MICROCAPITAL.ORG STORY: Philippines-Based MFI CARD Raises $10.4 Million In A 5-Year Privately Placed Bond Issue Supported By Grameen Growth Guarantee Program And 'A(-)' Rating By Planet Rating To Expand Its Microfinance Business

Philippines-based MFI, CARD Bank, Inc. (CARD) [1], or Center for Agriculture and Rural Development, was reported to have raised Peso 500 million (approximately USD 10.4 million) last month by issuing fixed-rate corporate notes with a five-year maturity. According to a report in Philippines online news portal, Business World [2], the funds raised would be used to expand CARD’s microlending business. SB Capital Investment Corp. [3], the investment banking arm of Security Bank Corp. [4], acted as issue manager and lead arranger. The privately placed debt issuance was reported to be the first of its kind by an MFI and was hailed in a report on Market Wire [5] as ‘an important milestone in opening up broader capital markets to MFIs in the Philippines’. The transaction was supported by a USD 5 million guarantee from Grameen Foundation’s Growth Guarantee Program [6] and related advisory support. MFI rating agency, Planet Rating [7], was reported to have given CARD a rating of ‘A(-)’, which meant ‘excellent’ on its scale. Planet Rating noted the absence of risks in the short- and mid-term in terms of CARD’s operations as well as the credit enhancement provided by Grameen’s guarantee. The notes were reported to have been purchased by the following institutions: Allied Bank Corp. [8], Rizal Commercial Banking Corp. (RCBC) [9], Security Bank Corp. [4], and Banco de Oro Unibank, Inc. [10] and its subsidiaries BDO Private Bank, Inc. [11] and BDO Leasing and Finance, Inc. [12].

Mr Conrado A. Gloria, Jr., SB Capital Investment executive vice-president, was quoted as stating that ‘[CARD’s debt issuance] was more than just a philanthropic issue; it was not just a CSR (corporate social responsibility) issue but a real commercial transaction’ . Ms Mary Jane A. Perreras, CARD director for fund resources management, observed that the debt issuance was ‘a first step towards more sophisticated funding’ for MFIs. Ms Perreras added that ‘microfinance in the Philippines still has a long way to go’ but that ‘[we] can probably do an IPO (initial public offering), as long as we have the support of the market’.

This is Grameen Foundation’s third and largest Growth Guarantee transaction with CARD. The transaction is expected to provide CARD with long-term financing to expand its outreach by an additional 100,000 poor families. The first two transactions, totaling USD 5.3 million in bank financing, were partially secured by guarantees of USD 1 million each through the program. Mr Alex Counts, president of Grameen Foundation, was quoted as stating that ‘in the current economic climate, when banks and investors are generally more risk averse than they were previously, this transaction sends a strong message about investor confidence in quality MFIs such as CARD, as well as in the broader microfinance industry’. Mr Counts added that the transaction ‘also demonstrates how Grameen Foundation’s Growth Guarantees program is helping to guide MFIs through different stages of financial maturity and investment readiness’.

CARD is one of the first Grameen replication programs in the world and is the largest MFI in the Philippines. CARD was established in 1986 as a social development foundation. CARD subsequently established CARD-Mutually Reinforcing Institutions (MRI) composed of the CARD Bank, CARD Mutual Benefit Association, the CARD MRI Development Institute, CARD Business Development Services, CARD MRI Insurance Agency and the Rural Bank of Sto. Tomas (Batangas), Inc. CARD is reported to have a repayment rate of about 98%. According to CARD’s profile on the MIX Market portal [11], an online database that houses financial and other data on MFIs across the globe, CARD has a gross loan portfolio of USD 13,230,863 and 117,195 active borrowers. CARD’s total assets as at the end of 2007 was reported to be USD 17,429,807. The MFI was reported to have a capital to asset ratio of 18.67 percent and a debt to equity ratio of 4.36 as at the same date.

By Chinq Yee Chong, Research Assistant

Bibliography

[1] CARD Bank, Inc.: www.cardbankph.com/

[2] Business World Report entitled ‘Microfinance institution raises P500M from bonds’: http://www.bworldonline.com/BW090209/content.php?id=023

[3] SB Capital Investment Corp.: www.securitybank.com.ph/subsidiaries.asp

[4] Security Bank Corp.: www.securitybank.com.ph/

[5] Report on Market Wire entitled ‘Grameen Foundation Catalyzes $10 Million Transaction for CARD’ : http://www.marketwatch.com/story/grameen-foundation-catalyzes-10-million-transaction-for-card-2009-08-31

[6] Grameen Foundation Growth Guarantee Program: http://www.grameenfoundation.org/what_we_do/capital_mgmt_advisory/transactions/

[7] Planet Rating: www.planetrating.com/

[8] Allied Bank Corp.: www.alliedbank.com.ph/

[9] Rizal Commercial Bank Corp.: www.rcbc.com/

[10] Banco de Oro Unibank, Inc.: www.bdo.com.ph/