Obama and Microfinance

http://www.reuters.com/article/bondsNews/idUSN1833100020090418

Recently, Barack Obama announced a $100 million microfinance fund during his visit to Trinidad and Tobago on April 18th. The new fund was one of the main points that Obama pushed along with energy, security, and climate change. The fund will be used to help with medium and long term finance for microfinance funds and microfinance vehicles. According to Reuters there has been about $9 billion to 9 million microfinance entrepreneurs made by 565 million microfinance funds around the Americas. Microfinance provides many of the jobs in the southern hemisphere. This kind of funding is extremely important during times like these. Due to the world wide recession many people have been losing their jobs. The recession is also causing a reduction in funds for microfinance projects for the many people that depend on them in the Caribbean and South America. This is evidence that Obama must believe that microfinance is a good way of helping people out of poverty especially in these hard times. It is also true that Obama is one of the first presidents to ever consider the idea of funding any kind of microfinance activity. Obama may be more open to the idea because his mother was so deeply involved in microfinance in Indonesia. Ann Durham worked closely with Bank Rakyat Indonesia and their microcredit branch. This is was one of the earliest and largest microfinance banks in the world. Furthermore, in her time at the University of Hawaii she wrote her dissertation on the peasant blacksmiths of Indonesia and how they survived and thrived. I am sure that this is part of the reason why Barack Obama is more open to the idea of microfinance and is more aware of the benefits that microfinance can hold for many people living in poverty.

The details of the fund is still being worked out but I will give the best report as possible as of now. The fund will be managed in partnership with the Multilateral Investment Fund(MIF) at the Inter-American Development Bank(IBD). The IBD is one of the premiere banks to provide solutions to development challenges in countries in Latin America and the Caribbean. They use partnerships with governments, companies, and civil societies to provide loans and grants to various projects in those nations. Other partners in this venture are the U.S Overseas Private Investment Corporation and the Inter-American Investment Corporation. The initial $100 million dollar investment will come from a mix of debt and equity determined by the boards of each of the partners. The MIF will begin to structure this fund and find new investors. They hope to eventually reach a goal of $250 million invested by private and public players. The actual fund named The Microfinance Growth Fund will be developed as a limited partnership in Delaware, and will be able to provide loans to microfinance institutions, microfinance investment vehicles, and other financial intermediaries that provide money to entrepreneurs. The market they are trying to fulfill is quite large as I mentioned before. As the world financial crisis continues to affect microfinance funds the deficit in the coming years could be around $750 million dollars according to the White House website. The funds will be given to various organizations even extremely small ones that have limited access to international investment. Obama and his administration believe this will provide a strong start to helping the microfinance cause in Latin America and the Caribbean.

I am impressed by this announcement by Barack Obama. I never would have thought that an idea like this would be brought up with everything else that is affecting the world. Obama is so focused on creating jobs in the states, providing clean energy, and getting our troops at Iraq that I did not think that microfinance would be an option for the US government to be involved in. But, it does not hurt that his mother was so involved over the years with microfinance projects all over the world especially in Indonesia. I am sure that Obama has been able to see first hand the kind of things that microfinance can provide for some people. I also think that Obama is using this fund as a kind of experiment. I think he is making this small investment in microfinance in Latin America to see if it will realy improve conditions so that he may expand it and possible create a new fund in the United States. I hope to see more of this from President Obama as his term continues. So far, so good, at least in the world of microfinance.