The Dutch Bank ING published its updated 2008 study on commercial bank microfinance activity, called “A Billion to Gain? The Next Phase”. A MicroCapital summary of the paper can be read here. MicroCapital is reviewing the microfinance activities of several of large international banks covered in the study, such as Commerzbank AG.
Although not one of the 20 largest global finance institutions by market value, Commerzbank is the second largest bank in Germany, with a consolidated balance sheet of EUR 620 billion. With over 8 million customers around the world, Commerzbank operates in 40 countries, employing 36,000 people. In 2007, the bank reported an operating profit of EUR 2.5 billion and an operating ROE of 18.7 percent.
Commerzbank is the only German financial institution with direct participation in microfinance institutions (MFIs) and focuses its equity investments in Southeast Europe. In addition, the bank has one relationship manager for microfinance at the corporate banking level and has minority equity stakes in ProCredit banks. ProCredit is a group of 22 banks operating in developing countries in Africa, Latin America, and Eastern Europe. These banks are for-profit (target ROE of 15 percent after tax), provide credit to micro and small enterprises, and supply average loan sizes of EUR 3000.
Commerzbank began acquiring equity stakes in 2000 and currently has equity holdings in 7 ProCredit microfinance banks (MFB). These MFBs are located in Kosovo, Serbia, Romania, Albania, Bosnia, and Bulgaria. Commerzbank’s equity stakes range from 7.6 percent to 21 percent, the smallest being in Bosnia and the largest in Romania. The bank also sold its 2 percent stake in ProCredit Bank Georgia to ProCredit Holding. Further details on Commerzbank’s investments in ProcCredit Banks can be found in the following MicroCapital article.
Most recently, Commerzbank founded a MFB in Belarus with KfW Bankengruppe, the European Bank for Reconstruction and Development, and the IFC, which is a member of the World Bank Group. According to a New Europe article, the MFB will have a total charter capital of EUR 10 million, target small and medium business, and is expected to cost EUR 35 million. Other equity investors will include the Netherlands Development Finance Company and Shorecap International.
Going forward, the bank continues to seek equity investment opportunities in MFIs in and outside of Europe. Commerzbank is also considering launching a private investor fund which consists of business loans to “poor” people.
by Jennifer Lee
Additional Resources:
ING Microfinance: “A Billion to Gain? The Next Phase”, by Matthijs Boúúaert, March 2008.
Commerzbank AG: Home, 2007 Annual Report
ProCredit Holdings: Home
MicroCapital: “German Commercial Bank Commerzbank AG Continues Microfinance Investment in ProCredit Bank”, April 10, 2006.
New Europe: “Commerzbank, KfW to hold stakes in microfinance bank”, November 10, 2007.
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