MANILA, Philippines – The Asian Development Bank (ADB) has partnered with the Citi Group to mobilize $100 million worth of loans to microfinance institutions in developing Asia under its Microfinance Risk Participation and Guarantee Program.
ADB’s microfinance program enables it to fill the gap by sharing risks with commercial banks that lend to microfinance institutions (MFIs). The bank promotes local currency lending to minimize the exposure of microfinance firms to foreign exchange risks.
“We’re excited to partner with Citi, an established player in microfinance in many countries in developing Asia,” said Christine Engstrom, director of the ADB’s Private Sector Operations Department, in a statement.
“Our partnership will help further expand the microfinance program, which has already facilitated more than $370 million in local currency loans across the region since 2012. Together, Citibank and ADB will improve access to financial services to even more low-income families and small-business owners, especially in rural and remote areas in Asia and the Pacific,” she added.
The multilateral lending institution noted many MFls fail to expand operations because of inability to raise funds from the commercial market.
Under the program, ADB selects partner financial institutions that has the capacity to provide local currency loans to ADB-approved MFIs. ADB guarantees the default risk of these MFIs, thereby catalyzing private sector participation and mobilizing additional funds for the small lenders.
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The program is ultimately aimed at supporting the growth of small businesses and help generate employment. This particularly benefits women entrepreneurs as in some countries, lending is biased towards male-run businesses.
