World Bank Group member IFC and Standard Chartered Bank announced that they have collaborated on the launch of the first-ever issuance of notes backed by loans to microfinance institutions in Africa and Asia.
The deal will establish a new product to provide investors with access to microfinance as an asset class, according to a release from both companies. It will also allow Standard Chartered to expand its lending to the microfinance sector.
The IFC will invest $45 million in credit-linked notes to be issued by MILAA (microfinance institutional loans for Asia and Africa), which is a SPV set up by Standard Chartered to facilitate microfinance lending.
The notes will be linked to a portfolio of loans that the bank has made to microfinance institutions in Sub-Saharan Africa as well as South Asia. These will also allow the bank to extend additional credit to microfinance institutions that will, as a result, reach more unbanked people, according to the release.
"This transaction will unlock more funding for microfinance. We believe improving access to finance is a key lever in reducing poverty and catalysing broader social and economic development. We hope other investors will be inspired by the IFC's support of this transaction," Peter Sands, Standard Chartered group chief executive, said in the release.
By working together on this innovative deal, IFC and Standard Chartered are helping people who do not have access to banking services. At the same time, we are building an asset class for investors who are looking for more microfinance opportunities in emerging markets, Lars Thunell, IFC executive vice president and CEO, said about the collaboration with StanChart.
Standard Chartered committed to establishing a $500 million microfinance facility over a five-year period as part of the 2006 Clinton Global Initiative. This transaction is part of this commitment. The bank is supporting 48 microfinance institutions across 15 countries in Africa and Asia, affecting the lives of 1.2 million people, the majority of whom are women. Since 2005, the bank has financed or arranged financing of $285 million, with an outstanding portfolio of $180 million.