On Monday, USAID has announced a partnership with Grameen Foundation for a $162.5 Million Credit Guarantee. By this valuable partnership, it will easier for the microfinance institutions (MFI) to access private credit as USAID and Grameen Foundation will share the credit risk.
As we all know, effects of the actual financial crisis also has an influence on the MFIs. As the unemployment rate increases, more and more people are trying to setup a micro-enterprise and this has increased the demand for microcredit.
According to USAID and Grameen Foundation, the 3 major ways that MFIs get funding are reinvestment of repaid customer loans, loans from commercials banks and finally grants from donors. As the financial crisis has reduced the access of commercial financing to the MFIs, this partnership between USAID and Grameen Foundation will provide credit enhancement for the MFIs.
Moreover, the partnership will lend money in local currency as they believe that this will present less risk of currency market fluctuations. In the actual financial meltdown, this partnership should give a helpful hand to worldwide MFIs who will profit from this partnership, an estimated of 691, 500 micro-entrepreneurs will benefit the loans provided by these MFIs.
Grameen Foundation is “global non-profit organization that combines microfinance, technology, and innovation to empower the world’s poorest people to escape poverty. It has established a global network of 46 partners in 25 countries that has impacted an estimated 18 million lives in Asia, Africa, the Americas, and the Middle East. Grameen Foundation was founded by Alex Counts, who began his work in microfinance with Grameen Bank founder and Nobel Peace Prize recipient Dr. Muhammad Yunus.”
USAID is an independent federal government agency that provides foreign assistance worldwide. “USAID has been the principal U.S. agency to extend assistance to countries recovering from disaster, trying to escape poverty, and engaging in democratic reforms.”