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LOCFUND, A UNIQUE LOCAL CURRENCY FUND FOR MICROFINANCE INSTITUTIONS

BIO has invested in LocFund, a local currency fund aimed at microfinance institutions in Latin America and the Caribbean, together with the Inter-American Development Bank - MIF and other DFIs such as FMO, Norfund, as well as private investors. Through this investment, BIO supports a local fund manager operating in one of the priority countries of the Belgian Development Cooperation (Bolivia).

In addition, BIO further contributes to the development of local skills in microfinance.  The majority of loans to microfinance institutions today are in US Dollars or other foreign currencies. Nevertheless, the needs of micro and small enterprises are different from the currency of the loans available in the market. This can generate a significant risk for the microfinance institutions and its clients in the event of devaluation in exchange rate, a common issue in developing countries. Offering financing in local currency to microfinance institutions represents an alternative that will allow those institutions to manage exchange rate risk besides increasing and improving its present financial products in order to better satisfy its clientele. LocFund is an innovative instrument to develop both the microfinance industry and the financial sector.

The Fund is very innovative since it will manage the local currency risk at fund level. It is expected to create a demonstration effect, as no similar instrument exists at this time. LocFund focuses on both regulated and non-regulated small and medium sized microfinance institutions in Latin America and the Caribbean that have limited or no capability to attract local funding. In local currency, the loans consist of the equivalent of between US$250,000 and US$1,500,000. LocFund includes a Technical Assistance facility to strengthen the capacity of the microfinance entities to manage the risks due to assets/ liabilities management more efficiently, and also develop new financial products for funding in local currencies. Total committed capital of LocFund is currently US$30 million. BIO’s exposure is US$2 million, of which 50 percent is in equity and 50 percent is in subordinated debt.

BIO’s strategic role • BIO’s presence–together with other DFIs improves the outside perception of the Fund which could help to attract senior debt.

• BIO would be setting an example that could encourage other investors (DFIs/private) to consider local currency initiatives.

• BIO has a seat on the Advisory committee; therefore it is able to influence the strategic decisions of the Fund (diversification, senior debt, etc.).

LocFund is managed by the Bolivian Investment Management (BIM Ltd.), an entity with nine years of experience in managing diverse Investment Funds. They have incorporated a team of experts in microfinance and in capital markets that operates in the entire region, in its offices in La Paz, Bolivia and San José, Costa Rica. Shareholders: BIM Microfinance, BIO, CAF, FMO, Gray Ghost, Hyos Invest Holding AG, the Multilateral Investment Fund (MIF) of the Inter-American Development Bank (IDB) and Norfund.

Source: Newsletter June 2008.

BIO SUPPORTS THE CREATION OF BANCOVELO, A MICROFINANCE INSTITUTION IN HONDURAS

BIO has committed funding in the form of equity –US$2 million– in order to assist the savings and loans association Popular in its transformation to a commercial bank, BanCovelo, as well as to expand its micro lending operations. This investment is the first in Honduras, and further strengthens BIO’s regional strategy. Moreover, this investment opportunity allows BIO to invest alongside one of the most successful microfinance providers in the Honduran market, Fundación Covelo.

Fundación Covelo began its work in microfinance in 1991, with the objective of serving the poor in the micro- and small business sector. Over time, the organization diversified its products and services to expand its finance offerings and, with that, positioned itself as the leading microfinance institution in the Honduran market.

In 2004, Fundación Covelo created Popular AAP with the vision of creating an association  specialized in loans and savings and a goal of serving the working capital and home improvement needs of micro entrepreneurs. At the end of 2006, the lending activities of Grupo Covelo were consolidated with Popular AAP to create a Honduran microfinance bank called BanCovelo.

