OMJ Portfolio ENG 2010

Opportunities for the Majority1300 New York Ave. NWWashington, DC 20577 [email protected]

www.iadb.org/om

D E L I VE R I NG business solutionsFOR TH E 3 6 0 M I L L I ON PEOPLE I N

LATIN AMER ICA AND THE CAR IBBEAN

AT TH E base of the pyramid

We're very pleased to present a portfolio of projects supported by the iDB's Opportunities for the Majorityinitiative. taken as a whole, these projects will reach millions of low-income residents of Latin america andthe Caribbean, from Mexico to peru, from Guatemala to Chile. ey represent an important milestone forOpportunities for the Majority as well: in only two years of operation, the initiative has surpassed $100million total in approved loans and guarantees. each individual project also adds to the priceless store ofknowledge and experience Opportunities for the Majority is developing on what works best when it comes toengaging with the base of the socioeconomic pyramid.

several of the projects represent new directions for microfinance, one of the most successful antipoverty toolsof the past decade. peru’s highly effective microfinance networks are supplementing public solutions to thepersistent housing shortage there by offering mortgage and home improvement loans. el salvador’s state-runlow-income housing fund, FOnaVipO, is working through microlenders to make home ownership attainablefor a segment of the population that never would have been eligible for traditional mortgages. also in elsalvador, FiDeMype is reaching microenterprises that are so small they were not previously able to accessmicrocredit services. and “Mejora tu Calle,” devised by Mexican cement company CeMeX, allows residentsof low-income neighborhoods to pool their microloans together to help pay for paving their streets.

Other projects show how existing institutions can serve as distribution channels for additional services. eGlobal partnerships social investment Fund 2010 will use the robust network of microfinance institutionsacross the region to enable them to move beyond working capital loans and provide needed health, education,and insurance services to their clients. in Mexico, Mi tienda, a network of stores in low-income, rural areas, isable to offer job training and a variety of services along with basic food and household products. anotherexciting new development is the consumer loan program now available to qualified clients of the Colombianutility company empresas publicas de Medellin that is extending financial democracy by leveraging thedistribution network of the company.

Opportunities for the Majority, which focuses on finding entrepreneurial solutions to the challenge of engagingwith the base of the pyramid, is also supporting projects that serve as incubators for the entrepreneurial spirit ofLatin america and the Caribbean. peru’s Mibanco is reaching out to support female entrepreneurs throughloans and training. Chile’s Banco de Credito e inversiones is helping microentrepreneurs, by innovating in theuse of non-financial information available through suppliers’ distribution networks, to build credit histories andgain access to a wide array of financial services. and the iGnia Fund is leading the way in demonstrating thatinvestment in companies that serve the base of the pyramid is profitable as well as socially responsible.

While these projects are each unique in many ways, they share one thing in common: the demonstrated powerof working in partnership.

$100 million is a figure to celebrate, but it’s only the beginning for the Opportunities for the Majorityinitiative as the 2010 project pipeline starts to take shape. We are excited about the work ahead, what we willlearn and the partrens we will meet in the coming months.

O P P O R T U N I T I E S M A J O R I T Yf o r t h e

new tools for Housing Finance in peru

peru has one of the world’s most sophisticated and

effective systems of microfinance institutions in the

world, serving many of the small businesses that

constitute the economic lifeline for 70 percent of

the country’s population.

yet this effective financing network, functioning

throughout the country, has so far had only a

minimum involvement in housing and mortgage

lending for the low-income population, a us$12

billion majority market with a housing deficiency of

up to 2.1 million units.

an iDB project under the Opportunities for the Majorityinitiative is designed to unlock the investment potential of anetwork of close to 40 peruvian microfinance institutions,enabling them to serve as a platform to provide a much greaternumber of mortgages and loans for home-improvement, majorengines of economic development.

as a first phase, the iDB is providing a us$10 millioninvestment, supplemented by a us$500,000 grant from theMultilateral investment Fund for technical assistance, to enableperu’s microfinance institutions to either initiate or expand theirhousing finance operations. peru’s Corporación Financiera deDesarrollo will provide counterpart funding of an additionalus$10 million.

Support for Low-Income Homeowners

e microfinance institutions supported by iDB resources willwork actively with the national housing fund, Fondo Mivivienda,to expand the number of low-income homeowners by helpingthem to participate in government subsidy programs.

e project is the first major iDB lending program in which theBank resources, dedicated to housing solutions, flow directly tomicrofinance institutions. if the operation is successful in itsinitial scope of providing around 6,000 housing solutions, it willserve as a model for expanded investments that will benefit amuch larger number of low-income homeowners.

in many cases, the financing solutions will not only enable a low-income borrower to purchase or upgrade an existing house, butthey will also enhance the infrastructure of existing smallbusinesses, many of which are operated from the home.

e program offers participating microfinance institutions threeproduct lines: financing for mortgage loans, financing for homeimprovement loans, and loans to strengthen the lendinginstitution’s equity position. e MiF grant will support thedesign and application of standardized mortgage and homeimprovement loan products and the design of a securitizationprogram, which has the potential of expanding housing financeopportunities in capital markets.

among the institutions eligible to participate in the programare the Cajas Municipales de Ahorro y Crédito (Municipal

savings and Loan Banks), Cajas Rurales (rural Banks), andeDpyMes, which are regulated financial institutions that

serve microenterprise and small business.

For more information about the programcontact: [email protected]

public-private partnership for Low-Cost Housing investments

FONAVIPO combines subsidies withsolid business practices

el salvador has developed a unique and sustainablefinancial business model that enables low-incomeconsumers to improve and expand their homes bymobilizing resources from both the public andprivate sectors, including commercial banks andmultilateral institutions. ese resources aresubsequently channeled to microfinance institutionsaround the country, serving a market of low-incomeborrowers and homeowners who otherwise wouldbe without access to credit.

Central to this financing model is FOnaVipO, thestate-owned national Low-income Housing Fund.it acts as a second-tier financial lender to 55microfinance institutions, including cooperativesand other nongovernmental organizations, whichoperate under a different set of rules compared withregulated, commercial banks. FOnaVipO alsoadministers a government subsidy program thatprovides homeowners with grants of up to $3,000to enable less affluent consumers to participate inthe housing market.

