Lessons Learnt from Guarantee Funds: The example of the International Guarantee Fund (IGF)
This report evaluates the structure, performance and target markets of International Guarantee Fund (IGF) in the context of current microfinance trends. It examines options for expansion and diversification, and offers suggestions for development. The study was mandated by Swiss Agency for Development and Cooperation (SDC) which supported IGF for over 15 years. The report includes case studies from IGF clients in Peru, Nicaragua, Togo and Benin. The first part of the report analyzes the impact of IGF loan guarantees on funding structure of target institutions. The second part studies MFI lifecycles, fund-raising strategies and recent microfinance investment trends. The report presents examples of guarantees for funding and investment, and proposes an IGF-type loan guarantee provider for the microfinance-for-development industry. It suggests that IGF can increase its impact by ensuring that:
- Funding for MFIs is on wholesale terms with minimal real collateral requirements;
- Risk profile of the MFI is measurable, priceable and distributable;
- Lending institution is committed to developing a wholesale lending business.
