Brac
Launches the World's First Micro-Credit Securitization
BRAC is proud to announce that it has received
all regulatory approvals necessary to complete the world’s
first micro-credit securitization, created to fund nearly 1.2
million micro-entrepreneurs. It will bring the resources of global
financial markets to the doorsteps of nearly 1.2 million households
in Bangladesh. This will be the first AAA-rated issue in Bangladesh.
This groundbreaking transaction provides
a new way for micro-finance institutions to fund their micro-credit
programs while reducing dependency on volatile donor financing.
It is expected to reduce the cost of capital for BRAC significantly.
This securitization of micro-credit receivables will thus allow
BRAC to disburse more funds to more micro-entrepreneurs.
BRAC Micro Credit Securitization Series
1 will see $180 million invested in the micro-credit sector over
a period of six years. The money will be disbursed to BRAC in
equal portions every six months, over 12 tranches.
Citigroup, FMO of Netherlands and local
(Bangladeshi) financial institutions are the investors of the
transaction. Additionally, Citibank NA will be the funding bank
for one-third of the transaction under the guarantee of FMO and
counter guarantee of KfW of Germany. BRAC will be the Originator
as well as the Service Provider for the transaction.
RSA Capital is the lead arranger and is
responsible for creating this innovative financial structure with
the help of MF Analytics. Citigroup, FMO and KfW are acting as
co-arrangers. The Trustee for this transaction will be Eastern
Bank Limited of Bangladesh. The transaction will require the creation
of a dynamic pool of receivables, and the software that selects
and updates this dynamic pool on a monthly basis has been created
by MF Analytics. Clifford Chance, and Lee Khan and Partners are
acting as legal advisors.
The securitized pool of micro-credit receivables
will be a microcosm of BRAC’s micro-credit portfolio. The
expected size of the dynamic pool will be about 3.3 million loans
for the life of the transaction. The average principal outstanding
of the securitized loans will be around BDT 6,700 (approximately
US$95).
All principal and interest payments in
the transaction are calculated and paid in Bangladeshi Taka values.
As a result, the entire currency risk for the transaction is borne
by global investors.
Since 1972, BRAC has been working with
the twin objectives of poverty alleviation and empowering the
poor with a holistic approach. It has made laudable contributions
in the field of microfinance, health and education and has recently
expanded beyond the borders of Bangladesh to Afghanistan and Sri
Lanka.
S N Kairy Kazi Arif Anwar
Head, Finance and Accounts
BRAC
0171300499
Kazi Arif Anwar
Manager
Public Affairs and Communications
BRAC
01713042775 |