FOnaVipO, which operates 150 agencies throughout thecountry, has earned a reputation for combining rigorousfinancial practices, including an innovative risk assessmentmodel and sustainable lending policies, with technicalassistance for consumers at the bottom of the economic andsocial pyramid.

a $7 million iDB loan for a five-year term, from its Opportunitiesfor the Majority facility, will enable FOnaVipO to providenew financing to microfinance institutions, which in turn willprovide loans to 2,300 low-income families. ese customerswill be empowered to buy a lot or progressively construct,expand or improve an existing structure. e average loan will beabout $3,000.

e program will be strengthened by technical assistance,including the establishment of an information and advisory centerand mobile administrative units, which will help low-incomehomeowners or potential homeowners submit the properdocuments and complete the required paperwork to qualify forloans and subsidies. training also will be offered to personnel ofthe participating microfinance institutions to improve customerservice and lending methods and to expand the client base.

Lessons learned from the project will be applied to additionalexpansion of FOnaVipO’s low-income housing program,which has already demonstrated a sustainable capacity to investin the low end of the housing market, a sector that traditionallyhas been ignored by large, formal and regulated banks. e low-cost housing market remains underserved and accounts for animportant part of the national housing deficit.

e Opportunities for the Majority financing is part of a muchbigger national lending program for el salvador’s housing sectorthat will be supported by an additional loan from the iDB and byresources from other international organizations. el salvador’spresident Mauricio Funes described the government’s inclusivehousing investment plan, known as Casa para Todos (a House forall), as fundamental to achieving “universal social protection” andto combating a cyclical economic slowdown.




self-Help for the poor through Microcredit

FIDEMYPE Offers Innovative Financial Solutions

Microenterprise and small business companies account

for 59 percent of el salvador’s work force and 49 percent

of the nation’s gross domestic product. yet the vast

majority of these firms, particularly those with small

incomes and in rural areas, do not have access to credit.

experience has demonstrated that properly managed

microcredit programs can achieve an adequate return

on capital while fulfilling a social need, enabling low-

income producers to survive and expand.

a unique institution in el salvador is addressing this

challenge: the trust for the Development of Micro and

small enterprise, or FiDeMype.

established in 2000 with support from the european union andthe el salvador government, FiDeMype lends funds to, amongothers, financial institutions outside of the formal banking systemthat in turn provide credit to microenterprises and smallbusinesses. it is the only second-tier trust in el salvador thatprovides credit to nonregulated microfinance institutions, whichby law are not allowed to accept deposits from the public otherthan credit unions and cooperatives.

recognizing the importance of FiDeMype in offering financialalternatives to underserved businesses, the iDB is supporting theinstitution through a $4 million loan, with resources from theBank’s Opportunities for the Majority facility. e iDB’s supportwill help expand access to financing by approximately 10,000urban and rural microentrepreneurs.

Advantages of IDB participation

e iDB loan, in addition to enabling FiDeMype tofurther develop its operations and meet unfulfilleddemand, illustrates the wide range of Bank products

and resources that can be mobilized to empower underserved,low-income entrepreneurs. prior to the loan, FiDeMypereceived $1 million in financing and $250,000 in technicalassistance from the iDB’s social entrepreneurship program.e Bank’s Multilateral investment Fund is analyzing thepossibility of providing a grant to assist nonregulated financialinstitutions to improve their institutional capacity and credit,administrative and financial systems.

FiDeMype does not receive resources from el salvador’sCentral Bank or other official banking institutions. its totalloans amount to around $10 million. While the institution isself-sustaining, international assistance is critical to its success,liquidity and expansion. iDB financing will be supplementedby resources from other international agencies, mainly ineurope, as well as by FiDeMype’s own resources.

FiDeMype offers a track record of best practices that may beapplied elsewhere in Latin america and the Caribbean tobetter serve low-income entrepreneurs and producers. Forinstance, FiDeMype has developed an effective and uniquerisk-assessment system, which provides a risk profile, acollateral requirement and a credit limit to each of its nonbankinstitutional clients. ese institutions in turn provideindividual borrowers with an average loan of around $1,500.two thirds of the individuals receiving these loans are women.

although its credit operations are directed to service low-income microentrepreneurs, FiDeMype has shown that thismarket can be consistently profitable. in a recent three-yearperiod none of its loans were nonperforming.

FiDeMype represents a public-private partnership. itsborrowers are from the private sector. its trustee is the BancoMultisectorial de Inversiones of el salvador, an officialinstitution that, while not guaranteeing FiDeMype’soperations, provides that institution with critical managerialand technical support.

Five percent of FiDeMype’s profits go to the Fundación deCapacitación y Asesoría en Microfinanzas, a foundation that

provides training and advisory services to microfinanceinstitutions.


Continued on back

A New Way to Pave City Streets

roughout Latin america low-income neighborhoods

have difficulty in paving city streets. Municipalities are

typically short of funds, and many informal urban

settlements have not yet been properly incorporated

into the tax base.

an innovative solution has been devised by CeMeX, a

multinational cement company based in Mexico, to

mobilize both public and private resources to pave

streets in low-income neighborhoods.

under the plan, called Mejora tu Calle, city residents will

receive individual microloans and then pool the

resources to finance half the cost of street pavement for

their neighborhood. Municipalities will contribute the

other half of the cost.

By participating in the project the iDB reduces the risk of otherinvestors, encouraging its partners to move ahead on a largerscale. e Bank has the capacity to incorporate the program intoa more ambitious mission of demonstrating to Latin america andthe Caribbean as a whole the advantages of public-privatepartnerships in improving entire municipal neighborhoods. eiDB is backing the Mejora tu Calle project with a $10 millionpartial credit guarantee and a $250,000 grant for technicalassistance to help the municipalities improve their tax collectionthrough more efficient property registration.

AMarket-Based Solution

e iDB’s support for the project is offered in the frameworkof the Bank’s Opportunities for the Majority, an initiative thatpromotes innovative solutions and public-private partnershipsto bring the benefits of economic growth to that 70 percent ofthe population in Latin america and the Caribbean with lowincomes.

CeMeX is a world leader in devising creative, market-basedsolutions through a partnership between consumers andproducers. recognizing the potential of a long-ignored butnumerous market segment, CeMeX in the 1990s organized aprogram known as Patrimonio Hoy, which enabled 185,000low-income households to improve their homes in stagesthrough a system of microloans. Many of these beneficiariesare now enthusiastic supporters of the Mejora tu Calle plan,which extends the microfinancing principle on a collectivebasis to entire neighborhoods.

“We know that our future is closely tied to the growth of ourpeople and to the coummunities where we work,”says jaimeelizondo, chairman of CeMeX Mexico.

