FIRST TRANSACTION

MARKET DEVELOPMENT

• Increasing financial inclusion: Locfund Next provides local and hard currency financing and other types of financial products and services to MFIs, through which it aims to reach at least 200,000 end clients, including at least 50% women and 40% rural residents. The Fund estimates its indirect impacts to benefit some 2.4 million people in the LAC region. The Fund’s intentionality in servicing the base of the pyramid is also demonstrated in that it tracks, on a quarterly basis, the average size of loans held in its (MFI clients’) portfolio. The Fund targets an average loan size for end‑clients under USD 1,500. Lower average microloan sizes are associated with wider access to financial services, especially for low‑income women borrowers.
• Strengthening capabilities and improving productivity of MFIs and their clients: Locfund Next has a dedicated Technical Support Facility (TSF) which provides MFI clients with assistance on digital transformation, with additional components focusing on gender, ESG and climate change mitigation and adaptation. Improving digital literacy and capabilities in the finance sector is associated with wider financial and digital inclusion, as well as positive spillovers between sectors of the real economy.

GENDER EQUALITY

• Supporting women’s leadership: Women represent 33% of the senior management (C‑Suite) team at Locfund Next, above the 30% threshold under the 2X “Leadership” Criteria. The policies and procedures related to gender equality which BIM has already put in place support women in the workplace. Women represent 53% of the workforce at the Fund level, which is over the 40% 2X threshold for the finance sector. Commitment to implement additional measures to support the recruitment, retention, and career development of women employees, as well as to strive for continued gender balance has been reflected in the 2X Flagship Fund Memorandum of Understanding (MoU) and serves as a basis for the Fund’s qualification under the 2X “Employment” Criteria.
• Improving equal access to finance for women: As of March 2022, MFIs supported by Locfund Next have a majority (~70%) women customers (individuals and businesses), which ties to Locfund Next’s corporate social target to reach at least 50% of women end‑clients. Thus, the current Fund’s portfolio composition tilted towards MFIs specifically or disproportionately benefiting women makes it qualified under the 2X “Investments through Financial Intermediaries”, or “Indirect” Criteria. Even more importantly, it demonstrates the strength of the Fund’s commitment regarding gender equality and women’s economic empowerment.

CLIMATE AND NATURE ACTION

• Introduce climate‑lens financing for MFIs: LFN is integrating climate considerations into its operations for the first time, aiming to promote climate finance among MFIs and their borrowers. The transaction’s proceeds will be used exclusively to finance climate‑related loans to MFIs, including those for solar energy, energy efficiency, clean cooking, and climate‑smart agriculture, in line with MDBs/IDFC Common Principles for Climate Finance.

SECOND TRANSACTION

MARKET DEVELOPMENT

• Expand access to local currency financing for MFIs to reach microfinance borrowers, including those in rural areas: The Fund provides local currency financing to Tier II and Tier III MFIs in LAC, helping mitigate foreign exchange risks and enabling MFIs to allocate more resources to microfinance operations. The Fund has provided the equivalent of US $315 million in local currency financing to 57 MFIs across 14 countries. To date, the Fund has reached 265,000 end‑borrowers, with 56% from rural areas.

GENDER EQUALITY

• Promote women’s access to finance: Women in LAC face a 7% gap in account ownership compared to men, which limits their access to formal financial services. As a 2X Flagship Fund, LFN applies a gender‑lens approach in lending to MFIs, where 96% of clients are currently 2X‑aligned and women represent 67% of end‑borrowers.

CLIMATE AND NATURE ACTION

• Introduce climate‑lens financing for MFIs: LFN is integrating climate considerations into its operations for the first time, aiming to promote climate finance among MFIs and their borrowers. The transaction’s proceeds will be used exclusively to finance climate‑related loans to MFIs, including those for solar energy, energy efficiency, clean cooking, and climate‑smart agriculture, in line with MDBs/IDFC Common Principles for Climate Finance.