MULTILATERAL INVESTMENT FUND MIF

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MULTILATERAL INVESTMENT FUNDMIF

• Promoting Private Sector Development in Latin
  America and the Caribbean

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MIF - A Unique Instrument

• Conceived in early 1990s 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

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Broad and flexible mandate to

• Support market reforms
• Build workforce capabilities and skills standards
• Broaden economic participation of smaller
  enterprises

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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

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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

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MIF focuses on Core Activity Areas

• 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

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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
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Technical Assistance Grants to governments, local
NGOs, 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

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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

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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

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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

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Credit Enhancement forSecuritized Bonds
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República Dominicana
Haití
Cuba
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
1,425
862
88
Guyana
Venezuela
Guatemala
788
Nicaragua
2,106
El Salvador
137
247
2,316
Colombia
Costa Rica
3,067
306
Ecuador
1,656
Perú
Brasil
5,200
1,295
Bolivia
Remittances in selected LATAM countries 2003
(millions US)
340
Argentina
225
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R E M I T T A N C E S LATAM 2002
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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.

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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
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Remittances Securitization Transaction Structure
US Remittances
Collecting Bank
Collections paid to a Master account
Master Account
USA/Europe
Remittances Beneficiaries
LATAM
Trust
in MXN
A cash shortfall in the trust, will be fund by
the Bank through the guarantee.
Cashflow
Collateral
Debt Service Reserve accounts
Debt Payment Account Reserve accounts Provisions
Accounts Acceleration Accounts
Full Corporate Guarantee by Local Bank
Paying 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