Creating NewWealth

paving municipal streets improves public health andneighborhood security and allows wage earners to travel totheir jobs faster and become more productive. property valuesrise, and so do incomes. in addition, thousands of neigh-borhood residents who participate in the microloan programwill develop credit histories that will enable them to have accessto other forms of financing in the future to meet their needs.

e microloans will average less than $1,000 each and berepaid over a period of 70 weeks. CeMeX will organize a salesforce consisting of a network, comprised mainly of women,known as promotores, to market the loans and collect thepayments, and it will administer the loans through a special

purpose Vehicle.


empowerment through investment

For more information about the program contact:[email protected]


empowerment through investment

an evaluation has shown that the income of a family partici-pating in Mejora Tu Calle — typically there will be two wageearners in a family — is expected to rise by more than eight timesthe amount of their original investment in road improvementaer five years. e time frame for paving a neighborhood streetwill be reduced from as long as 10 years to 70 weeks.

ATestedModel

CeMeX tested the Mejora Tu Calle Model in thecity of reynosa, Mexico, in 2007 and achievedpositive results. e latest program will be applied

in its first phase to 12 selected cities, where 35,000 families are toreceive microloans for financing pavement. in its second phasethe model will be extended to up to an additional 60 cities.

similar public-private programs for municipal infrastructure havebeen carried out by the Mexican state of Baja California, which

launched a cost-sharing program in 2003 with support fromthe north american Development Bank, and in nicaragua

and Chile.

Continued om ont

a Leap Beyond Microfinance:Bundling Microloans with High impact social services

e nongovernmental organization Global partnershipsis redefining microfinance. Moving beyond the conceptof microloans as working capital, it aims to achievegreater impact in reducing poverty by combining theseloans with affordable social investments, such as healthservices, training and low-cost pensions and insurance.

is approach represents a significant strategic leapcompared with traditional microfinance lending. itconceives of low-income borrowers not only aseconomic agents, but also as individuals and familymembers who need advisory, educational, and healthservices, among other products, to raise their livingstandards in conjunction with access to finance.

e new Global partnerships social investment Fund2010 seeks investments in Latin america that arefinancially sound, competitively strong and with projectsdisplaying an exceptional level of social impact.

Global partnerships, which has its main offices in seattle,Washington, and Managua, nicaragua, will use its extensiveexperience to identify microfinance institutions that are sociallydriven and have the capacity to bundle financial products withlow-cost social services, such as regular medical check-ups,training in agriculture and other areas, the introduction of newmicrobanking technologies, insurance, and small-scale pensionsystems. ese services are to be financed by affordablecontributions from the beneficiaries. By combining financial andnonfinancial services with working-capital microloans and newmicrofinance technologies, Global partnerships and its portfolioorganizations will achieve a greater impact in breaking thepoverty cycle.

Social Investment Fund 2010

to help finance this strategy, the iDB is participating in the $25million social investment Fund 2010 by providing a $5 millionloan from its Opportunities for the Majority facility. e resourceswill be channeled to about 20 qualified, highly motivatedmicrofinance institutions serving low-income and ruralcommunities in 11 countries in Latin america. e program isexpected to improve the lives of 500,000 low-income borrowerswhile at the same time providing a positive return to lenders.

since it was founded in 1994, Global partnerships has developedan excellent track record for sound financial management. inaddition to providing small loans for productive activities andresources for social services, Global partnerships has alsointroduced new financial and management technologies tailoredto the microfinance market. among them are evaluation andtraining tools, foreign currency hedging mechanisms and programimpact measurements.

examples of Global partnerships’ successful experience inbundling social services with microloans are its investment innicaragua, to support proMujer, which has screened 10,000women microentreprenuers through medical checkups forcervical cancer, saving 700 lives, and in el salvador, with apoyointegral, which combines microloans with affordable life andhealth insurance.

e iDB support for the social investment Fund 2010 is designedto help ensure the sustainability and expansion of Globalpartnerships’ portfolio, as well as to counteract a trend in recentyears in which some microfinance institutions are reducing socialinvestments. Global partnerships’ innovative approach,combined with its business skills, is expected to result insuccessful experiences that can be repeated and expanded

throughout Latin america and the Caribbean.



Mi tienda’s innovative rural supply network

small, family-run grocery stores, known as tiendasde abarrotes, are essential for supplying basic goodsand services in thousands of low-income ruralcommunities in Mexico.

ese stores are convenient – many are open 24hours a day – but they normally charge higher pricesthan supermarkets and other large retailers in bigcities, because of their reduced economies of scaleand higher associated transportation costs.

Mi tienda, a Mexican company sponsored byprivate Mexican and international social investors, isdedicated to improving the lives of low-incomefamilies, enhancing the efficiency of the rural supplychain, and increasing the sales and productivity ofsmall family-owned rural grocery stores. providingdoor-to-door supply of basic products, as well asconsultancy and training services, Mi tienda focuseson benefiting small grocery stores in communitieswith populations of less than 5,000 inhabitants.

aer launching operations in 1999 with a single pilot warehousein the city of atlacomulco, Mi tienda currently providesdistribution and technical assistance services to 620 grocerystores in that city’s surrounding communities. is pilotwarehouse now serves as a model for Mi tienda’s expansion planto set up an additional 36 warehouses to service 22,000 grocerystores in communities of south central Mexico.

e iDB, using resources from its Opportunities for theMajority initiative, is supporting the expansion with a $2 millionloan, while other project sponsors, including private andinstitutional investors, are investing $13 million in equity tocomplete the project’s financial package. promotora socialMexico a.C., one of Mexico’s most respected social foundationsand main shareholder of Banco Compartamos, is providing aguarantee for the iDB loan.

Training is essential

essential to the success of the program is the trainingcomponent, in which Mi tienda offers free technical advice toincrease the skills of the grocery store owner-operators, most ofwhom have little formal education. training is offered inadministration, accounting, inventory management, productdefinition, and store layout and shelf placement.

e model of Mi tienda shows how an efficient rural supplychain, combined with entrepreneurial training, can make moreand higher quality basic goods available to rural communitiesat lower prices, while at the same time improving the lives andstrengthening the skills of small rural microentrepreneurs.

e expansion of Mi tienda’s warehousing and trainingoperations are expected to have a significant impact inimproving living standards of both providers and consumers andto result in the testing of new techniques and approaches thatcould later be applied throughout Mexico and other countries ofthe region.



epM extends Financial Democracy in Colombia

empresas públicas de Medellín has experiencedmore than a half-century of solid financial growthand market expansion, becoming the second largestprovider of electricity in Colombia as well as asupplier of water, sewerage and natural gas and,through a subsidiary, telecommunications services.

