6% of their populations living under $1 a day. The reason that those two regions are given such a large sum of money is that they have "…larger economies [that are] presumed to have lower overall risk" (Masser, 2009, p. 1716).
Masser approaches that argument to a fuller extent on page 1718: there are "clear reasons for investing such large amounts in relatively well-off regions" like Central Asia, Latin America and Europe, the author states. When the MIGA / IFC pour money into "more prosperous regions" it helps provide a more "diversified portfolio that protects investments in riskier regions by ensuring returns" (Masser, 2009, p. 1718). On the other hand, while money managers would agree that investing in a sure thing can provide cash to cover losses in a less-than-sure thing, Masser (p. 1719) asserts that investing less in "least developed regions" is a "major shortcoming of MIGA and IFC.
Lending to "Small and Medium Enterprises" (SMEs) is very important when it comes to development in a struggling economy, Masser writes (p. 1721). The author backs up this assertion; SMEs "by their nature tend to be more responsive to market conditions" he insists, and frequently SMEs are the first to "respond to economic opportunities" (Masser, 2009, p. 1721). That said, SMEs are often lacking in "sufficient access to financial markets" and hence, there are signs, Masser explains (p 1722) that MIGA, IFC and OPIC are "strengthening the necessary financial infrastructure."
For example, MIGA provides guarantees that in turn help new banks get started, and by serving local entrepreneurs MIGA is actually assisting the local and national economies. IFC is putting forward efforts to increase its lending to SMEs -- and in 2006, IFC lent $1.62 billion to sub-Saharan Africa, according to Masser's research (p. 1723). That assistance to sub-Saharan Africa resulted in 144,000 "outstanding loans to SMEs" in 2006, demonstrating the ripple effect that investments in the financial sector can have on economies, Masser explains on page 1723.
Another example of the ripple effect pointed to by Masser is found in IFC's 2007 annual report; in that report IFC's "total exposure in financial markets" was $9.85 billion. However, the exposure of that money to clients, lenders, and insurers themselves "far exceeds" the $9.85 billion; indeed, over $57 billion in SME and microfinance loans "…were supported through the IFC exposure" of the $9.85 billion, Masser points out (p. 1724). In short, it takes...
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