Microfinance flourishes as institutions inject funds

Institutional investment in microfinance – small-scale lending in developing countries – has been given a major boost by two new institutional commitments. French bank Crédit Agricole is launching a €50m ($73m) fund in collaboration with Grameen Bank, run by Professor Muhammed Yunus the Nobel prize-winning pioneer of microfinance schemes in Bangladesh.
At the same time, Dutch civil service pension fund giant ABP and its US peer TIAA–CREF, the higher education and medical workers fund, were named amongst investors in a $125m fund close by Catalyst Microfinance Investors (CMI). The fund is believed to be the largest collective equity capital commitment to microfinance.
The Grameen-Crédit Agricole Microfinance Foundation will provide credit, loan guarantees and equity capital to microfinance projects worldwide. The foundation said it was seeking additional funding from institutional investors and large European companies with the aim of raising a total of €150m in the next two years. Crédit Agricole’s asset management arm is also working with the foundation to create a microfinance-focused fund, which will be launched next year. Both ABP and TIAA–CREF are among the leading institutional investors in microfinance. Excluding its latest allocation, ABP hadmicrofinance investments amounting to approximately €20m at the end of 2007.
In December, 2006, TIAA–CREF launched a four-year project to invest $100m in microfinance. Its first allocation was a $43m private equity commitment to ProCredit Holding, a German microfinance specialist, which itself invests via a network of microfinance banks, notably in Eastern Europe and post-conflict countries in Africa.
CMI is managed by microfinance companies ASA in Bangladesh and Sequoia in the UK and the Netherlands. It said it intended to use most of the new funding from investors to grow ASA International in the largest microfinance markets in Asia and Africa.
Paul Spijkers, chief investment officer, alternative investments, at ABP, said: “Our financial commitment to CMI and ASA International will give some of the world’s economically most disadvantaged people the opportunity to improve their livelihoods, while, simultaneously, the investment has the potential to provide us with a combination of strong growth and attractive returns in high growth economies. These investments are particularly fit for a pension fund as a risk diversifier. They are relatively non-correlated with most other asset classes.”