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The MIF works to improve access to microfinance services in rural areas of the Dominican Republic

Jan 9, 2013

The Multilateral Investment Fund (MIF), a member of the Inter-American Development Bank (IDB) Group, has approved a $2.5 million equity investment, as well as non-reimbursable technical cooperation for capacity building, evaluation and knowledge dissemination of up to $630,000, to support the establishment of a regulated rural microfinance institution in the Dominican Republic, Banco de Ahorro y Crédito S.A., BANFONDESA. These funds will be complemented by funding from other investors and counterpart resources.

The project, whose main objective is to contribute to improving the economic conditions of micro and small enterprises in the Dominican Republic, will focus mainly on rural areas and will be implemented by Fondo para el Desarrollo INC. (FONDESA), during the initial stage of the technical cooperation component.

Microfinance can be a powerful tool to improve the lives of many people in Latin America and the Caribbean. However, a critical factor is accessibility. Without local institutions reaching low-income areas, it is difficult for people to be made aware of, and benefit from microfinance services.

In the Dominican Republic, the microfinance industry reaches less than 585,000 clients with a penetration rate below 15%, slightly lower than the regional average. There are close to 1.4 million potential clients without or with limited access to financial services, a large number of which are located in rural and marginalized areas. While the industry is maturing, there is still room for improving efficiency through increased competition.

The MIF aims to achieve expanded access to microfinance services through this project by helping establish a regulated microfinance institution that will serve microenterprises and low-income families in the Dominican Republic, particularly in rural areas.

This project will help an existing local microfinance institution, FONDESA, transition into a regulated financial entity. FONDESA currently has a portfolio of $35 million and nearly 40,000 clients located in the northern and eastern provinces. In the past five years, the institution has experienced rapid growth, becoming the largest non-regulated microfinance institution and the most important provider of financial services in the rural areas of Cibao.  The new regulated institution, Banco de Ahorro y Crédito FONDESA S.A. (BANFONDESA), will be capable of expanding services and diversifying its product offerings, introducing innovative technologies to improve productivity, and reaching vulnerable and isolated populations.

In five years, this project is expected to expand access to financial services to nearly 100,000 clients, including rural and low-income populations and women. By helping to establish BANFONDESA, the MIF will fulfill its commitment to improve economic opportunities in Latin America and the Caribbean through access to financial services.

Approved Amount: US$ 2,500,00.00

Approval Date: September 26, 2012

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