BIO continues its support to the provision of microfinance loans in local currency

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The BIO’s Board has approved an investment of up to $4 million in the equity of Locfund II.  It also gave BIO approval for negotiating a senior loan to the fund of up to $1 million. Locfund II is a 9-year closed-end local currency debt fund targeting Tier II and Tier III microfinance institutions in Latin America and the Caribbean. The Fund will also – in selected cases – support MFIs to access to the local capital markets. The Fund targets $60 million, more than 100 loan operations and it is expected to support about 100,000 jobs. The Fund will be managed by BIM Ltd., a Bolivian fund manager with strong experience in microfinance and FX management in the targeted region.

Locfund II is the successor fund to Locfund I where BIO invested $2 million back in 2007. Since inception, Locfund I has been a successful fund, reaching both its social targets, with 65.000 final clients reached, and its financial objective, with an expected IRR of 8,7% as per December 2012. Those convincing results have been reached not only through the investment, but also thanks to the technical assistance facility, to which BIO participated for a total amount of $200.000.

“We believe that Locfund II  will make an important contribution to deepening the microfinance sector and supporting entrepreneurs in the region through the provision of loans in local currency (average size of $1.200)” note Sissi Frank, Senior Investment Officer, and Nicolas Blondeau, Microfinance Specialist at BIO.

The positive decision is based on the following three main points:

-    BIO will support the efficient provision of financial services to low income populations with limited access to mainstream financial services. The Fund is expected to support about  100,000 jobs

-    Innovative instrument addressing a real demand for local currency funding through providing local currency loans and stimulating Tier II and Tier III MFIs access to the local securities markets

-    Bolivian Fund Manager committed to achieving both social and financial goals