The bank has a network of 27 branches in rural and urban Honduras and has a loan portfolio of approximately US$35 million (in 2007). BanCovelo expects to triple the number of beneficiaries it serves in the next five years. In June 2007, it had nearly 24,000 borrowers, of which over 69 percent were women. The average loan size is US$1,786 equivalent in local currency, and the beneficiaries are low-income people. In addition to BIO’s Investment, BanCovelo investors include international shareholers, such as ACCION Investments, Banco Centroamericano de Integración Económica (BCIE), FMO and IFC.

Source: Newsletter June 2008.

DEG AND FMO SIGN US$50 MILLION CREDIT FACILITY AGREEMENT WITH CHINESE GREEN ENERGY SUBSIDIARY

Yingli Green Energy Holding Company Limited, one of the world’s leading vertically integrated photovoltaic product manufacturers, announced that Baoding Tianwei Yingli New Energy Resources Co., Ltd, the Company’s principal operating subsidiary, has entered into a five-year credit facility agreement with FMO and DEG. Under the agreement, DEG and FMO have agreed to lend Tianwei Yingli up to an aggregate of US$50 million to support Tianwei Yingli’s capacity expansion, subject to certain conditions.

"Climate protection has been an important issue for DEG since the mid-1990s", said Mr. Winfried Polte, Chairman of the Board of Management of DEG. "We are proud to support Yingli Green Energy as a company distinguished by exceptional expertise and a proven track record in the solar energy industry. In addition, Yingli Green Energy’s capacity expansion will create thousands of new jobs in China thereby contributing to economic growth in this rapidly developing economy."

"FMO is strongly committed to renewable energy projects," said Mr. Arthur Arnold, Chief Executive Officer of FMO. "Energy is central to economic and social development and essential to fighting poverty in emerging markets. Therefore we are pleased to contribute to the rapid growth of the solar energy market worldwide by financing Yingli Green Energy’s expansion of production capacity in China."  (More)

FINNFUND PARTICIPATED FOR THE FIRST TIME IN AFRICAP MICROFINANCE FUND

In its recent second round of investment, in which Finnfund participated for the first time, AfriCap raised about US$30 million, boosting its total capital to 50 million. At the same time it transformed itself into a permanent company under the name AfriCap Microfinance Investment Company.

Finnfund holds 6.1 percent of the new company’s share capital. The major shareholders are the European Investment Bank (EIB) with 14.6 percent and two private funds, Nordic Microcap with 12.2 percent and Blue Orchard Private Equity Fund with 10.2 percent. Other shareholders include the Netherlands development finance company FMO, Sweden’s Swedfund and Norway’s Norfund.

So far, AfriCap has invested in 14 institutions in thirteen countries. Its portfolio is geographically diverse, stretching from Egypt to South Africa and from Senegal to Madagascar.

It is currently exploring new investment opportunities in these and other countries and intends to expand its portfolio with 20 investments during the next five years.

AfriCap Microfinance Fund is a pioneer in its field in Africa, and has also managed to attract private funding for microfinance banks. Was established in 2001, AfriCap was the first equity fund in the continent dedicated to microfinancing. It makes equity and quasi-equity investments in microfinance banks which, in turn, provide microcredit and deposit services to low-income customers.

European development finance institutions and NGOs specializing in microfinance were among AfriCap’s first financial backers, but the fund’s aim from the outset was to also attract private investors.

“One of our objectives was to give a sign to investors,” says managing director Wagane Diouf of AfriCap Microfinance Investment Company. “Private investors have been discouraged by the lack of transparency and risk diversification and by undocumented commercial returns.”  (More)

FMO AND RABOBANK LAUNCH INDIA AGRI BUSINESS FUND

Last week, FMO and Rabobank launched the India Agri Business Fund, a Private Equity Fund for assisting the expansion of the Indian food and agribusiness sector. FMO and Rabobank will invest US$20 million and US$25million respectively. Other lead investors of the Fund are IFC and DEG with a share of US$ 20million each enabling a First Closing of US$85  million. Uniquely, the Sponsor and the Lead Investors are all “AAA” institutions.

