Search engine giant Google and the Inter-American Development Bank (IDB) have set aside more than US$12 million to support Latin American microfinance institutions reeling from the economic devastation brought about by the COVID-19 pandemic.
Google and the IDB will give $8 million and $4.5 million, respectively, to Locfund Next, a regionally managed institution dedicated to providing financing in local currency.
Microfinance institutions across Latin America have been caught in a whirlwind of liquidity crunch. Their funding sources have dried up and their loan books have been growing relentlessly. Worst still, the increasing volatility in forex exchanges has left them clueless as to how to deal with currency mismatches, according to the IDB.
The region’s economic recovery will derail if these small banks go out of business.
“This initiative with IDB Lab increases the capital available so that SMEs can access formal microcredits and, based on this, strengthen their economic recovery and resume a path of growth and prosperity,” says Adriana Noreña, VP for Latin America at Google.
The Silicon Valley giant has recently launched a new fund aimed at encouraging financial institutions to lend more money to small and medium-sized enterprises.
“This joint investment will allow IDB Lab to accelerate its work in financial inclusion by creating permanent solutions that facilitate access to financing and support the digitization of financial intermediaries,” said Irene Arias, CEO of the IDB Lab.