Last Thursday, the World Bank and the German government jointly announced the creation of a $500 million Microfinance Enhancement Facility intended to “support microfinance institutions facing difficulties refinancing as a result of the global financial crisis and ensure that low-income borrowers in developing countries continue to have access to finance.” The short-to-medium term Facility will be created under the auspices of the International Finance Corporation (the World Bank’s “private sector arm”) and will receive an initial contribution of $150 million from the IFC and $130 million from the German development bank KfW Entwicklungsbank (KfW). The Facility will be managed by BlueOrchard Finance, responsAbility Social Investments AG and Cyrano Management. KfW is expected to provide refinancing services “to more than 100 microfinance institutions in up to 40 countries,” and “will support lending to as many as 60 million low-income borrowers in many of the world’s poorest countries.”

Despite the financial crisis the World Bank has stated that the microfinance industry has continued to perform well and maintain healthy portfolios, although some of these institutions have encountered problems refinancing debt. World Bank Group President, Robert Zoellick, announced that “[t]he Microfinance Enhancement Facility will provide vital funding and ensure that microfinance continues to stimulate growth, create jobs and overcome poverty in emerging markets.” Dr. Norbert Kloppenburg, COO of KfW, also noted that “[w]ith this facility we can set a strong example and quickly counteract the current downward trend in lending to microfinance institutions.”

In November, the World Bank increased its financial support for developing countries by committing the International Bank for Reconstruction and Development (one of the two member-country-owned institutions that compose the World Bank Group) to lend up to $100 million over the next three years and launched four facilities designed to target issues faced by the private sector.