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Financial Investment in Community Finance Institutions: Providing Leverage for Development and Governance

Examining issues guiding private investment in community finance sector
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This paper presents lessons that Développement International Desjardins (DID) has learned in its decade of involvement in community finance. It includes the following:

  • Financing by major international investors provides significant financial leverage for beneficiary institutions, and fosters improvement in their governance;
  • Investment in community finance offers prospects of adequate returns for all investor types;
  • Rates of return must be high enough to make investments worthwhile;
  • Financing solutions for community finance institutions should be adapted to their circumstances;
  • Community-owned financial institutions revitalize the local economy, and contribute to poverty alleviation through capital reinvestment;
  • DID can act as a bridge between the partner and the international financial market;
  • Investment should be carried out though a clearly defined process that is understood by the investment partner;
  • Partnership approaches create value for investors as well as the institution being financed;
  • Relationship between investment and technical assistance efforts should be managed using good governance guidelines.

Finally, the paper states that access to capital is the main concern for the survival and growth of community finance institutions.

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