MICROCAPITAL STORY: CDC Group Invests $30m in Microfinance Funds: India Financial Inclusion Fund and Catalyst Microfinance Investors

CDC Group, the British government-backed, private equity fund of funds with net assets of 4 billion USD, has invested into two microfinance funds to the tune of 15 million USD: the India Financial Inclusion Fund, managed by Caspian Capital Partners, and the Catalyst Microfinance Investors, managed by Catalyst Microfinance Investment Company. By investing in MFIs, the fund aims to provide low-income persons access to a wide range of financial services, including credit, savings, and fund transfers.

Catalyst Microfinance Investors is managed by Catalyst Microfinance Investment Company, a joint venture between ASA, one of the big four MFIs in Bangladesh, and Sequoia, a Dutch corporate finance boutique. Its fund will invest in a network of growing greenfield microfinance institutions in countries such as India, Pakistan, Nigeria, and Ghana. The fund will aim to help MFIs accelerate their expansion, and in turn provide capital to low-income groups and microenterprises located in poor communities.

Hywel Rees-Jones, Managing Director for alternative investments at CDC, commented that, “Catalyst Microfinance Investors will be using the expertise of ASA, a renowned Bangladeshi NGO which has an impressive track record having been involved in microfinance since 1991.” He continued, “Microfinance has played a vital role in boosting development in Bangladesh by increasing the range of financial services available to poor people traditionally excluded from the mainstream. We hope and expect that this success can be applied to other emerging markets.”

Caspian Capital Partners, meanwhile, is an independent microfinance adviser based in Hyderabad, India. The fund provides growth capital and strategic support to existing and start-up MFIs. The fund focuses solely on India, with an emphasis on towns in rural areas with low microfinance penetration. According to a report from VCCircle, India Financial Inclusion Fund is aiming at a final close of 100 million USD. In this vein, it has raised 15 million USD from Global Microfinance Equity Fund and 8 million USD from Switzerland’s Social Investment Services. Its current investments include two India microfinance banks, Ujjivan and Equitas, as well as A Little World, the developer of ZERO, India’s first domestic payment system with specific focus on reaching out to masses with the lowest available communication infrastructure.

“Around 400 million people do not have access to formal, affordable financial services in India. The India Financial Inclusion Fund will improve funding to microfinance institutions, bringing improved credit opportunities in much needed regions,” remarked Hywel Rees-Jones.

Based in England, CDC is a private equity fund of funds that makes investments in firms holding an investment portfolio of social enterprises. CDC particularly targets those firms that invest in Asia, Africa, and Latin America. Per 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 (DFID). According to CDC’s website, as of December 2007, the organization held total assets of 4 billion USD, and a return on assets of 33 percent (p. 34).

In August 2008, MicroCapital reported on CDC’s investment on Luxembourgian Venture Capital Firm Advans SA, which specializes in microfinance ventures. CDC Group is also one of the biggest limited partners of India-focused private equity funds, according to VCCircle. In 2008, it announced a 250 million USD investment into one infrastructure and two real estate funds in India.

By Yanni Hao, Research Assistant

Additional Resources:

ASA: “Home”

A Little World: “Home”

Britain’s Department for International Development: “Home”

CDC Group: “Home”

Caspian Capital Partners: “Home”

Catalyst Microfinance Investors: “Home”

Equitas: “Home”

MicroCapital Story: August 18, 2008, “MICROCAPITAL STORY: British Government-sponsored CDC Group to Invest $10.5m of Equity in Luxembourgian Venture Capital Firm Advans SA”

Sequoia: “Home”

Ujjivan: “Home”