Citi, IFC to support expansion of BRAC's micro-lending

Feb 2008
Bangladesh, February, 12 2008 - IFC, a member of the World Bank Group, and Citi, the leading global financial services institution have concluded a US$22 million term financing to support BRAC's micro-lending in Bangladesh.

The facility will be made available in local currency Bangladesh Taka (BDT), having a tenure of five years with an amortizing structure. BRAC, one of the largest micro-finance institutions in the world, continues to invest in portfolio expansion. As part of BRAC's move for managing its balance sheet, this innovative structuring and exploring diversified sources of financing, especially longer tenure financing, will be beneficial to the micro-credit and small and medium enterprise segments served by BRAC. The loan is part of a wider Citi led financing for BRAC that was mandated last year. Of the US$55 million in equivalent BDT term financing, Citi is providing US$42 million in BDT. The US$22 million IFC-Citi tranche closed recently includes a US$18 million partial credit guarantee from the IFC. This risk sharing partnership with IFC will enable Citibank in Bangladesh to extend additional long-term local currency funds to BRAC.

Fazle Hasan Abed, Chairperson of BRAC, present at the signing with IFC and Citi, said, "To finance the growth of our microfinance operations, we need local currency financing. Support from IFC and Citibank, as well as our partnership over the years, has been invaluable."

"With this guarantee, BRAC will be able to reduce its dependence on grants for growth and outreach to poor people, particularly women borrowers," said Lars Thunell, IFC Executive Vice President and CEO.

"Citi is honoured once again to support BRAC in their micro-lending expansion plans in Bangladesh. Citi has a track record of closing several groundbreaking deals for BRAC. IFC is an important partner of Citi in various markets globally. We look forward to working with BRAC in the future. I would like to thank all our partners who helped make this such a successful transaction," said Mamun Rashid, Managing Director and Citi Country Officer-Bangladesh.

Citi and BRAC have a long relationship that included the issuance of the world's first Triple A rated local currency securitization of microcredit receivables in 2006. This was followed by innovative remittance distribution arrangement and the first-ever backstopped facility for an MFI (BRAC) in 2007.

This is IFC's first investment in BRAC, but the two intuitions have a long-standing relationship. In Bangladesh, IFC and BRAC have jointly pioneered projects in housing finance and SME lending in the past. BRAC's microfinance and development programmes cover all 64 districts in Bangladesh. It also offers microloans to women through its group-lending methodology.

Source : The New Nation

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