analyzing its 1.7 million customers, epM concludedthat many of its low-income clients wereunderachieving in terms of economic and socialadvancement: they paid their bills on time, but wereexcluded from credit markets and the formal bankingsystem. Lack of access to formal financing, a handicapfor 75 percent of the population of Medellín, forcedmany citizens to resort to informal loans – withextraordinarily high interest rates – to buy such basicnecessities as refrigerators and home improvementsupplies.

epM decided to extend financial democracy, enabling more low-income customers to enter the formal banking and credit systemand hence buy more basic goods at less cost. to achieve this goal,epM is leveraging its customer records of monthly bill paymentsby converting them into the equivalent of a credit history, theessential prerequisite for obtaining a loan and other financialservices. a good utility payment history, according to epM,represents a good credit history, thereby bringing a much largernumber of people into the formal financial system.

is strategy also represents a profitable business venture,enabling epM to expand and diversify its presence inunderserved markets.

to carry out the program epM established a trust, Financiacíonsocial, managed by two large Colombian banks. e trustscreens and evaluates the credit profile of customers based ontheir utility payment records and other available data. osewho qualify receive a credit line to make purchases of basicnecessities – such as refrigerators, other appliances and homecomputers – or building materials for home improvements. anetwork of 170 retail outlets, including 80 chain stores, hasagreed to honor the credit line. Customers using the creditoption receive bills for their purchases along with their monthlyepM utility bills.

e system is described by epM’s General Manager Federicorestrepo posada as “a grand social alliance of bring a betterquality of life for our customers.” its target is to bring anadditional 190,000 households into the credit markets by 2015,since participation in the program will report to official creditbureaus. Most of the new beneficiaries of the credit system willbe those who have only modest incomes. e iDB is supportingthe program with a $10 million loan from its Opportunities forthe Majority financing facility. e iDB’s Multilateralinvestment Fund is expected to provide a grant to supportrefinements in the credit rating system so it may be applied tocustomers with very low incomes who traditionally represent ahigh risk for financial institutions.

in addition to improving the quality of life for many utilitycustomers, Financiación social is also expected to result inenergy savings, as more consumers will be able to replace oldappliances with new ones that are more energy-efficient.property values are expected to rise as borrowers use the newcredit system to buy supplies to improve their homes.

epM’s system of extending financial democracy to the base ofthe economic and social pyramid has the potential to become

a model that can be adopted by other utilities inside andoutside of Colombia, bringing opportunities to improve

the quality of life to millions of consumers in Latin



Mibanco: strengthening Women’s entrepreneurship

From its modest beginnings as a nongovernmentalorganization dedicated to providing small loans toimprove the lives of the poor, Mibanco has grownsteadily in four decades to become peru’s fih largestcommercial bank.

Mibanco is also the country’s largest commercialbank specializing in financing microenterprise,combining sound business practices with a high levelof social commitment and innovation.

now Mibanco is adding a new dimension to itsgrowth strategy: bundling loans with training tospecifically strengthen women’s entrepreneurship.

to increase the success rate and expansion capacity of womenmicroentrepreneurs, Mibanco has launched a new productcalled Crecer Mi Negocio (My Business Grows), that will offerloans as low as $350 and on average in the $2,000 to $3,000range, to enable women to invest in productive assets – such asequipment or machinery to expand production – or in thepurchase, expansion or improvement of a business locale.

in a parallel project, Mibanco will offer a massive program ofone-session training workshops free of charge for more than100,000 low-income women entrepreneurs in basic financialliteracy and management. an additional training course of upto 150 hours will be offered to those women who own moremature small businesses and have qualified for at least $10,000in credit. e longer course will be developed jointly by theunderbird school of Global Management and a peruvianuniversity.

e iDB is providing a $10 million loan through itsOpportunities for the Majority initiative to help financethe project, while the Bank’s Multilateral investmentFund is providing a $3 million grant to support thetraining component.

Investing in Training

For Mibanco, combining free training with microlending is aproven good investment. e bank has already pioneered theuse of single-session workshops as a business tool through aprogram called Planificando el Éxito de Mi Empresa, which hastrained more than 100,000 microentrepreneurs, both men andwomen, in a program developed in conjunction with aprenda,a sister company. Mibanco has concluded that the trainingworkshops enabled it to both reduce the risk of its loan portfolioand reduce the interest rates charged to clients.

By focusing a new lending program to benefit womenmicroentrepreneurs, Mibanco intends to reassert its historicalsocial commitment and at the same time expand its client base,opening a new avenue for business growth aimed at serving thebase of the economic and social pyramid. e technique ofbundling microloans with free training opportunities benefitingwomen entrepreneurs could serve as a model for othermicrofinance institutions in peru and in other countries.

in addition, Mibanco´s new program will meet an immediateneed of many women microentrepreneurs because of a newperuvian law that restricts sales by street vendors. e law willrequire the vendors to move to fixed establishments, opening acredit market for those microentrepreneurs needing to purchase,lease or improve a business locale to enable their businesses tosurvive.

Microenterprise and small business account for about 60 percentof employment in peru, and 43 percent of these enterprises arerun by women. although women have a better track record inrepaying loans than men, their businesses are 30 percent lesslikely to survive in the medium term than firms owned by men.Because women microentrepreneurs are more likely to invest inthe health and education of their children than men, and

because many are single heads of households, investments insmall businesses run by women have a very high social and

economic rate of return.



BCi Business strategy:extending Financial services rough supply networks

Where others see obstacles, Chile’s Banco de Crédito einversiones (BCi) sees opportunities.

about 64 percent of Chile’s one million micro-enterprises, which account for 60 percent of the nation’semployment, lack access to banking services, adrawback for the country’s otherwise exemplaryeconomic performance.

Banks are oen reluctant to extend financial services tolow-income entrepreneurs because of what theyconsider excessive risk, represented by the lack of acredit history for borrowers, their low incomes, andrelatively low levels of education. is market is alsoassociated with high service costs.

BCi concluded that the microenterprise market, largelyignored, could fit into its growth strategy, offering bothprofits and an opportunity to help fulfill the bank’ssocial mission.

rough a new unit, Banca emergente BCi nova, BCi isaggressively pursuing business opportunities in the low-incomemicroenterprise market by applying new and existing technologies,specialized training for both beneficiaries and bank personnel, anddeveloping innovative alliances to allow suppliers, intermediaryorganizations and other large companies already serving the baseof the pyramid to share credit history information.

e iDB’s Opportunities for the Majority initiative is providingthe new BCi investment strategy with a $10 million partial creditguarantee to support microloans, while the Bank’s Multilateralinvestment Fund is providing a parallel $600,000 grant to helpfinance training and the creation of business alliances.

