IFC’s most effective way of reaching the smallest businesses is to help build commercially viable microfinance institutions (MFIs). That’s why our investments in commercial MFIs that give the poor access to essential financial services are up from about $67 million two years ago to over $245 million today, and are set to keep growing.

These institutions finance creditworthy low-income entrepreneurs—many of them women—who otherwise would have no access to mainstream banks. As of December 2003, the combined outstanding loan portfolio of IFC’s investee MFIs exceeded $1.2 billion, with many offering not just loans but also savings, insurance, home improvement loans, and other key services needed by the poor.

We often provide technical assistance alongside these investments, committing $16 million of it this year. Technical assistance is used to:

• support the launch of new commercial MFIs and build staff and management skills of existing ones,
• help nongovernment organizations transform into for-profit microlenders, and microfinance institutions expand into SME lending,
• support government efforts to build financial sector supervisory capabilities,
• develop more supportive legal and regulatory framework for microfinance.

IFC encourages market-priced microfinance products rather than subsidized lending. This market focus leads to more financially sustainable institutions that can in turn offer their clients better access to financial services.