Beyond Emergency Responses: Ensuring the Legacy of Market-Based Microfinance Expansion
This paper describes key features of the Microfinance Innovation Fund that was a prominent feature of the Earthquake and Tsunami Emergency Support Project in Indonesia.
The Earthquake and Tsunami Emergency Support Project aimed to develop sustainable and responsive financial services to micro and small enterprises in Aceh and the island of Nias in Sumatra, Indonesia. Before establishing the Fund, the project:
- Provided technical assistance to build the capacity of partner banks;
- Created a Board for the Fund;
- Setup guidelines for operations;
- Extended loans and deposits at near-market rates;
- Partnered with PT. Permodalan Nasional Madani (PNM), a government-owned, non-bank institution that assumed the role of Fund custodian.
The Microfinance Innovation Fund provided commercial funding to partner banks willing to expand financing for micro and small enterprises. It was designed to serve microfinance-oriented banks beyond the life of the project. As of late 2009, funds allocated to the Microfinance Innovation Fund had been fully disbursed to partner banks. Before end-2009, the exit strategy is to hand over the Microfinance Innovation Fund to the proper pre-existing entity, most likely the PMN, to continue fund operations.