Over the next six years BCi expects its new strategy to resultin the extension of credit and other financial services to morethan 80,000 microentrepreneurs.

One of BCi’s advantages is its ability to create alliances withsuppliers, utilities, nongovernmental organizations and edu-cational institutions to build a nonconventional credit risk profileof customers who otherwise lack a credit history. Obtaining acredit profile is the gateway for unlocking credit and otherfinancial services for microenterprises. BCi is in the process ofdeveloping such partnerships with more than 30 organizations tohelp build a databank of creditworthy, low-income customers.

another pioneering technique devised by BCi is to dividemicroenterprise loans into two types, Alianza and Ejecutivo.Customers for the Alianza loans, receiving credit from $300 to$1,000, are screened in a specially designed process usinginformation from suppliers, such as embonor, a distributor ofCoca-Cola, and Comercial torino, a distributor of beautyproducts. in addition to loans for working capital to buy businesssupplies, all qualified customers open bank accounts, designed topromote savings and timely loan payments.

e Alianza process enables BCi to approve credit profiles of newcustomers in “batches,” reducing time and costs. e methodworks. e Alianza portfolio has a very low arrearage rate of 1.25percent.

e customers for the Ejecutivo loans, from $800 to $1,800, arescreened by a comprehensive system of credit checks that mayinclude visits by loan officers to interview relatives and businessassociates. since the Ejecutivo borrowers are considered less of arisk, their interest rates are reduced.

Other innovations being adopted by BCi are wireless point-of-saleelectronic devices to gather credit information on potentialmicroenterprise loan customers, the use of mobile educationalclassrooms to extend financial literacy, and the use of Webbanking, mobile banking and telephone banking systems.

With its 326 bank branches and 988 atM outlets, BCi is Chile’sthird largest private bank. it also has representation offices inLima, Mexico City, Miami and são paulo. its size, solid financial

track record, and investment in cutting edge technologies placeBCi in a position to make a real impact in improving the

livelihood of a substantial number of low-incomeentrepreneurs while building a new investment and

development model that can be repeated throughoutthe region.




Venture Capital for Low-income Markets

IGNIA Fund Bets on Investments for the Underserved

investing in housing, healthcare, education, basic

utilities and nutrition can not only fulfill a social

mission, but it can also be a profitable business venture.

is is the concept of iGnia Fund, which will channel

venture capital resources to fund commercially viable

growth companies serving the “base of the pyramid,”

those persons in Latin america and the Caribbean

earning less than $3,260 a year. e iGnia Fund selects

projects with the potential to be expanded on a larger

scale, thereby increasing the social and economic impact.

e fund was established by two prominent microfinancepioneers, Michael Chu, former CeO of aCCiOn international,and Álvaro rodriguez arregui, who has held a number of seniorpositions in business, banking and microfinance. ey and otherinvestors in the iGnia fund have a track record ofprofessionalism, business expertise and a commitment to thesocial and economic development of underserved markets. Chuis also a senior lecturer at the Harvard Business school, where hespecializes in majority markets issues.

“partnering with the iDB is especially meaningful given theBank’s leadership through its Opportunity for the Majorityinitiative,” commented Chu.

e iDB is supporting the fund with a $25 million senior securedloan, a $5 million equity investment from the Multilateralinvestment Fund—which is part of the iDB Group—and aMiF grant of $205,000 for technical assistance.

iGnia’s initial investments were in primedic, whichdelivers quality health care to low-income families inMonterrey, Mexico, and in jardines de Grijalva, abusiness that develops low-income housing inChiapas, Mexico.

Forging Partnerships

e loan to iGnia, approved in 2008, was the first by theiDB in the framework of the Opportunities for the Majorityinitiative. it illustrates the Bank’s ability to form partnershipsto expand investments that serve majority markets and toleverage resources that attract other investors who have theskills, experience and capacity to develop focused projectswith a significant, positive impact on low-income groups. atthe same time these projects offer an attractive rate offinancial return.

e iDB loan enables iGnia to move forward on its plan toraise a total of $75 million for investments benefitting themajority in up to 12 business projects throughout Latinamerica and the Caribbean. e fund intends to focusinvestments on small- and medium-sized companies, thosewhose revenues are less than $10 million a year, and on thosefirms that operate on the “last mile” of the value chain:businesses that provide services directly to consumers. inaddition to improving the quality of life of low-incomegroups, a firm receiving an iGnia investment mustrepresent a proven, robust business model with low fixedcosts and the ability to quickly generate sufficient cash flow.iGnia expects to make an exit from all its investments aer12 years with a significant profit.

For more information about the fund contact:[email protected]

“Partnering with the IDB is especially meaningfulgiven the Bank’s leadership through its Opportunityfor the Majority Initiative. With the IDB’s support,we hope to create the vanguard of new industriesthat will deliver key goods and services to help thepoor realize their full human potential,”

—Michael Chu (Funding Partner and seniorlecturer at the Harvard Business School).

A Vision for Housing Solutions in Paraguay

Housing and Banking Access: Two Persistent Issues Affecting the Poor

Paraguay’s housing deficit is not unique; most low-income communities across Latin America struggle with finding safe and affordable homes. Credit is virtually nonexistent for those at the bottom of the socioeconomic pyramid, so their prospects for improving their living conditions are grim.

However, Paraguay faces a particular limitation in addressing the housing and banking challenges of its low-income residents. Its financial institutions have limited options for accessing long-term local currency lending, which further limits the capacity of local institutions to offer credit to traditionally marginalized sectors.

Financial Institutions and a Nonprofit Unite for Results

With the support of a US$3 million partial credit guarantee from the Opportunities for the Majority initiative of the

Inter-American Development Bank, Citibank N.A. Paraguay will provide the long-term financing needed by local financial institution Vision Banco to fund a new home improvement credit line designed specifically for low-income households.

Vision Banco, a leading Paraguayan commercial bank, specializes in microfinance; 75 percent of its loan portfolio corresponds to microcredit and loans for small and medium businesses. Habitat for Humanity, an international Christian nonprofit dedicated to building and repairing housing for the poor, has been working in Paraguay since 1998. Together, they have designed a program that provides low-income families with both the financial resources and technical expertise they need to make quality improvements to their homes.

Financial Tools for Low-Income Homeowners

While some loan recipients are already microcredit clients of Vision Banco, Habitat for Humanity will play an important role in screening and training qualified applicants. Habitat architects will work with beneficiaries to plan and carry out the proposed construction projects, and will provide training in financial literacy to help the loan recipients understand how to manage the repayment of their loan, as well as make them aware of other financial services available to them.

