BAKU, Azerbaijan, May 28. The International Finance Corporation (IFC), a member of the World Bank Group, has unveiled a groundbreaking initiative designed to enhance funding access for small businesses in emerging markets, with a particular focus on enterprises owned by women and those engaged in agriculture and climate-related activities, Trend reports via the IFC.
The newly launched MSME Finance Platform promises a financing package of up to $4 billion from IFC's own account. This initiative targets banks, non-bank financial institutions, microfinance institutions, and innovative digital lenders, all dedicated to serving micro, small, and medium enterprises (MSMEs). Both new and existing IFC clients will have access to these funds.
To amplify the impact, the Platform will employ various credit enhancement mechanisms to attract private capital, including a pioneering Catalytic First Loss Guarantee. This strategy aims to mobilize an additional $4 billion in financing from eligible financial service providers, significantly expanding the lending capacity to MSMEs.
The IFC will use its risk capital to offer first loss protection to qualifying financial service providers, which often possess substantial local currency liquidity but are hesitant to lend to MSMEs due to perceived high risks. By leveraging these mobilization techniques, the MSME Finance Platform seeks to optimize capital structures and redirect substantial local currency financing to small businesses.
Support for the Platform comes from the International Development Association's Private Sector Window (IDA PSW), which will help mitigate credit and foreign currency risks in low-income countries. The IDA PSW Blended Finance Facility (BFF) will contribute up to $100 million. Additionally, the Global SME Finance Facility (GSMEF) and the Women Entrepreneurs Opportunity Facility (WEOF) will provide resources to encourage lending to agriculture-focused and women-owned MSMEs.
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