Multilateral Investment Fund -MIF - Promoting Innovation and Entrepreneurship in Latin America and the Caribbean

Multilateral Investment Fund -MIF - Promoting Innovation and Entrepreneurship in Latin America and the Caribbean

The MIF: a unique instrument Established in 1993 with the goal of advancing the development of the private sector in LAC MIF is the largest private sector oriented grant donor: 1,100 projects, $1,3 bn committed, 800 partners Innovation is a key element of our mandate: always trying to develop new methodologies and models that can be taken to scale MIF uses both grant and financing instruments

MIF projects characteristics Innovative Demanded by the private sector Executed and cofinanced by local partners (i.e. chambers of commerce, universities, municipalities, etc.) Produce high demonstration effects: capturing best practices and disseminating results are key elements Average term: 3 to 4 years Average MIF contribution: US$ 1,5mm (50-70%)

Broad and flexible development goal to: Improve the business environment Human resources facility Assist small businesses to improve their competitiveness Entrepreneurship

Our interest in entrepreneurship Economic dynamism and diversification higher added-value Employment generation Wealth generation New technology development and absorption Broader equity ownership

Our experience: first generation projects 14 approved projects in 13 countries since 1999. More than US$ 15mm committed 3 year average project life / some of them are still being executed Target group: young people (18 to 30 years old) Executing agencies: mostly foundations and NGOs Very narrow geographical focus

Our experience: first generation projects II Pilot projects that tested new mechanisms Short-term goal: enterprise creation Long-term goal: to promote entrepreneurial culture; to generate sustainable employment; or to increase the beneficiaries available income Activities: training, access to markets, institutional strengthening, regulatory framework improvement, financing

1st generation tentative results Many lessons learned and incorporated into the design of 2nd generation projects and other IADB activities Sustainability and replicability: major outstanding challenges Scarce participation by local for-profit private sector Some growth of beneficiary companies Gaps in financing chain were not overcome High impact among target population

Characteristics of 2nd generation projects 9 projects approved since 2005 with approx. US$ 30mm committed in grants and financing (seed capital). Strong pipeline Average project term of 4 years (8 years for the financial vehicles) / projects are showing first encouraging results Target group: high-growth entrepreneurs and private investors Executing agencies: mostly private sector National geographic focus

Characteristics of 2nd generation projects II Pilot projects that test new mechanisms Comprehensive projects that work both supply and demand Short-term goal: creation of new high-growth ventures with the potential to attract private investors Long-term goal: develop a more friendly entrepreneurial ecosystem Activities: business development services, financing, investor and investee readiness, institutional coordination, validation and dissemination, public policy proposals

The concept of Comprehensiveness Supply: Financial services Business development services Demand: More and better entrepreneurs Entrepreneurial Entrepreneurial culture ecosystem Institutional coordination

Programa de Promoción de la Empresarialidad Dinámica en Costa Rica CR-M1003 Arranque Etapa I Investigación y Desarrollo Etapa II Desarrollo Inicial Etapa III Crecimiento Etapa IV Ideas Emprendimientos Empresas FUENTES DE EMPRENDEDORES Universidades, CENAT Escuelas Técnicas Grandes Empresas ANGELES INVERSORES COMPONENTE 2 FONDO COINVERSION COMPONENTE 4 Otros FONDO DESCUENTO INTANGIBLES COMPONENTE 4 INCUBADORA COMPONENTE 1 INTERNACIONALIZACION COMPONENTE 3 ACTIVIDADES PROMOCION EMPRESARIALIDAD COMPONENTE 2 Fondos de VC Bancos, etc. + RIESGO -

Challenges ahead Problems in defining target beneficiaries: who are the entrepreneurs we want to support?

Challenges ahead II Exit and return on investments moderate expectations of return (upside potential) economic cycle Weak business climate weak regulatory frameworks macroeconomic instability in some countries High transaction costs - investee readiness and monitoring must be intensive and hands-on Lack of equity culture

Challenges ahead III Gaps in financing chain follow-up funding is a serious constraint Informality lack of middle managers Risk averse culture scarcity of entrepreneurs Small internal markets need to expand internationally How to promote synergies among the different national initiatives (avoid reinventing the wheel)

What s s next? Learn and communicate (knowledge management) Support more specialized and sophisticated projects in those countries in which we are already present Develop highly new complementary thematic areas such as corporate entrepreneurship, second chance (risk aversion), over the counter markets, etc. Take to scale successful initiatives. Strive for sustainability!

Reference Material Learning Guide for Dynamic Entrepreneurship Projects http://www.iadb.org/mif Go to MIF Topics

We want you!! New blog on European angel networks best practices http://ikei.wordpress.com

Thank you! Multilateral Investment Fund Inter-American Development Bank www.iadb.org/mif