To be eligible for these new loans, clients must have been working for the same employer for at least three years, be supporting at least one dependent, already own land, have family income of no more than four times the minimum wage, and participate in mandatory financial education workshops led by Habitat for Humanity.

This project is an example of the multisectoral approach frequently used by OMJ, as it combines the resources of a private financial institution, a commercial bank, and an experienced nonprofit to make the project stronger and better able to reach more clients than any individual partner could on its own. As a result, up to 2,500 families will lead healthier, more secure lives and will have increased access to financial services.

A Partnership for Safe and Affordable Homes

Over 800,000 Paraguayan families lack adequate housing; that number is growing by 15,000 every year. Low-income families have almost no access to the financial products they need to improve their living conditions.

New solutions for such households are now available, thanks to an innovative four-way partnership involving local microfinance institution Vision Banco, the international nonprofit Habitat for Humanity, the commercial bank Citibank, N.A. Paraguay, and the Inter-American Development Bank’s Opportunities for the Majority (OMJ) initiative. Low-income families will be able to access the loans they need to repair, expand, or improve their homes. They will also receive financial literacy training to help them manage their financial responsibilities.

For more information about the program, contact: [email protected]

Tackling the Challenge of Finding and Developing Innovative Business Plans

Sharing Knowledge, Fostering Ideas

As a first step in the program, Opportunities for the Majority and Dalberg held a BOP Modeling Workshop in Miami on July 19, 2010. Dozens of executives heard about companies whose BOP business plans are finding success, learned more about the unique demographics and needs of low-income communities across Latin America and the Caribbean, and brainstormed about what their companies could do to develop their own projects.

Companies were then invited to fill out applications describing their business concepts. After consideration by a selection committee, seven companies were chosen to become part of the CLP. They cover the food, housing, health, technology

and education sectors —all areas of urgent need for majority markets. They were chosen because their ideas were judged to be the most innovative and to have the best chance of engaging with the base of the pyramid on a large scale. The companies are:

• 3M, an American-owned multinational producer of a variety of products for households, workplaces, and schools, which is interested in creating educational technologies that can be used in classrooms, and proposes launching the new products in Argentina or Uruguay.

• Camargo Correa, a Brazilian-based building materials manufacturer, which wants to introduce its affordable prefabricated housing in Argentina.

• COMFAMA, a Colombian social enterprise with a rent-to-own housing model that will allow low-income people to access housing subsidies more easily.

• Empresa Promotora de Servicios de Salud, which has developed a successful business model for offering health care services to low-income residents in Guatemala, and now seeks to expand its reach into El Salvador and beyond.

• Hitecer, a Paraguay-based computer firm interested in developing educational technology and affordable laptop computers for low-income teachers and students.

• IMSA, a Honduran flour producer owned by parent company Grupo Corona, which proposes partnering with female entrepreneurs who will use IMSA flour to make breads and tortillas and sell them in their communities.

• ZOOM Lego, a Brazil-based affiliate of the Danish toy manufacturer, which wants to develop educational materials to support early childhood development and distribute them through a social franchising model.

Using grant resources from OMJ and financial contributions from the companies themselves, consultants from Dalberg began working intensively with the CLP participants in late 2010. With Dalberg’s guidance, the companies are all developing customized plans for developing their concepts into detailed business plans. These seven companies will serve as leaders in their fields, showing the corporate world what BOP business models are all about.

The Corporate Leaders Program for Success in Majority Markets

While many companies are interested in base of the pyramid (BOP) business models, they often lack an understanding of how to access majority markets, have inaccurate assumptions about low-income consumers, and have little experience in scaling up projects to make a significant social impact. To transform their preliminary concepts into detailed and successful business models, they need information, tools—and lots of advice.

To address these issues, the Opportunities for the Majority initiative of the Inter-American Development Bank, in partnership with management consulting firm Dalberg Global Development Advisors, developed the Corporate Leaders Program for Success in Majority Markets (CLP), with the goal of identifying several medium and large firms that have promising ideas about launching BOP business projects, but need some mentoring to get their plans ready to execute.


Strengthening Community Institutions that Support Local Microentrepreneurs in El Salvador

Marketplaces at the Heart of Communities

El Salvador has over 260 markets administered by municipal governments, in settings ranging from urban neighborhoods to small towns. These marketplaces act as public services, as they offer space in which local microentrepreneurs can conduct their businesses, and in which local residents can purchase affordable food and other goods.

While these historic marketplaces remain popular throughout the country, they face increasing competition from supermarkets and other chain stores. Deficiencies in utilities like plumbing and electricity cause problems with hygiene and ventilation in the market buildings, and make the markets less attractive to customers and more likely to harbor dangerous food-borne illnesses.

In some towns, the demand from merchants has outgrown the available space inside the markets. Undeterred, many vendors have set up stands on street corners, which has led to crowded sidewalks and traffic problems.

To address such issues, Opportunities for the Majority is loaning US$10 million to El Salvador’s Federation of Savings and Loan Associations and Workers’ Banks (FEDECREDITO), a privately owned, cooperative financial institution with a network of 48 savings and loans associations and seven workers’ banks. Its member institutions provide microloans and other financial services to low-income families and microentrepreneurs across El Salvador.

FEDECREDITO, through its member institutions, will channel the OMJ funds into subloans for the municipalities that administer the markets. The money will be used to renovate market buildings, making them more inviting and useful to a new generation of vendors and shoppers.

Improving Management along with Infrastructure

While modernizing and expanding the aging buildings that house the markets is one goal of this project, strengthening the tools and skills of those who oversee and operate the markets is equally important. A technical cooperation grant will complement the loan for structural upgrades by supporting management skills training programs that will help the municipalities run the markets more effectively and expand their provision of public-private services.

Supporting Municipal Marketplaces

In most cultures around the world, municipal markets are popular places for starting up small businesses. An entrepreneur can set up a stall with very low overhead costs, and sell anything from food to crafts, from household goods to simple services. Some sellers pass their market businesses down through their families; others may use their market stalls as launching pads for larger projects. Communities also benefit from central marketplaces that offer shoppers a variety of fairly priced and locally produced products.

In El Salvador, a new credit facility supported by the Inter-American Development Bank’s Opportunities for the Majority (OMJ) initiative will help ensure that municipal marketplaces remain a vibrant part of the local economy and a cradle of entrepreneurship and innovation.


