BRAC
Launches World's First Micro-credit Securitisation
July 6th, 2006
BRAC, the world’s
largest national NGOs with over 5mm borrowers and 100,000 employees,
has closed World’s first micro-credit securitisation structured
by RSA Capital, Citigroup, FMO and KfW.
This groundbreaking transaction,
denominated in Bangladesh Taka (BDT), will provide an aggregate
of BDT 12.6 BN (US$180mm equivalent) of financing for BRAC over
a period of six years. Under the program, BDT 1 BN (US$15mm equivalent)
will be disbursed every six months to BRAC, with a maturity of
one year.
The transaction is a securitisation
of receivables arising from micro-credits extended to low-income
individuals by BRAC, primarily in rural communities not reached
by Bangladesh’s commercial banks. The structure involves
the creation of a special purpose trust which purchases the receivables
from BRAC and issues certificates to investors representing beneficial
interest in such receivables.
The securitisation will
allow BRAC, to diversify its funding sources, reduce its on-balance
assets and also disburse more funds to a larger number of micro
entrepreneurs, reinforcing BRAC’s determination in helping
in the development of the micro-credit sector.
“This transaction
underlines BRAC’s commitment to be the leading provider
of innovative financing solutions to micro entrepreneurs. We have
brought the global financial markets to the doorsteps of nearly
1.2mm households in Bangladesh. As one of the largest financing
efforts ever dedicated to advancing poverty focused microcredit,
this is a landmark for the micro finance industry,” said
Mr. Fazle Hasan Abed, Chairperson, BRAC.
The transaction will also
help in the development of Bangladesh’s local capital markets,
as it marks the first such securitisation in the market and also
the first AAA rated local certificates issue in Bangladesh, rated
by the Credit Rating Agency of Bangladesh. The transaction was
very well received by the local investors.
RSA Capital is the lead
arranger and Citibank, N.A. Bangladesh (Citigroup), FMO (Netherlands),
and KfW (Germany) are the co-lead arrangers. FMO will directly
purchase one-third of the certificates. Citibank, N.A will purchase
another one-third of the certificates, backed by a guarantee of
FMO and counter guarantee of Kfw. Additionally, Citibank, N.A.
Bangladesh, with two other local banks will purchase the remaining
one third of the certificates.
BRAC will be the Originator
as well as the Service Provider for the transaction. The Trustee
for this transaction will be Eastern Bank Limited of Bangladesh.
Citibank, N.A. Bangladesh is the Account Bank for the trust. The
transaction required the creation of a software to track a dynamic
pool of receivables, which was created by MF Analytics. Clifford
Chance, and Lee Khan and Partners are acting as legal advisors.
About BRAC
With more than 100,000 employees, BRAC is the largest NGO in the
world. Diagnosing poverty in human terms and recognizing its multidimensional
nature, BRAC takes holistic approach in striving to fulfill its
twin objectives of poverty alleviation and the empowerment of
the poor. This approach combines economic development and livelihood
generation enterprises with health, education and other social
programs. BRAC’s outreach covers all 64 districts of the
country, and it has been called upon to assist a number of countries,
including Afghanistan and Sri Lanka.
About RSA
RSA, a financial boutique based in Dhaka, was appointed by BRAC
as Lead Arranger and a group of institutions joined together to
structure and to act as Co-Lead Arrangers, including Citigroup
(Bangladesh/Hong Kong), FMO (Netherlands) and KfW (Germany), all
of which have significant securitisation experience.
About Citigroup
Citigroup (NYSE: C), the leading global financial services company,
has some 200 million customer accounts and does business in more
than 100 countries, providing consumers, corporations, governments
and institutions with a broad range of financial products and
services, including consumer banking and credit, corporate and
investment banking, insurance, securities brokerage, and asset
management. Major brand names under Citigroup’s trademark
red umbrella include Citibank, CitiFinancial, Primerica, Smith
Barney, Banamex, and Travelers Life and Annuity. Additional information
may be found at www.citigroup.com. Established in 2004, the Citigroup
Microfinance Group leverages specialized microfinance expertise
with the resources and experience of the company’s Corporate
and Investment Banking, Consumer, and Global Wealth Management
businesses, product groups and employees to work with partners
to address the needs of those who are not currently reached or
are underserved by formal financial institutions.
About FMO
The Netherlands Development Finance Company (FMO) - the international
development bank of the Netherlands invests risk capital in companies
and financial institutions in developing countries. With investment
portfolio of EUR 2.4 billion, FMO is one of the largest bilateral
development banks worldwide aimed to create flourishing enterprises
and opportunities for the poor together with a wide range of local
financial institutions and international partners. FMO tailors
financial product mixes in order to best serve the entrepreneurs.
Towards this end, it makes use of innovative options like investments
in local currency, long-term financing and capacity development.
Securitisation and mezzanine financing are financial products
that complement this effort.
About KfW Entwicklungsbank
KfW Entwicklungsbank (KfW development bank) finances investments
and accompanying consulting services in developing countries.
It carries out its work on behalf of the German Federal Ministry
for Economic Cooperation and Development (BMZ) and committed to
the primary goal of German development cooperation, namely to
sustainably improve the economic and social conditions of the
people in developing countries. Through its Financial Cooperation
(FC) it contributes to reducing poverty, protecting natural resources
and securing peace worldwide. KfW Bankengruppe relies on a broad
experience in securitisation transactions and has significantly
contributed to the development of the German securitisation market.
Since the end of 2000, credit institutions can transfer risk related
to SME loans to the capital market via KfW's securitisation platform
PROMISE. For the purpose of securitising private residential loans,
in October 2001 KfW Bankengruppe established its platform PROVIDE.
Media Contacts:
BRAC: Kazi Arif Anwar
Tel: +880-2-9881265/8824180 ext-2158
Email: arif.ka@brac.net
RSA: Sameer Ahmad
Tel: +880-01713-080125
Email: sameer@rsacapital.com
Citigroup: Mehreen Mahiuddin
Tel: 880-2-8855139-41 x 1103
Email: mehreen.mahiuddin@citigroup.com
FMO: Suzan van der Wiel
Tel: +31 (0)70 314 96 57
Email: s.van.der.wiel@fmo.nl
KfW: : Dr. Charis Pöthig
Tel. ++49/69/7431-4683
Email: charis.poethig@kfw.de
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