Sierra de Luna S.A. (Microfin)

MIGA has issued a guarantee of $0.95 million to Grupo ACP Inversiones y Desarrollo of Peru for its investment in Microfinanzas del Uruguay S.A. of Uruguay. The coverage is for a period of up to three years against the risks of transfer restriction, expropriation, and war and civil disturbance.

The project consists of the establishment and operation of Microfin, a microlending organization in Uruguay. The organization is to be a subsidiary of Grupo ACP Inversiones y Desarrollo. The guarantee covers a shareholder loan by Grupo ACP Inversiones y Desarrollo. Microfin plans to focus on micro-loans between $3,500 and $10,000, but it will also provide loans below that range. It also plans to establish an estimated 100 service points throughout the country in order to reach underserved segments of the microfinance market.

One of Microfin’s objectives is to close the existing gap between the demand and supply of financial services to low-income sectors in Uruguay. The country’s existing financial infrastructure is dominated by large banks and does not meet the needs of some of the most vulnerable groups. Microfin intends to target micro-entrepreneurs (those with ten employees or less). By supporting small businesses, it should help generate employment and improve living standards and may encourage new entrants to Uruguay’s microfinance market.

MIGA’s participation in this project is consistent with the World Bank Country Assistance Strategy for Uruguay for 2005-2010 which focuses on helping the government attain equitable and sustainable economic development. This is a South-South investment. The project was underwritten through MIGA’s small investment program.