting uncertainty and challenging economic prospects.
The Program’s clients will include traditional financial services providers, such as SME-focused banks, microfinance institutions, non-bank financial institutions, and the new generation of IFC’s partners – digital finance and embedded finance players.
Like prior programs, this program will boost new job creation and sustain existing jobs in emerging markets – but on a much greater scale. As one of the elements of this program, we are also earmarking up to US$250 million for funding resilience and protection for MSMEs and other vulnerable communities located in small island nations that are most at risk of the effects of climate change and resulting natural disasters.
Through this partnership with private sector investors, IFC seeks mobilization support from partners, expects to increase outreach, lower transactional costs, and expand the range of financial services being offered to MSMEs.