In a bid to support microfinance institutions (MFIs) in Latin America and the Caribbean — especially small- and medium-sized ones dealing with the fallout from the current COVID-19 crisis — Google has allocated US$8 million to the regional Locfund Next through the Inter-American Development Bank’s innovation arm, IDB Lab.
Locfund Next is the first permanent regional vehicle, managed by local managers, dedicated to providing financing in local currency and supporting digital transformation of MFIs.
According to the IDB, “As the effects of COVID-19 crisis impact the economy of the Latin American and Caribbean (LAC) region, small and medium microfinance institutions face serious liquidity problems and currency mismatches as their loan portfolio quality deteriorates, their funding sources dry up, and volatile currencies enhance their foreign exchange (FX) risks.
“To ensure that microfinance institutions can continue to provide essential financial products and services in the short term, but also to accelerate the post-COVID-19 economic recovery process in Latin America and the Caribbean, Google is supporting Locfund Next…” the regional bank noted.
This initiative forms part of Google CEO Sundar Pichai’s efforts to create a US$200-million fund that will support non-governmental organisations (NGOs) and financial institutions around the world to strengthen their access to credit initiatives for SMEs. It is the only initiative of its kind for the LAC region.
As a partner, IDB will complement Google’s grant to Locfund Next with a contribution of US$4.5 million.
“We are enormously proud to have been selected by Google to manage its economic recovery resources in the face of the pandemic,” Irene Arias, CEO of the IDB Lab, stated.
“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.”
The initiative is not the first partnership between the IDB and Google, as both share a long history of working together to promote economic development in Latin America. Together they previously collaborated on ConnectAmericas — an initiative that helps SMEs strengthen their businesses by providing them access to clients, suppliers, and investors in the region and around the world.
“For Google, supporting small and medium-sized businesses has always been a fundamental part of our philosophy. For this reason, we feel a deep responsibility to work with SMEs in their recovery process from the COVID-19 crisis,” Adriana Noreña, VP for Latin America at Google, stressed.
“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,” she further explained.
For his part, Bernardo Guillamon, manager of the IDB’s Office of Outreach and Partnerships, underscored the importance of private sector contributions to the post-pandemic recovery.
“With this new collaboration, we are demonstrating how high social impact can be achieved with investments in public-private partnerships by large companies,” he said, adding: “It is a very innovative complement to the achievements obtained in the more than 10 years of partnership between Google and the IDB.”