Opening the Door to Higher Education for Low-Income Students in Mexico

Barriers to Education

In 2010, 2.4 million Mexicans were enrolled in higher education, two-thirds of them in public universities and one-third in private colleges. Mexican public universities currently are able to accept only about one in five students who apply. Private institutions provide alternatives, but their tuition fees are well out of reach for low-income families. As a result, each year millions of young adults in Mexico are turned away from the path to job opportunities and social advancement that a college degree represents. This situation will become only more difficult over the coming decade, when the Mexican college student population is expected to nearly double.

Financing Now Available for Low-Income Students

FINAE S.A. de C.V, a Mexican financial institution, is one of the few options available to students seeking loans to help finance their education. Only 2 percent of Mexico’s college students have an education loan, as compared to 76 percent in the United States and 59 percent in England. FINAE

was established in 2007 by a group of Mexican investors in response to universities’ requests for financing alternatives for students who would otherwise not be able to attend college. It works with a select group of well-known private universities. Loan recipients must maintain higher than average grades and must be pursuing a degree in a field for which there is demand in the job market. Because Mexico has little history with student loans, FINAE works hard to educate potential clients about how its loans work and the advantages of financing higher education.

FINAE’s loans finance between 20 and 100 percent of the total cost of a university degree, or from US$2,000 to US$20,000 per borrower, depending on the students’ earning potential after graduation. FINAE has developed an effective, computer-based system for managing relations with its borrowers and receiving their repayments after they leave school.

A Brighter Future for College Graduates

A US$2 million loan from the IDB’s Opportunities for the Majority initiative will allow FINAE to expand its loan offerings. By partnering with FINAE, Opportunities for the Majority will not only help thousands of low-income Mexican students earn college diplomas, but will also let them establish formal credit histories, which will help them access a variety of financial services in the future, from bank accounts to mortgages and business loans. Most importantly, the college graduates will be able to pursue skilled and professional jobs that will bring them higher incomes and better prospects for supporting their families in the future.

New Options for Aspiring College Graduates

College degrees are hard to obtain in Mexico, but especially so for students from low-income families. Only one in four Mexicans between the ages of 19 and 24 is enrolled in college—a number that drops to one in 30 for young people at the base of the pyramid.

A loan from the Inter-American Development Bank (IDB) through the Opportunities for the Majority (OMJ) initiative will help the Mexican education finance company FINAE expand its student loan offerings, allowing more low-income students to get degrees and training that will lead to better jobs and brighter futures.


Backing Community-Driven and Community-Led Investment in Ecuador

A Network Creates Local Solutions

The Jardin Azuayo Cooperative, based in a largely rural area of remote villages in southern Ecuador, has created a decentralized management structure with 30 branches. This system enables the cooperative to serve each individual community better by offering members products and services that are tailored to meet its specific needs. This bottom-up branch system creates local jobs by hiring villagers to administer its programs, gives people the chance to serve as leaders within their own communities, and helps ensure that programs and projects financed by the co-op are implemented effectively and appropriately. At the same time, leaders from

each branch have the opportunity to learn from one another’s experience, and to enhance their impact by banding together under the Jardin Azuayo name.

One highly successful example of a Jardin Azuayo project is the Mercado de Centavo (“One Cent Market”) in the town of Paute, which is managed, supplied, and staffed entirely by local women. In this area of Ecuador, many men migrate to larger cities or abroad to look for work, leaving wives and other female relatives at home. With support from Jardin Azuayo, the women of Paute established a central market where they could sell produce, meats, crafts, and other goods. They are developing their entrepreneurial skills at the same time that they are earning money to support their households.

Investment with a Social Impact

A $3 million loan from the OMJ initiative, along with $6 million mobilized from impact investors Incofin, Calvert Foundation, and Oikocredit, will finance Jardin Azuayo’s new Credits for Community Development project. In turn, the project will channel funds to municipalities, community organizations, and other local entities to finance improvements in social infrastructure such as renovating public schools; establishing marketplaces, parks, and other public spaces; building roads; and installing water treatment systems. This loan will help fund as many as 250 such projects.

Jardin Azuayo has a slogan: “To save is to invest in hope.” Its members are given the tools to capitalize on hopeful investments, including savings accounts, automatic teller machines (ATMs) that service remote localities, the option to use mobile phones or computers to transfer money and process bill payments, and perhaps most importantly, credit accounts to finance their own dream projects, be they business ventures or new homes. For its part, Jardin Azuayo lives up to its motto by reinvesting profits in new projects, multiplying its impact by keeping money within its communities.

From Disaster to Hope

In 1993, a landslide and widespread flooding devastated the region around the city of Paute in southern Ecuador, taking lives and destroying property in its path. Out of a belief that the community itself was best able to determine what was needed to help it not only rebuild but grow and prosper, the Jardin Azuayo Cooperative was founded in 1996 as a savings and loans co-op dedicated to meeting the needs of this underserved region.

Today, the cooperative’s microloans support a wide variety of projects, such as educational programs, development of small businesses, and infrastructure improvements. The co-op boasts US$175 million in assets and some 180,000 co-op members. Now, with a $US9 million loan package from the Inter-American Development Bank’s Opportunities for the Majority (OMJ) initiative and three impact investment co-lenders, Jardin Azuayo will be able to increase its activities.


Small Farmers, Big Dreams: Creating Value at the Base of the Pyramid in Mexico

Reaching Scale with Effective Business Models

Sabritas has already conducted two pilot programs to test sunflower cultivation in Mexico, supporting the conversion of 350 hectares of farmland. A key obstacle to scaling production proved to be the lack of working capital loans to support smaller producers. Agrofinanzas, a financial institution that specializes in working with the agro-industrial sector, will provide such loans to the farmers so they can purchase seeds and expand their production of sunflower crops.

The Inter-American Development Bank’s (IDB’s) Opportunities for the Majority initiative has been instrumental in helping Sabritas structure a market-based business model that will be sustainable in the long run. Thanks to the IDB, the project also has a sound financial structure. In creating a risk-sharing model, the IDB established a new alliance between Agrofinanzas and Sabritas to collectively provide the needed financial resources for the projects. Agrofinanzas will finance loans to producers; Sabritas will finance the costs related to supply chain management and will cover a portion of potential losses; and the IDB will provide a partial credit guarantee to further mitigate the underlying credit risk.

When the project reaches full scale, as many as 2,000 microloans will have been made and a new sunflower supply chain will be launched. In addition to increasing their income by selling their crops, the farmers will build up credit histories and be able to access other financial services, like insurance or loans for purchasing homes or for higher education.

Added Benefits for Health and the Environment

Besides addressing concerns about saturated fats and their effects on health, the conversion of farmland for the production of sunflowers is also in alignment with another Mexican government priority: diversifying crops and reintroducing native crops whose production has fallen off in recent years.