The Fund has been established as limited liability Company in Mauritius. It has contracted Rabo Equity Management Company Limited based in Mauritius as the Investment Manager while Rabo Equity Advisors Private Limited will be the Investment Advisor. It is expected that a few large commercial investors will join in the next Closing within 12 months.

The Fund will target more than 38 sub sectors of Food & Agribusiness and will additionally aim to invest in agri infrastructure, i.e. cold chain logistics, warehousing, dedicated ports, auction markets, etc. It will follow the best practices including on social and environmental issues. (More)

IFC AND PROPARCO INVEST IN VEOLIA WATER AFRICA, MIDDLE EAST AND INDIA

The objective of this investment is to encourage the development of infrastructure and water, wastewater and electricity services in Africa, the Middle East and the Indian subcontinent.

The International Financial Corporation (IFC), the private sector arm of the World Bank Group, and PROPARCO, the subsidiary of Agence Française de Développement (AFD) in charge of financing private investments in developing countries, acquired a shareholding in Veolia Water Africa, Middle East and India (Veolia Water AMI).

This Veolia Water subsidiary operates water, wastewater and electricity services in Africa, the Middle East and the Indian subcontinent. The aim of the transaction is to support infrastructure development in these world regions.

The shareholding was acquired under a capital increase. IFC and PROPARCO took 13.89% and 5.56% respectively of the capital stock of Veolia Water AMI.

IFC's investment comes in the form of €25 million in capital stock and a loan facility of €35 million. Veolia Water AMI intends to allocate this holding to its share capital and to the financing of its program to extend infrastructure and supply services through its local subsidiaries.

Proparco is investing €10 million to encourage the development of Veolia Water AMI projects to provide access to water, sanitation and electricity throughout the regions where it operates.  (More)

NORFUND  INVESTS IN FUND TARGETED AT SMES IN VIETNAM

Norfund has invested US$5 million in SEAF Blue Water Growth fund, a mezzanine financing fund targeting small and medium enterprises (SMEs) operating in Vietnam and potentially Cambodia.

Despite increasing liquidity in the Vietnamese market, the SME sector remains largely underserved. With an anticipated deal size between US$750 mil – US$1.5 million, the fund targets the lower end of the SMEs sector.

“This investment will provide the much needed financing to SMEs, the economic engine of the economy in developing countries,” says Elizabeth Lee Marinelli, head of department funds and financial institutions in Norfund.

A low-income nation which ranks as one of Norway’s main development partners, Vietnam’s capital market and private sector are underdeveloped compared with many other Asian countries.  “We also aim to create a demonstration effect that investments in SMEs could be profitable and lucrative to both local and international investors,” Marinelli adds.  Co-investors include Finnfund, Sifem, and FMO. Norfund holds a 20 percent.  (More)

PROPARCO: SHARING FRENCH EXPERTISE IN RENEWABLE SOURCES OF ENERGY AND THE ECO-INDUSTRY IN CHINA

In April, PROPARCO invested € 5 million in the Cathay Capital I Fund. The fund, part of a French registered pooled fund worth € 50 million, will mostly finance the development of French companies in China, whose aim is to capture markets in this country. The management team is structured around two people: Mr Cai, an entrepreneur of Chinese descent, who has, since 1993, established close links with France. In particular, he supported fair sized French SMEs in their quest to break into Chinese markets. Edouard Moinet has worked for twelve years for SME investment funds at Siparex.

French SMEs represent numerous advantages for the Chinese market, but their success depends on local partnerships which can provide commercial outlets and guarantee their security on a legal level. Thanks to the vast experience and biculturalism of its two promoters, the fund’s objectives are to identify and structure such partnerships, and to finance their implementation through equity investments in these SMEs. This should allow for about a dozen transactions, worth between € 2 to 5 million each.  Source

SIMEST AND BNL TEAM UP TO SUPPORT ITALIAN COMPANIES EXPANSION

BNL - BNP Paribas Group and Societa Italiana per le Imprese all'Estero, have signed an agreement to support steps taken by Italian companies to expand internationally.  

