This summary covers investments by Grupo ACP and Mibanco in Microfin (Sierra de Luna S.A., which is in the process of redenomination to “Microfinanzas del Uruguay S.A.”). The investors have applied for MIGA guarantees of $ 1.2 million for a period of up to three years against the risks of transfer restriction, expropriation, and war and civil disturbance.
The project consists of the establishment and operation of Microfin, a microlending organization in Uruguay. The organization is to be a subsidiary of Grupo ACP. The proposed guarantees would cover a shareholder loan from Grupo ACP and a non-shareholder loan by Mibanco. Microfin plans to focus on micro-loans between $3,500 and $10,000, but it will also provide loans below that range. It also plans to establish an estimated 100 service points throughout the country in order to reach under-served segments of the microfinance market.
The project is a Category C under MIGA’s environmental review procedures.
The most recent World Bank Country Assistance Strategy for Uruguay focuses on helping the government attain equitable and sustainable economic development. This includes measures to reduce vulnerability, sustain growth, and improve living standards.
One of Microfin’s objectives is to close the existing gap between the demand and supply of financial services to low-income sectors in Uruguay. The country’s existing financial infrastructure is dominated by large banks and does not meet the needs of some of the most vulnerable groups. Microfin intends to target micro-entrepreneurs (those with ten employees or less). By supporting small businesses, it should help generate employment and improve living standards and may encourage new entrants to Uruguay’s microfinance market.
The proposed project would be underwritten through MIGA’s small investment program.