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Microfinance Projects

Volume 455: debated on Friday 26 January 2007

To ask the Secretary of State for International Development how much was spent by his Department on microfinance projects in each of the last five years; and how much is planned to be spent over the next five years. (117301)

The UK’s 2006 White Paper on International Development commits us to tackling barriers to access to markets and financial services, and supporting microfinance initiatives in partnership with banks and regulators.

For DFID, microfinance is part of a broader strategy to promote stronger and more inclusive financial sectors. In addition to programmes that have microfinance as the central activity, DFID supports programmes to improve access to finance for poor people where microfinance is just one component. These programmes aim to encourage the entry of financial institutions into the microfinance sector and assist Governments to improve the regulatory environment for financial institutions to serve the poor.

In the last three financial years (not including the present year) DFID spent the following on microfinance and financial sector projects.

April to March:

£ million

2003-04

40

2004-05

23

2005-06

23

The totals for the years preceding this were not disaggregated and calculating this now would involve a disproportionate cost. In total, DFID has spent over £165 million to support microfinance and financial sector projects and had committed £140 million more at 31 October 2006.

DFID continues to design and implement new programmes which will improve access to finance. Since the last review of commitments in October, DFID has approved a £9.3 million, five-year financial sector development programme in Nigeria and a £32.8 million seven-year PROSPER programme in Bangladesh, which includes capacity building for microfinance institutions.

A number of the international agencies that DFID supports are active in promoting microfinance and financial sector development. The World Bank, the International Finance Corporation and several regional development banks all provide significant funding or technical assistance in these areas. We do not have the necessary level of disaggregation of figures to provide a figure for the total spent on microfinance and financial sector development.

DFID has also been successful in leveraging financing from the private sector. For example, DFID provided a first-loss facility of £820,000 via the Financial Deepening Challenge Fund that generated a total fund of £80.6 million from 13 institutional investors for the Deutsche Bank Community Microfinance Facility.