The agreement will give Italian companies, which are undertaking investment programs and initiatives to set up in markets outside the European Union, the opportunity to take advantage of specialist and tailored services in countries where BNL operates with its own organization and dedicated professionals.

Societa Italiana per le Imprese all'Estero (SIMEST), the holding company of the Italian Foreign Trade Ministry, promotes companies' international expansion by taking equity stakes of up to 49% in foreign companies in which Italian companies also hold a stake. It manages the public venture capital fund, advises and assists companies from the outset until completion of their foreign investments.

In view of Italian companies' existing commercial interests, under the agreement, Algeria, Dubai and other Gulf countries, Libya, Turkey, India and Vietnam, will be treated as high priority countries for mutual presentation of projects and joint support for companies taking steps to expand internationally.   (More)

SIFEM INVESTS US$7 MILLION IN THE FIRST CLOSING OF THE SEAF LATAM GROWTH FUND

The SEAF Latam Growth Fund is a successor fund of the SEAF Trans Andean Fund and Colombia Fund. The SEAF Latam Growth Fund invests in small and medium enterprises in Latin American countries of Colombia and Peru, building on the experience of its predecessor funds. Sifem invested US$7 million into the Fund together with the International Finance Corporation, the Belgian Investment Company for Developing Countries, the Finnish Fund for Industrial Cooperation and other institutional investors.

 The SEAF Latam Growth Fund is managed by Access Fund Management, an independent fund manager founded by the SEAF team in Latin America.

Source: SIFEM 04/04/2008

SIFEM SIGN FIRST CREDIT DEAL WITH AZERBAIJAN BANK

The Swiss Investment Fund for Emerging Markets (SIFEM), on behalf of the Swiss Confederation, allocated US$6 million for the six years term to the finance micro, small and agricultural business of the country, to the Azerbaijani Micro Financing Bank (AMFB), the bank reports on 11 January.

Today, AMFB received the first US$4 million from SIFEM. These funds will be spent by the bank in the crediting of the micro, small and agricultural business. So, the minimum 50% of the funds will be directed to the new agrarian credit bank products.

The agreement is the first deal between AMFB and SIFEM. AMFB drew more than US$90 million to develop the micro and small enterprise in Azerbaijan. The key goal of the crediting fund to the AMFB is, to render the assistance to expand one of the successful local banks in the future, which supports the local micro and small enterprises and encourage the diversification of economy in the non-oil and gas sector.  (More)

SWEDFUND INVESTS IN LEADING MICRO FINANCE BANK IN AZERBAIJAN

At the end of February Swedfund invested US$5 million in Micro Finance Bank of Azerbaijan (MFBA). Azerbaijan has one of the world’s fastest growing economies, and MFBA is the leading bank of its kind in the region, with around 50,000 micro customers, who are mainly sole traders and small private firms. The total investment in MFBA amounts to US$25 million, which has been invested in the bank by other European and American financial institutions.

This investment reflects Swedfund’s support for the development of micro, small and medium-sized enterprises in Azerbaijan, whose most serious problem at present is often lack of finance.

“Azerbaijan is a commodity-based economy that is heavily dependent on its oil exports. Oil accounts for more than 50 per cent of the country’s GDP and some 55 per cent of the government’s budget revenue. The development of micro finance institutions is one of the key components needed for the development of other sectors than oil and for the growth of small and medium-sized enterprises in the country. At present there is considerable demand for capital from micro-customers in the country that traditional banks cannot satisfy. By investing in MFBA, Swedfund will be helping the bank to further expand its business and provided financing for a larger number of micro customers,” comments Lydia Molin, Swedfund’s investment manager for Eastern Europe, on this investment.  (More)