Business Support: Digital transformation in Central America

Locfund II is a second-generation local currency debt fund which is exclusively focused on the microfinance sector. Besides providing mid-term local currency loans to smaller MFIs in Latin America, and financial services to MFIs that are ready to access capital markets, the fund manages a Technical Support Facility. 

Since 2007, Norfund has, in addition to its investment, supported Locfund’s MFIs through technical assistance. One of the largest achievements through this Technical Support Facility (TSF) is the progress that has been made in supporting MFIs in their digital transformation.  

Digital assessment

To make MFIs market ready, and competitive, digital transformation is essential. For this purpose, the management company responsible for Locfund II (BIM) developed a digital assessment tool in 2019 together with an external consultant. This tool allows MFIs to get insight into where progress can be made, and where change is needed in comparison on a country and portfolio level. Based on this assessment, with support from the Locfund TSF digital expert, a technical support project is developed in collaboration with the MFI. Where needed external experts are hired, and Locfund II has for this purpose collaborated in various instances with FinTech experts in the region. 


Since 2019, the digital assessment tool has been used by 54 MFIs, and, following the results of this assessment, 17 projects were approved across eight countries. Projects that are developed and focus on digital transformation include roadmap development mobile banking apps and training but also digital onboarding. One of the most crucial steps is developing a digital roadmap, which includes key performance indicators and is an important first step in further digitalization.  

In 2021, of the 27 new projects approved under the Locfund II TSF II, 13 projects focus on digital transformation. These initiatives that drive technological development and disruption have become even more important because of the pandemic. The support through the TSF can therefore provide a gentle push toward creating a level playing field.  

“For MFIs to continue to be able to compete with other actors, for example tech start-ups, the drive to digitalisation is crucial”

Digitalisation expert at Locfund