“This project is a great example of the kind of base of the pyramid business model we are working to support and promote,” said IDB project team leader Elizabeth Boggs Davidsen. “It will enable small producers to have access to otherwise unavailable financing to expand their production. We are pleased to play a role in helping small farmers and Sabritas scale up this program to address both the demand for more nutritional oils and the working capital needs of low-income farmers in rural Mexico.”

The project is expected to serve as a model of how the private sector can align its operations to advance public policies while still making smart business decisions. This is a model that the IDB expects to replicate in other countries and industries.

PepsiCo Brings the Base of the Pyramid into its Supply Chains

In rural Mexico, small farmers tend to grow staple crops like beans and corn, and sell them only in their immediate communities. With little access to national supply chains or the working capital they need to expand their farms, they remain at subsistence levels. Meanwhile, Mexico is developing ever-higher rates of obesity and related health issues, leading the government to call for food companies to cut their use of saturated oils and trans-fats, and to implement public incentive plans to diversify the country’s agricultural profile.

Sabritas, a leading Mexican snack foods producer owned by PepsiCo, has decided to take action. With support from the Opportunities for the Majority (OMJ) initiative and the local financial institution Agrofinanzas, it will scale a pilot program that incorporates small farmers into its sunflower supply chain. The new production of sunflower oil will reduce the company’s dependence on expensive, unhealthy imported palm oil, while giving small farmers the chance to expand their crop output and enter the formal economy.


Including Small-Scale Producers in Argentina’s Wine Industry

Modest Origins of a Celebrated International Export

The international wine industry has a glamorous image in magazines and elite restaurants. But, as with most agricultural products, a great amount of hard work goes into making fine wines, most of it carried out in rural areas by low-income farmers and laborers.

The La Riojana cooperative, based in western Argentina’s Rioja-Chilecito valley, was founded in 1940 and currently has approximately 500 members, most small-scale producers of the grapes and wines for which Argentina is famous. The cooperative’s wines are highly regarded and have earned Fair Trade certification status. To date, however, the individual producers have had very limited access to the financing they need to upgrade and expand their operations.

Connecting Producers to Supply Chains through Working Capital

A US$2 million loan from the Inter-American Development Bank, through the Opportunities for the Majority Initiative, will significantly reduce the need for farmers to rely on high-interest credit lines, which are difficult to access and can hinder their ability to grow and expand their business. The fund will allow La Riojana to create a microloan fund, which will help members purchase new equipment, modernize their operations, and increase their production output. As a result, the project will strengthen the competitiveness of these small-scale producers, helping them gain the volume they need to enter regional and global markets. This loan is the first granted to a cooperative by Opportunities for the Majority.

Benefits Spill Over to the Community

Increased productivity and revenue at the cooperative will also benefit the surrounding community. La Riojana currently employs 305 workers full time and up to 1,300 during the harvest period. As production expands, more jobs will be created for the low-income residents of this rural region. This project is a clear example of the bottom-up approach that the Opportunities for the Majority initiative is successfully supporting. Through its operations, La Riojana is working to ensure that small farmers will play a role in international supply chains and will have a significant impact on many more nearby families.

Helping a Cooperative of Smaller Wine Producers Compete with Larger Firms

In recent years, Argentina’s wines have gained acclaim and distribution on an international scale. The country’s tourism industry has also benefited, as wine aficionados from around the world have come to visit vineyards and tasting rooms. However, these benefits have reached mostly those producers that are large enough to get the scale needed to satisfy the growing demand of new markets.

Now, through an innovative microloan fund, the members of La Riojana, a cooperative of small-scale wine producers, will be able to compete with their larger counterparts by increasing the output of their vineyards and improving the quality of their wines.


Transforming the Lives of Low-Income Microentrepreneurs in Brazil

Challenges and Opportunities for Microentrepreneurs

In the developed world, about 80 percent of the food services sector is made up of stable, profitable businesses. In Brazil, the reverse is true: 80 percent of its food-related businesses are small, informal—and economically vulnerable. Making and selling food is a popular entrepreneurial activity, as barriers to entry are low, no education is needed, and preparation work can often be done in a home kitchen with equipment that is already available. However, a lack of basic management skills, resources, and experience means fledgling microentrepreneurs in the food services sector have a hard time earning a modest living, let alone making their businesses profitable and successful. They are unable to position and market their businesses in a way that makes them to stand out against the competition. Without access to working capital, they lose time

and money every day by buying ingredients at retail prices because they do not have enough cash on hand to buy in bulk and benefit from economies of scale. They are also unable to buy the equipment or hire the employees that would allow them to expand beyond the “micro” stage of entrepreneurship.

A Recipe for Success

Tenda Atacado Ltda., a leading wholesale retailer in the state of São Paulo, sells food in bulk and other consumer goods at discount prices. Another company in the Tenda Group, Vox Cred S/A, offers a variety of credit services to Tenda’s clients, the majority of whom are microentrepreneurs. Based on its experience, Tenda is developing a new program, Mundo Vox Tenda, which targets low-income microentrepreneurs in the food services sector, providing them not only with financing options to cover working capital needs and buy equipment and materials, but also with training in basic business knowledge: financial literacy, marketing, food safety practices, and the process of business formalization. As an added incentive, participants who complete the business training program will receive lower interest rates.

Tenda expects to reach between 55,000 and 90,000 microentrepreneurs with its new Mundo Vox Tenda program. The loans will be financed in part by a US$10 million loan from Opportunities for the Majority. A US$270,000 technical cooperation grant will help cover the costs of developing and implementing the training program.

This business model is potentially scalable throughout Brazil and replicable throughout the region. By giving microentrepreneurs the training they need to run successful businesses, and access to credit that will help them not only grow their microenterprises but also participate in the formal economy, the Mundo Vox Tenda program may transform the economic prospects of transformadores at the base of the pyramid.

Providing New Tools to Culinary Microentrepreneurs

In Brazil, people who make and sell simple ready-made food items are known as transformadores because of their skill in transforming raw ingredients into popular meals and snacks. But no matter how delicious their wares, without access to working capital or basic business knowledge, these microentrepreneurs face challenging odds in making a living from their businesses.

With support from the Inter-American Development Bank’s (IDB’s) Opportunities for the Majority Initiative, São Paulo-based food wholesaler Tenda Atacado Ltda. is offering new tools to help culinary microentrepreneurs establish thriving businesses, including credit for financing the purchase of equipment and ingredients, and training in management skills.


OMJ Portfolio ENG 2010

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Transcript of OMJ Portfolio ENG 2010