KfW Entwicklungsbank and IFC launch world's largest fund to …

Refinancing assured for the microfinance sector Major contribution toward safeguarding and creating jobs in developing and transition countries

In the presence of German Development Minister Heidemarie Wieczorek-Zeul and World Bank Group President Robert Zoellick, KfW Entwicklungsbank and the IFC today launched a cross-border refinancing facility for microfinance institutions.

The fund, created by KfW Entwicklungsbank with assistance from the IFC, has a target volume of USD 500 million and aims to support microfinance institutions (MFIs) by assuring their ability to lend to small and micro entrepreneurs – even in times of a global financial crisis – and thus to preserve and create jobs also for poor people. KfW Entwicklungsbank will provide a promotional loan amounting to USD 130 million and the IFC will contribute USD 150 million.

The refinancing facility is one of several joint efforts by the German Government and the World Bank Group to mitigate the negative impacts of the global financial crisis for developing and transition countries.

“Microcredit is one of the most effective development policy instruments. Microfinance institutions are doing an excellent job all over the world. We must not allow the global financial and economic crisis to jeopardise the work of these institutions. We must act now to ensure that those who are least responsible for the financial market crisis do not have to bear the brunt of the hardships it is causing. With the new facility, we are helping to make sure that people will continue to be able to make use of microfinance services in their efforts to find ways out of the poverty trap”, said Heidemarie Wieczorek-Zeul, head of the German Federal Ministry for Economic Cooperation and Development (BMZ) and member of the Board of Supervisory Directors of KfW Bankengruppe.

“Supporting micro enterprises is highly relevant for development policy reasons because in developing and transition countries, the smallest and small businesses act as a motor for growth and for jobs while also laying the groundwork for safeguarding existing employment. With this facility we can set a strong example and quickly counteract the current downward trend in lending to and by MFIs”, explained Dr Norbert Kloppenburg, member of the Managing Board of KfW Bankengruppe.

Over the coming weeks and months the facility is to be endowed with additional funds from other public donors, development financiers and possibly also commercial investors, making it the world's largest refinancing facility for microfinance institutions.

Robert Zoellick, World Bank Group President since 2007, commented:
“Microfinance plays a critical role in providing financial services to poor people and fighting poverty. The Microfinance Enhancement Facility will provide vital funding and ensure that microfinance continues to stimulate growth, create jobs, and overcome poverty in emerging markets. I am most appreciative of the German Government's support, through KfW, for this innovative facility at a time of economic danger for the developing world”.

KfW is one of the largest microfinanciers the world over. On behalf of the German Government, KfW Entwicklungsbank is now promoting some 100 microfinance projects in around 60 developing and transition countries. Its current project portfolio adds up to approx. EUR 800 million (as of the end of 2007). German Development Cooperation activities reach out to some 50 million people all over the globe.

Contact at the BMZ:
Stephan Bethe, tel +49 (0)30/2503-2450,
E-mail: stephan.bethe@bmz.bund.de
Contact at KfW Bankengruppe:
Dr Charis Pöthig, tel +49 (0)69/7431-4683,
E-mail: charis.poethig@kfw.de