EDB, Microfinanzas PR partner to spur self-employment
As part of an initiative to promote the development of micro-enterprises and self-employment among Puerto Rico’s low-income residents, the Economic Development Bank has partnered with the Puerto Rico Microfinances Corp., known as Microfinanzas PR, to establish a case referral system between the institutions.
“The EDB has the mission of providing financial products to small- and mid-sized entrepreneurs. In that sense, we are in a continuous search for real solutions for them,” said EDB President Joey Cancel-Planas, during a morning news conference. “With this partnership we segment our customer base, maximize our resources, and ensure a better service to our entrepreneurs, especially those with low incomes.”
The EDB, through its Capital Investment Economic Development Bank subsidiary (EDBCI, in Spanish), has invested about $1.2 million in Microfinanzas PR, which is added to the $4 million provided by the BBVA Microfinance Foundation during the past six years.
“Our specialty at Microfinanzas PR is productive finance based on the provision of financial products and services to disadvantaged entrepreneurs to develop sustainable productive activities,” said the organization’s President Annette Montoto.
“This methodology, modeled and developed at the BBVA Microfinance Foundation, is the most effective and sustainable path in the fight against poverty, as shown by World Bank data, which says that 77 percent of people who have come out of poverty, have done so through individual initiatives, while financial exclusions has been the main obstable,” Montoto said.
Recently, the EDBCI’s board authorized an additional $500,000 investment into Microfinanzas PR, earmarked for granting loans to prospective clients referred by the EDB, which will review requests for funding of between $500 and $15,000 to develop productive activities.
“Despite having products for small and medium businesses, for the EDB it is very expensive to create a structure that attends to this sector with specific needs,” said Cancel-Planas. “It is more cost-efficient to partner with the private sector, so we can expand our borrower spectrum and respond to the majority of our clients requesting services through an expert entity such as is Microfinanzas PR.”
Through the agreement, the EDB will receive and prequalify applications for financing, basing its procedure on the criteria established by Microfinanzas PR, which in turn will analyze, disburse and manage the approved loans.
Microfinanzas PR was created with the goal of contributing to improve the quality of life for low-income entrepreneurs and their families, by promoting socioeconomic development. Although it is a for-profit organization regulated by the Office of the Commissioner of Financial Institutions, it was created under the “social business” concept through which beneficiaries reinvest in their own activities. Their customers are those with productive self-management activities, but lack access to the conventional financial system.
Currently, Microfinanzas PR has funded activities for more than 1,500 low-income microentrepreneurs. About 63 percent of businesses supported in 2013 have created an average of four new jobs.