The Asian Development Bank (ADB) has approved an additional $100 million for an existing microfinance risk participation and guarantee programme.
The programme has been supporting growth and employment opportunities for over three million borrowers across Asia and the Pacific, said a media release on Thursday.
"Giving small businesses and entrepreneur’s access to finance is one proven tool to improve livelihoods and reduce poverty," said Sabine Spohn, Senior Investment Specialist in ADB's Private Sector Operations Department.
"ADB will continue to expand its support for those at the bottom of the pyramid by increasing the size and scope of the microfinance programme," Sabine Spohn.
The microfinance programme is implemented through a risk participation and guarantee structure, reports BSS referring to the media release.
Under the programme, ADB selects partner financial institutions that provide local currency loans to ADB-approved MFIs. ADB risk participates or partially guarantees the default risk of these MFIs, thereby catalysing private sector participation and mobilising additional funds for them.
Since 2010, ADB's microfinance programme has supported $622 million in new loans, and an additional $327 million in cofinancing. The programme has worked with 27 MFIs and operates in India, Bangladesh, and Indonesia.
Among the 3.49 million borrowers served by the programme more than 90 per cent have been women and predominately in rural areas. Standard Chartered Bank and Citi as well as IFMR Capital, IndusInd Bank, Kotak Mahindra Bank, and RBL Bank are backers of the programme in the risk participation structure.
ADB's additional financing will help the programme expand into new markets in the region, such as Myanmar, Pakistan, and Sri Lanka. The programme will also expand its scope, allowing the programme to guarantee or risk participate directly with MFIs or as part of a financial institution's overall microfinance portfolio.
The programme will also be able to partially guarantee bonds and securitisation transactions issued by MFIs, thereby enabling greater access by MFIs to capital markets and broadening diversification of funding sources.
In addition, tenor on ADB guarantees will increase to up to five years. Combined, these changes will offer the programme's partners greater flexibility and encourage a broader range of financial institutions to participate in the programme.
