MICROCAPITAL STORY: International Finance Corporation (IFC) to Join German Development Bank Kreditanstalt für Wiederaufbau (KfW) and Venture Capital Firm Advans Group in Launching Commercial Microfinance Institution Advans Banque Congo; Will Provide up to $3.1m in Debt and Equity

IFC (International Finance Corporation), a member of the World Bank Group, has announced it will provide financial assistance in the launching of commercial microfinance institution (MFI) Advans Banque Congo. Based in the Democratic Republic of Congo, Advans Banque Congo will provide microloans to small enterprises and individuals located in the country’s urban areas. IFC’s support of the commercial MFI is its latest project in a campaign to expand microlending to 400,000 entrepreneurs in Africa’s poorest regions.

Total project cost is estimated at USD $30 million. IFC plans to provide as much as USD $3.1 million, consisting of a loan of up to USD $2 million, and an equity investment of up to USD $1.1 million. Other equity stakeholders include Advans SA, a Luxembourg-based venture capital firm that plans to own a majority stake, and KfW (Kreditanstalt für Wiederaufbau), Germany’s main development bank. Horus Development Finance of France will provide technical assistance on the project.

IFC and KfW’s collaborative equity investment in Advans Banque Congo is a manifestation of the Greenfield Microfinance Initiative. Under this agreement, the two organizations have partnered to mobilize USD $100 million toward microfinance development across Sub-Saharan Africa, aiming to jointly establish seven microfinance institutions over the next five years. In April 2007, IFC and KfW entered into a similar agreement in Asia, in which both organizations committed a total of USD 1 billion to support microfinance development across the continent.

In promoting African microfinance, IFC is engaged in other partnerships as well. MicroCapital recently reported on IFC’s collaboration with Standard Chartered Bank of England to provide credit-linked notes to microfinance institutions in Africa. Outside of Africa, MicroCapital has reported on several IFC stories, including a USD 33 million investment in Centro Financiero BHD of the Dominican Republic in April 2008, a partnership with Citi to expand micro-lending in Bangladesh in February 2008, and a USD 50 million investment in consumer finance company Micro Provident of Botswana in February 2008.

Based in Washington, D.C., IFC is a multilateral institution that is a member of the World Bank Group. Established in 1956, IFC seeks to promote sustainable private sector investment in emerging economies worldwide through the provision of loans, equity and structured finance. As of December 2007 it had a global investment portfolio of USD 790 million, return on assets of 6.46 percent, and a debt-equity ratio of 186.98 percent, as calculated from its 2007 financial statements.

Originally founded as a reconstruction bank for post-war Germany, Frankfurt-based KfW finances debt investments in developing economies on behalf of the German Federal Ministry for Economic Cooperation and Development. As of June 2007, the bank held 99 active microfinance investments totaling USD 923 million. KfW’s financial ratios cannot be provided as the organizations financial statements are not available. As of December 2007, KfW received a rating of AAA from Fitch Ratings, Moody’s, and Standard & Poor’s.

Horus Development Finance is a French consulting firm that provides technical assistance to microfinance institutions in developing countries. It owns and frequently partners with Advans SA on projects. Financial data on Horus is not available on MIX Market or on the firm’s website.

Incepted in 2005, Advans SA is a Luxembourg-based venture capital firm that specializes in microfinance-related ventures. Its stated mission is to “build a network of financial institutions in developing and emerging countries offering loans, deposits and other standard financial services to [microenterprises] which have limited or no access to formal banking services.” Over the next five years, Advans plans to create 10 new MFIs and invest in existing MFIs as the majority shareholder, principally in Africa and Asia. At January 2008, the firm had two active microfinance investments and held USD 12.93 million in fund assets. Advans is owned and managed by Horus Development Finance, provider of technical assistance on the Advans Banque Congo project.

By Ryan Benson, Research Assistant

Additional Resources:

KfW (Kreditanstalt für Wiederaufbau): Home

International Finance Corporation: Home

World Bank Group: Home

World Bank Group: IFC Microfinance Program Expands in the Democratic Republic of Congo, Aims to Support Loans to 400,000 New Borrowers in Africa in Next Five Years

Advans Group: Home

International Finance Corporation: Advans Banque Congo – Summary of Proposed Investment

Horus Development Finance: Home

European Investment Bank: Home

Netherlands Development Finance: Home

International Finance Corporation: IFC Supports Madagascar’s SME Sector with First-of-Its-Kind Investment