TIFI: Helping small business loans go global
The problem: small businesses need financing to grow. The solution: financial institutions should lend them money.
Of course, it’s never that simple. Especially for financial institutions in developing countries, which often don’t have the resources to deliver efficient, risk-mitigated SME (small and medium enterprise) lending.
That’s where Technology and Innovation for Financial Inclusion (TIFI) comes into play. With the support of our donors, the Worldwide Foundation for Credit Unions provides financial support to TIFI, in addition to funding from USAID, to develop tools that credit unions in developing nations can use to improve and expand their SME lending.
Currently, TIFI is focused on three countries—Burkina Faso, Guatemala and Kenya—with key credit union partners in each country, working cooperatively with the World Council of Credit Unions (WOCCU), cascading support to a wide network of other credit unions that collectively serve millions of members.
There are a few ways TIFI is helping to make SME lending easier and more effective. The biggest focus is on something called the SME Lending Toolkit: a comprehensive package of resources, tailored to each TIFI country and designed to reduce lending risk through smarter loan underwriting.
In addition to streamlined lending training, the Toolkit also identifies localized market trends to help credit unions diversify loan products to meet the needs of their community.
Since the program’s launch in 2018, over 20 credit unions have adopted the SME Lending Toolkit, granting loans totaling nearly $30 million across the three TIFI countries. Even more impressive, following the program’s rollout, the percentage of loans past due went from 30 percent to a less than a two percent average across the participating countries.
TIFI is making an impact in other ways, too. The digitization of banking is helping to democratize credit in emerging markets and developing countries. TIFI is at the forefront: Helping credit unions adopt digital lending platforms and foster technology partnerships to grow their digital readiness.
The program also includes business development services (BDS), because we know successful SME lending isn’t just about the lender. BDS works with community organizations to help formalize SMEs and grow their respective trades. Simply put: It’s easier and safer for credit unions to lend to healthy, established SMEs. Supporting SMEs through this market approach means TIFI can deliver more robust and holistic programming.
It’s an exciting program that has a rewarding domino effect. TIFI is boosting credit unions’ capacity for lending, which means small businesses in developing countries can flourish resulting in stronger and more resilient communities. It’s truly a win-win-win.
The work isn’t done yet. The World Bank estimates there are trillions of dollars in unmet SME financing around the world. Can we count on your support?