The Second Story: Wholesale Microfinance in Latin America

This paper reviews the Inter-American Development Bank's Microenterprises Global Credit (MG) programs. The objectives of the MG programs are: 

• Downscaling, or a greater participation by formal financial intermediaries in microfinance;
• Upgrading, institutional strengthening and consolidation of newly created formal financial institutions dedicated to microfinance;
• Complementary policy reforms to reinforce the first two objectives. The paper states that the MG programs utilize a two-tier structure to accelerate the expansion of microfinance services toward the microenterprise sector: second-tier institution channels provide financial resources to the first tier retail lenders;
• First-tier intermediary financial institutions, in turn lend directly to microenterprises. From 1990 to 2001, the IDB approved more than USD 534 million in financing for these programs, and disbursed over USD 356 million through second-tier institutions. These institutions in turn lent to over 100 first-tier financial intermediaries.