MICROCAPITAL STORY: International Finance Corporation (IFC), a Member of the World Bank Group, to Invest $45m in Britain’s Standard Chartered Bank to Expand Microfinance in Africa and Asia

The International Finance Corporation (IFC), a member of the World Bank Group, will partner with Britain’s Standard Chartered Bank, a commercial bank, by investing USD 45 million for bank-issued credit-linked notes, which will allow the bank to increase lending to microfinance institutions (MFIs) in Africa and Asia.

The credit-linked notes to be held by the IFC will be backed by loans made to MFIs in sub-Saharan Africa and South Asia by Standard Chartered. The notes are officially issued by Microfinance Institutional Loans for Asia and Africa (MILAA), a special-purpose vehicle set up by the bank. The transaction is the first of its kind for the microfinance sector and is the latest piece of Standard Chartered’s USD 500 million microfinance facility, established in 2006 as a part of the Clinton Global Initiative.

“We are building an asset class for investors who are looking for more microfinance opportunities in emerging markets,” said Lars Thunell, IFC executive vice president and chief executive.

MicroCapital has reported several notable transactions involving the IFC this year, including a USD 33 million investment in Centro Financiero BHD of the Dominican Republic in April, and, in February, a partnership with Citi to support the expansion of micro-lending in Bangladesh, a USD 20 million loan to MFI Banco Ficohsa of Honduras, and a USD 50 million investment in consumer finance company Micro Provident of Botswana.

Established in 1956, the IFC is a multilateral institution within the World Bank Group based in Washington, DC. It seeks to promote sustainable private sector investment in emerging economies worldwide. It has a cumulative committed portfolio of USD 790 million worldwide, making it one of the top three global investors in microfinance by volume. As calculated from its 2007 financial statements, the IFC’s return on assets was 6.46 percent, and its debt-equity ratio was 186.98 percent.

Standard Chartered has also received attention for its microfinance activities this year, including its involvement in a currency swap on behalf of MFI Faulu of Kenya in April and a USD 2.8 million loan to the China Foundation for Poverty Alleviation (CFPA) in January.

Though based in London, Standard Chartered Bank focuses its business in Asia, Africa, and the Middle East. The result of a 1969 merger between two banks that originated in the British colonial era, it now has annual revenue of USD 11.1 billion. The bank’s support of microfinance includes 48 MFIs in 15 countries in Africa and Asia, and its outstanding portfolio totals USD 180 million. As of year-end 2007 (financial statements), Standard Chartered’s return on assets was 0.91 percent and its debt-equity ratio was 93.48 percent.

By Stephen Son

Additional Resources:

Reuters: “IFC and StanChart deal seeks to boost microfinancing”

IFC: “IFC and Standard Chartered Bank Collaborate on the Launch of Innovative Credit-Linked Notes to Improve Financing for Microfinance Sector”; 2007 Annual Report

MicroCapital.org article, April 24, 2008: “International Finance Corporation (IFC) to Invest $33m in Dominican Republic’s Centro Financiero BHD, a Provider of Microfinance and Other Financial Services”

MicroCapital.org article, February 25, 2008: “Citi teams with IFC to Support Expansion of BRAC Microlending in Bangladesh with USD 22M, Part of USD 55M Financing Deal”

MicroCapital.org article, February 22, 2008: “International Finance Corporation (IFC), a Member of the World Bank Group, to Lend $20m in Debt and Invest $400k in Advisory Services to Banco Ficohsa of Honduras”

MicroCapital.org article, February 5, 2008: “International Finance Corporation (IFC) Invests $50m in Consumer Finance Company Micro Provident Botswana (Letshego)”

MIX Market: Profile for IFC

MicroCapital.org article, April 29, 2008: “Microfinance Institution Faulu Kenya Unveils $7.8m Plan to Become Bank, Expand”

MicroCapital.org article, January 28, 2008: “Standard Chartered of England, and China Foundation for Poverty Alleviation (CFPA) of China, Sign Loan and Co—Operation Agreements to Provide Microfinance Loan Facilities in China”

Standard Chartered Bank: Annual Report 2007