MICROCAPITAL STORY: British Government-sponsored CDC Group to Invest $10.5m of Equity in Luxembourgian Venture Capital Firm Advans SA

Advans SA, a Luxembourgian venture capital firm that specializes in microfinance ventures, recently announced it raised EUR 7 million (USD 10.5 million) in equity capital from CDC Group, a private equity fund of funds sponsored by the British government. CDC’s investment aims to support Advans’ expansion of investments in Asian and African microfinance institutions (MFIs). The deal will consist of two financing rounds: CDC has committed to an initial round of EUR 3 million (USD 4.5 million) in equity, and plans to invest EUR 4 million (USD 6.5 million) of equity during a subsequent round of Advans-planned fundraising in early 2009.

CDC’s commitment to Advans takes its total investment in microfinance-related funds to USD 53.2 million since 2004. Prior to the Advans deal, CDC’s most recent microfinance investment occurred in October 2007, when MicroCapital reported that it made a USD 30 million equity commitment to American hedge fund Minlam Microfinance Offshore Fund.

Evidenced by Advans’ stated mission “to build a network of financial institutions in developing and emerging countries offering […] standard financial services to [microenterprises]”, and its demonstrated success at attracting players like CDC (USD 4 billion in assets), Advans appears poised to join the ranks of a growing number microfinance-oriented VC and PE firms that command a large number of MFIs in which they retain both operational and equity control. Such firms include ProCredit Bank, Access Holdings and Catalyst Microfinance Investors (CMI). This is a relatively nascent approach to commercial microfinance investment; three of these institutions – Access, CMI and Advans – were established after 2005. Coincidentally, their inception followed UN-sponsored International Year Of MicroCredit 2005, an event that helped advance the notion of microfinance as a profitable enterprise and legitimate asset class.

Based in Luxembourg, Advans SA describes itself as a venture capital firm that “creates new microfinance institutions in which it invests as lead shareholder, alone or with other shareholders with similar interests and vision, guided by two bottom lines: return on investment and social development.” To date, Advans manages only three microfinance ventures, but has stated plans create 10 new MFIs and invest in existing ones as the majority shareholder over the next five years. As reported by MicroCapital, Advans’ most recent venture was the establishment of Advans Banque Congo in June 2008.

Advans was originally founded by French consulting firm Horus Development Finance, with equity backing of several development financial institutions. Along with CDC’s equity investment, current ownership of Advans includes Horus Development Finance, World Bank unit International Finance Corporation (IFC), German development bank Kreditanstalt für Wiederaufbau (KfW), European Investment Bank (EIB), French Development Agency AFD, and Dutch development bank FMO. No shareholder retains more than a 20 percent stake in Advans. For more information on Advans’ ownership, please click here.

Based in England, CDC is a private equity fund of funds that makes investments in firms holding an investment portfolio of social enterprises. CDC targets those firms that invest in Asia, Africa, and Latin America. As part of its investment policy, 50 percent of CDC’s portfolio is allocated toward investments in Sub-Saharan Africa and South Asia.

CDC operates as a government-sponsored, privately-managed enterprise. Registered as a Public Limited Company (PLC), 100 percent of CDC’s equity is owned by Britain’s Department For International Development. Evidently, CDC does not receive government funds on an annual basis; as stated on its website, “[CDC] has received no government capital for a decade.” As of December 2007, the fund held total assets of USD 4 billion, and reported return on assets of 33 percent (p. 34).

By Ryan Benson, Research Assistant

Additional Resources:

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

MicroCapital Story: UK’s CDC Group Invests USD 30 Million in Minlam’s Microfinance Offshore Hedge Fund

Advans SA: Home

Horus Development Finance: Home

Private Equity Hub: CDC Backs Advans

CDC: Home

CDC: 2007 Financial Statements

MIX Market: Advans SA

Department for International Development: Home