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MULTILATERAL INVESTMENT FUND MIF

MULTILATERAL INVESTMENT FUND MIF. Promoting Private Sector Development in Latin America and the Caribbean. MIF - A Unique Instrument. Conceived in early 1990’s to support wave of privatization and economic reform sweeping through Latin America and the Caribbean

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MULTILATERAL INVESTMENT FUND MIF

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  1. MULTILATERAL INVESTMENT FUNDMIF Promoting Private Sector Development in Latin America and the Caribbean

  2. MIF - A Unique Instrument • Conceived in early 1990’s to support wave of privatization and economic reform sweeping through Latin America and the Caribbean • Created to help bridge gap between theory and realities of transition to market economy • Built to test new ideas and catalyze reform

  3. Broad and flexible mandate to: • Support market reforms • Build workforce capabilities and skills standards • Broaden economic participation of smaller enterprises

  4. Structured to Innovate • Wide range of grant, investment and other financial instruments • Acts directly with private sector as well as governments • Pilots new development approaches and then shares lessons across the region

  5. $830 million in over 520 projects • Co-financing from partners brings total to $1.3 billion at work • resources have been primarily directed to less developed countries

  6. Microenterprise - Innovation partnerships program - Regulatory and supervisory framework - Strengthening microfinance institutions Financial sector and capital markets - Capital market development - Market transparency measures - Regulatory reform and supervision Small businesses - Streamlining regulations - Innovative business relationships - Eco-efficiency - Quality management - Financing options - Information technologies - Skills standards and credentialing Market functioning - Regulatory framework - Facilitation of trade and investment - Labour market modernization MIF focuses on Core Activity Areas

  7. Instruments Financial Investments $234 mm approved 56 deals Non-reimbursable Grants 54 operations in financial and capital markets US $ 71million approved Small Enterprise Investment Facility 7

  8. Technical Assistance Grants to governments, local NGO’s, business associations • To help fund programs that pilot new approaches to improve private sector • Always funding a local partnership • Sustainable, with demonstration effect • MIF resources must be critical to outcome • Focus on sharing lessons learned • Average grant size $1-1.5 million

  9. Financial Sector Reform • Market Transparency Measures • Accounting and Auditing Standards • Regulatory training and consolidation of financial sector supervision • Capital Market Development • Harmonization • Clearance and Settlement • Removal of Barriers

  10. Investments – Use of loans, guarantees and equity for microfinance and SME support • Has enabled NGOs to become regulated financial sector institutions and grow beyond donated funds • MIF now has 14 such investments in its portfolio plus equity participation in five leading funds: Profund, Lacif and Solidus, Accion Investments and the Emergency Liquidity Facility • Financed majority of microfinance activity in Latin America and the Caribbean total aggregate portfolio - $167mm – 650,000 clients

  11. Investments • MIF is also the leading investor in creating new formal risk capital vehicles for small business in the region – 35 funds • 27 funds fully organized and partially disbursed. A total of 290 entrepreneurs are supported through MIF funds; about one quarter of these companies are startups. • Funds target small business and start-ups that otherwise cannot access long-term risk capital

  12. Credit Enhancement forSecuritized Bonds

  13. República Dominicana Cuba Haití México 1,194 977 13,266 Honduras 2,217 Principales Recipientes de Remesas de América Latina y El Caribe2002 (en millones de US$) Jamaica Trinidad y Tobago 862 1,425 88 Guyana Venezuela Guatemala 788 Nicaragua 2,106 137 El Salvador 247 2,316 Costa Rica Colombia 306 3,067 Ecuador 1,656 Perú Brasil 5,200 1,295 Bolivia Remittances in selected LATAM countries 2003 (millions $US) 340 Argentina 225

  14. R E M I T T A N C E S LATAM 2002

  15. Benefits of Securitized Remittances Banks can access longer term financing with remittance securitization Significant savings in interest rates estimated more than 150bp from an increase in the credit rating of B to BBB Improve the asset liability management of local banks through access to longer term/lower rate funding sources. Banks can pass on savings from remittance securitization to its customers and clients (e.g., longer-term loans or new products such as mortgage loans). Very low past defaults in future flow transactions Latin America.

  16. Remittances Securitization: Flow of Funds Collecting Bank Collecting Bank Collecting Bank US$ Deposits (remittances) Master Account USA/Europe LATAM Paying Bank (local) Trust Transfers (remittances) Securitized Bonds Institutional Investors Partial Credit Guarantee and/ or Subordinated Debt

  17. Remittances Securitization: Transaction Structure US$ Remittances Collecting Bank Collections paid to a Master account Master Account USA/Europe Remittances Beneficiaries Trust LATAM in MXN A cash shortfall in the trust, will be fund by the Bank through the guarantee. Cashflow Collateral Paying Bank Debt Payment Account Reserve accounts Provisions Accounts Acceleration Accounts Debt Service Reserve accounts Full Corporate Guarantee by Local Bank Local Bank (originator) Financial Tests Reimbursement to guarantor from collateral pool Excess cash after funding structure accounts Securitized Bonds IDB PCG or Sub Debt Investors

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