54 / 106
54
F
inancial markets in developing
countries are limited by the lack
of national savings and inability
to acquire external financing or
uncertain government policies. These
problems are reflected in economic
activities, with private sector
companies unable to secure funding
resources from formal financial
services, which severely hamper their
ability to conduct business.
Since its establishment, the
Ta i wan ICDF has ca r r i ed ou t
microcredit and small- and medium-
size enterprises (SMEs) relending
projects, offering support and
financial resources for financial
i n t e rmed i a r i es t o bu i l d t he i r
capacity to provide high-quality
and continuous financial services,
and introduce innovative financial
products that correspond to local
development requirements, providing
micro- and small businesses with
improved access to financing.
Innovative mechanisms and
designs
To stimulate the growth of micro,
small and medium enterprises
(MSMEs), reduce the risks perceived
by financial institutions and provide
incentives for them to grant loans to
MSMEs, the TaiwanICDF took into
account different societal and cultural
surroundings of partner countries
to design the loan projects. For
example, the group lending model
was applied in the African region,
where collective penalties and social
conventions were used to bind the
relevant parties and reduce the
possibility of loan default.
In Asia-Pacific and Latin America,
these loans were supplemented with
technical assistance, where SMEs
or small farmers applying for loans
were given consultation to help
boost their productivity. Smartphone
technologies enabled microcredit to
be provided on demand, whereby
loans from financial institutions are
made in connection with goods
purchasing in rural areas and product
delivery by wholesalers, benefiting all
parties involved.
In terms of the diversification of
financial institutions, the TaiwanICDF
has coopera t ed wi t h var i ous
participating institutions such
as NGOs (semi-formal financial
institutions), non-bank financial
institutions, cooperatives, commercial
banks, and factoring companies.
To link resource deployment to
the specified goals of development,
in recent years the TaiwanICDF has
worked with regional multilateral
development banks to launch
innovative financing mechanisms and
designs. In the Student Loan Fund,
for example, innovative loan services
were introduced and promoted to
technical training institutions, schools
and commercial banks of Central
America, allowing youths access to
affordable student loans and quality
technical and vocational training. As
for the Green Energy Special Fund,
reduction in carbon dioxide emission
was linked with loan interest rate
subsidy to encourage the adoption
of the best available technologies for
municipal infrastructure projects.
Difficulties were encountered
when these two projects were first
implemented. In the first case,
we had to explain in detail to the
local commercial banks in order
to increase their willingness to
participate in the loan program. In
the second case, it was necessary to
provide municipal governments with
cost analyses of green technology
and demonstrate the benefits of using
renewable energy products. Thus, it
was possible to stimulate interest and
promote these projects.
The TaiwanICDF received positive
feedback in 2015 for the innovative
methods applied in these projects.
This feedback encouraged us to
design new financial projects in
response to the national development
strategies and needs of our partner
countries. Recent examples include
the “Home Energy Efficiency and
Renewable Energy Project in the
Republic of the Marshall Islands”
and a collaborative agriculture loan
program aimed at the agriculture
value chain with the European Bank
for Reconstruction and Development
(EBRD).
Looking ahead, the TaiwanICDF
will continue to pay close attention
to the trend of financial innovations
in development assistance to
enhance the quantity and quality of
development assistance provided.
The TaiwanICDF, working with the Central
American Bank of Economic Integration
(CABEI), offers student loans through local
financial institutions, so that students can
continue their studies.
Change 5
Strengthen financial intermediaries to provide diverse loan services