The micro and small enterprise (MSE) market is served by banks, specialized microfinance providers, savings and loans societies and other community-based financial cooperatives. There is a distinct need for risk support via credit guarantee scheme instead of traditional on-balance sheet. The Risk Sharing Facility (RSF) addresses the mitigation of risks of rare, unexpected stress losses by way of residual portfolio coverage that provides an alternative mechanism for effective portfolio diversification.
The RSF is expected to
- increase access to debt finance by MSEs.
- help mitigate and diversify default risk.
- encourage banks and FIs to grow their MSE loan portfolios.
- catalyse and leverage lending by banks to segments ‘perceived as risky’.
- help MSEs mobilise resources to grow their businesses.