MICROCAPITAL BRIEF: Citi to Buy 1.1m Tons of Carbon Credits from MicroEnergy Credits, Offsetting Cost of Efficient Heaters Financed by Mongolian Microfinance Institution XacBank

Citi Microfinance, a subsidiary of US-based Citibank that supports microfinance institutions (MFIs), and Citibank’s Environmental Products Trading and Organization Team recently announced a plan to buy 1.17 million metric tons of carbon credits from MicroEnergy Credits (MEC), a US-based for-profit firm that assists MFIs in launching clean-energy lending programs. The purchase will take place over seven years and the credits will be generated through reductions of greenhouse gas emissions after the installation of efficient household insulation and heating appliances in the city of Ulaanbaatar, Mongolia.

XacBank, a Mongolian community development institution, will issue microloans to fund the purchase and installation of the appliances. The reductions in household emissions earned by the use of these energy efficient fixtures will be assigned to MEC. In turn, MEC will quantify, aggregate and sell the credits to Citi Microfinance, who will monetize them on the open market through the Environmental Products Trading and Organization Team. An unspecified portion of the profit from Citi’s carbon credit purchase will be disbursed by MEC to XacBank so that the MFI can expand its clean energy program and increase access to clean energy loans.

The program is currently being approved and registered by the Clean Development Mechanism, a program of the United Nations Framework Convention on Climate Change (UNFCCC).

By Charlotte Newman, Research Associate

About Citi Microfinance
Citi Microfinance, created in 2005 as part of US-based Citibank, is engaged with approximately 100 microfinance institutions (MFIs), networks and investors in 40 countries. It aims to expand the range and reach of financial services available to poor people by offering products and services including financing, access to capital markets, transaction services, hedging foreign exchange risk, credit, savings, remittances and insurance.

About MicroEnergy Credits
MicroEnergy Credits (MEC) is a financial intermediary that helps microfinance institutions (MFIs) access carbon markets to raise funds to offset the cost of clean energy. Founded in 2007 and based in the US city of Seattle, Washington, MEC works with microfinance institutions and carbon emission reducers around the world. A for-profit social enterprise, MEC reaches 80,000 households with clean energy services in partnership with 20 microfinance institutions as of 2012.

About XacBank
XacBank is a community development financial institution that was founded in 1998 and aims to provide “inclusive and value adding financial services to the citizens and expatriates, institutions and enterprises of Mongolia, while maintaining its leadership in the global microfinance industry.” XacBank is a subsidiary of TenGer Financial Group, a regional family of companies that also include XacLeasing, XacSecurity, TenGer Solutions and TenGer Insurance. As of 2010, XacBank reported to the US-based nonprofit Microfinance Information Exchange (MIX) total assets of USD 380 million, a gross loan portfolio of USD 264 million, approximately 75,700 borrowers, a return on assets (ROE) of 0.43 percent and return on equity (ROE) of 5.29 percent.

Sources and Additional Resources:

Information sent to MicroCapital from Citigroup: “Citi to Purchase 1.17 Million Tonnes of Carbon Credits in Innovative Microfinance Deal with MicroEnergy Credits and Mongolia’s XacBank.”

MicroCapital.org story, March 20, 2012, “MICROCAPITAL BRIEF: Calvert. Citi Foundations Launch Women Investing in Women Initiative (WIN-WIN) Channeling $20m to Microfinance,” https://www.microcapital.org/microcapital-brief-calvert-citi-foundations-launch-women-investing-in-women-initiative-win-win-channeling-20m-to-microfinance/

MicroCapital.org story, January 10, 2012, “MICROCAPITAL BRIEF: Overseas Private Investment Corporation (OPIC) Approves $10m Loan to MicroEnergy Credits (MEC) to Promote Clean Energy Microfinance,” https://www.microcapital.org/microcapital-brief-overseas-private-investment-corporation-opic-approves-10m-loan-to-microenergy-credits-mec-to-promote-clean-energy-microfinance/

MicroCapital Universe Profile: Citi Microfinance
https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Citi+Microfinance#Description_140_word_limit_

MicroCapital Universe Profile: MicroEnergy Credits
https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=MicroEnergy+Credits+%28MEC%29

MicroCapital Universe Profile: XacBank
https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=XacBank

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