International Finance Corporation (IFC)
IFC is a member of the World Bank Group. Promoting the development of small and medium enterprises (SMEs) in developing countries is a core part its private sector development strategy. IFC provides investment, technical assistance and advisory work to improve the regulatory environment and make operations more efficient.
IFC:
• invests in financial intermediaries and private equity partners in order to increase capital flows;
• develops and enhances key business skills in SMEs and institutions that serve them;
• helps to improve the overall business environment and investment climate; and
• works through local institutions - banks, leasing companies, credit bureaux - to educate and advocate for policy and regulatory reforms.
Using its experience in investing and working in the developing world, IFC helps to create opportunities to reach SMEs in innovative ways by:
• creating and strengthening financial institutions through a combination of investments and technical assistance;
• integrating investment projects with local communities and businesses to maximise impact;
• running regional offices and project development facilities to create a strong field presence and provide knowledge of the situation on the ground; and
• disseminating examples of good practice and evaluates the impact of its programmes.
Funding
IFC invests in financial markets targeting SMEs, including microfinance institutions (MFIs), leasing companies, banks and private equity funds. It provides technical assistance programmes, including financial management training for small businesses. IFC invests in commercial MFIs that give the poor access to essential financial services. These institutions finance creditworthy low-income entrepreneurs, many of them women, who have little or no access to mainstream banks. IFC funding takes the form of loans, private equity and quasi-equity, and offers financial risk management products and intermediary finance.
Capacity Building Facility
The Capacity Building Facility (CBF) is IFC's grant-making arm and provides funding for innovative pilot projects that promote small business development. It also forms partnerships with other leading SME-focused organisations that replicate best practice models, including:
• helping microfinance institutions reach commercial sustainability;
• capacity building to help non-governmental organisations and local SME service providers develop sustainable products and services; and
• developing nascent business associations in frontier countries.
A network of 10 Project Development Facilities around the world addresses small business development through complementary intervention, such as improving the business-enabling environment, increases available business services by building the capacity of local service providers. Work in the financial markets sector strengthens financial institutions that serve small businesses.
Technical Assistance
Technical assistance is provided in tandem with these investments to:
- support the launch of new commercial MFIs and build staff and management skills of existing ones;
- help non-governmental organisations transform into for-profit microlenders, and microfinance institutions expand into SME lending;
- support government efforts to build financial sector supervisory capabilities; and develop more supportive legal and regulatory framework for microfinance.
Linkages
Linkage work complements selected IFC investments to increase the developmental impact on local communities, including SMEs, by:
• improving local SMEs' technical and business skills;
• facilitating access to finance for local suppliers; and
• strengthening local supply and distribution networks.
Support services for SMEs
IFC's central SME Department is a joint initiative with the World Bank and provides support services for IFC's many SME-related activities.
The SME Department:
• identifies and makes available expertise for small business programmes, and develops programmes which focus on financial markets development, improving the business enabling environment, and providing business development services for SMEs;
• shares best practices, experience, and knowledge from a small business development work, including metrics and evaluation methods; lessons learned and illustrative case studies; and participates in networks such as the International Financial Institutions (IFI) working group and the Committee of Donor Agencies for Small Enterprise Development.
Criteria
Enterprises must be majority private sector-owned and controlled. See IFC website for details on How to Apply for IFC Financing and on drawing up an Investment Proposal.
Contact
Small and Medium Enterprise Department, IFC, 2121 Pennsylvania Ave., NW, Washington, DC, 20433, USA
Source
IFC 2004 Annual Review - Small Business Activities; IFC website
Internet location
http://www.ifc.org/ifcext/sme.nsf/Content/Home
For more information, please write to: infosme@ifc.org