NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

IFC, a member of the World Bank Group, announced a $400 million increase and one-year extension of the Base of the Pyramid (BOP) platform – an initiative first launched in 2021 to help financial services providers deliver critical funding to small and informal businesses, and low-income households.

The additional financing, which brings IFC’s total investment to $1 billion, will ensure much-needed liquidity for lenders in the most vulnerable markets and expand support to underserved segments of the population, including women and women-owned businesses. With an average loan size of $1,149 to sub-borrowers of IFC clients under the platform, IFC is able to reach very small businesses. To date, more than 50% of the current portfolio is expected to reach women entrepreneurs. Moreover, investments under the platform have demonstrated the commercial viability of financing for small and informal enterprises even in a challenging economic context, mobilizing more than $105 million from other lenders, of which $85 million was in very poor or conflict-affected countries.

The informal sector and micro, small and medium enterprises (MSMEs) are vital parts of emerging market economies, contributing to economic growth, job creation, provision of goods and services, and poverty alleviation. MSMEs make up over 90% of all firms and account, on average, for 60-70% of total employment and 50% of GDP worldwide. Still, the MSME finance gap stands at roughly $5.7 trillion, and more than $8 trillion when informal enterprises are included.

Projects under the BOP platform are expected to help client financial institutions grow their loan portfolios from 5.5 million to 7.9 million loans to MSMEs, more than doubling their outstanding portfolios to over $13 billion.

“Rising inflation and global economic volatility have left local financial institutions more risk-averse and less likely to lend to small or informal businesses,” said Tomasz Telma, Director and Global Head of IFC’s Financial Institutions Group. “The platform expands access to finance where it is needed most, supporting entrepreneurs and individuals at the base of the pyramid whose contributions are essential for a resilient economy, but who are often excluded from the formal financial system.”

The platform is supported by the International Development Association’s Private Sector Window (IDA-PSW), with 50% of the financing targeted to IDA countries. Up to $130 million will be made available through a pooled first-loss guarantee from the IDA-PSW Blended Finance Facility. In addition, resources from the IDA-PSW Local Currency Facility may be allocated to support local currency lending to IFC clients included in the Base of the Pyramid platform.

“This platform underpins IDA’s commitment to supporting jobs and economic transformation. Access to financing for MSMEs is crucial to supporting economic activity and resilience,” said Dirk Reinermann, Director, IDA Mobilization and IBRD Corporate Finance. “We are also pleased to see that the platform has been able to broaden IFC’s client base with several new client financial institutions participating.”

The extension and additional investment in the BOP platform will enable IFC to continue delivering fast and flexible solutions to its most vulnerable clients.

Photo courtesy of Meena Kadri.