Thursday, April 30, 2026
News and Views from the Global South
FINANCE: In Search of New Clients, Latin Bank Eyes Poor
Emad Mekay
- The Inter-American Development Bank (IDB) unveiled a five-year plan Tuesday to invest at least three billion dollars in loans to Latin America that would cater to millions of marginalised low-income consumers whom the Bank sees as a potentially lucrative market for international and local businesses.
The plan comes as some powerful finance institutions like the International Monetary Fund (IMF) and the IDB face growing suspicion from governments in developing nations which have been their traditional borrowers.
A number of governments are now shunning new loans from the public lenders, citing their overbearing influence. Many Latin American nations are also accumulating their own reserves, meaning they have less need for outside loans.
Like the IMF, one of its parent organisations, the IDB, which lends only to Latin American nations, saw its operating income slide from 862 million dollars in 2004 to 712 million dollars this year.
The decrease was largely due to a reduction in net interest income from its loan portfolio after Brazil and Argentina repaid large emergency loans, a Bank official said.
“The Bank recognises it has to delve into new venues now. The pressure is really on,” said the official, who wished to remain unidentified.
At a press conference Tuesday, the IDB’s new president Luis Alberto Moreno, a former Colombian diplomat with close ties to Washington, quantified the changed need.
“I think it’s time for a new approach: less macroeconomics and more microeconomics,” he told reporters.
Moreno, who assumed his post last October, said that the initiative, “Building Opportunity for the Majority”, would focus on improving conditions for the “base of the pyramid”, or the poorest in Latin America and the Caribbean.
He also unveiled new data on businesses opportunities in this previously neglected market.
The IDB belongs to a species of Western-funded banks called multilateral financial institutions that includes the World Bank and the Asian Development Bank. Their role has been to lend to governments while promoting private investment in developing countries.
IDB officials told reporters that research they commissioned from the World Resources Institute, a Washington think tank, shows that some 360 million people, or 70 percent of the population in Latin America and the Caribbean, who earn less than 300 dollars a month now constitute a mouth-watering market worth some 510 billion dollars a year.
“These data show emphatically the size and the importance of the ‘market of the majority’ across a range of countries in the region,” said one document distributed to the press that examined the population living below 3,260 dollars annually in 20 Latin nations.
Donald F. Terry, manager of the Multilateral Investment Fund at the IDB, said of the figures: “That is a market for the private sector to think about. It’s a market for the private sector to produce goods and services that the poor and the majority need at prices they can afford. That is a market that is totally underserved.”
Terry, whose official job description is to “accelerate the market transformation of economies in Latin America and the Caribbean”, added: “It’s a 510-billion-dollar market. So we have to get at that.”
He noted that the “poor majority” in the 12 countries surveyed also hold fixed assets such as rural land, homes and small businesses worth a whopping 1.2 trillion dollars, a sum expected to rise to 2.5 trillion dollars after all Latin American nations are included.
“It is enormous,” Terry said. “We have to unlock the assets of the majority. The starting point is the data we are presenting to you.”
On taking the helm of the IDB, which disbursed loans worth more than seven billion last year, Moreno quickly acknowledged the budget squeeze on international lenders in Latin America.
IDB officials say Moreno asked his research team to identify new areas for investment. The data they came up with shows a serious lack of services and wide room for companies to break into the “poor people’s market”.
“The data that we now have for the first time allows us to better understand things that have been hidden in plain view for generations,” said Terry. “So this is extremely important.”
The plan unveiled Tuesday would promote new Bank loans in six priority areas, including basic infrastructure, housing for the poor, and digital connectivity and communications.
The IDB will double its lending for basic infrastructure – water, sanitation, electricity, urban transport and rural roads – to one billion dollars a year by 2011 to accommodate some 105 million people without piped water in their homes, and 153 million people with proper sanitation services.
It says it wants to capitalise on the housing shortage, where 30 million families live in substandard housing, and strengthen the private sector capacity to do business for the “majority” housing market.
The plan also sees the IDB increasing funding for job training by 50 percent, to two billion dollars over the five-year period.
The IDB pledged to work to “spur the volume of microfinance” in the region from five billion dollars to 15 billion dollars by 2011, with private banks providing most or all of the money.
It says it will also create a new one-billion-dollar lending programme for small and medium enterprises from 2007 to 2011.
The plan reflects decisions made during the IDB’s annual meeting in Brazil in April to boost lending to the private sector after the board of governors, the IDB’s top policymaking body, eased the criteria for loans to the private sector.
Previously the Bank’s private sector financing was restricted to projects in infrastructure, development of capital markets and promotion of foreign trade.
The IDB is made of 47 member countries that include 26 mostly borrower nations in Latin America and their creditors: the United States, Canada, 16 lenders in Europe, as well as Israel, Japan and the Republic of Korea.
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