MEET THE BOSS: Interview with Robert Annibale, Global Director of Citi Microfinance (Part One of a Two Part Series)

Bob Annibale is Global Director of Citi Microfinance. He leads the bank’s commercial relationships with microfinance institutions, on a multi-business and product basis, providing financing and product partnerships to institutions that serve the poor and the unbanked.

He joined Citibank in 1982. After a first assignment in Greece, he held a number of senior treasury, risk and corporate positions at Citi in Athens, Bahrain, Kenya, London and New York.  Mr. Annibale completed his BA degrees in History and Political Science at Vassar College and his Masters Degree in African Studies (History) at the University of London, School of Oriental and African Studies.

Mr. Annibale served on the Board of Advisors for the United Nations High Level Commission on Legal Empowerment of the Poor. He represents Citi on the Board of the Microfinance Information Exchange, on the Council of Microfinance Equity Funds and with the Microfinance Network. He also serves on a number of other external boards and councils.

Robert Annibale, Global Director of Citi Microfinance

MicroCapital: First of all, can you provide a quick market update and overview with regards to where the microfinance industry is currently at post global credit crisis?

Bob Annibale: The good news is that the microfinance industry has thus far proved pretty resilient to the impact of the global credit crisis–with differentiation by country and region. Clearly those institutions that were funding in local markets and local currency have fared the best, as have institutions that can accept deposits.

However, across geographies and types of MFI (microfinance institutions), it would be fair to say that most MFIs are paying more today (the cost of funding is higher) than they did a year or two ago.  In most cases MFIs haven’t passed the cost on to the end client, but they are absorbing that cost and trying to achieve efficiency in other ways.  We have also seen portfolio at risk (PAR) and net write offs increase in many markets, but this appears to have more to do with over lending or local market issues than as a consequence of global financial market events. In some countries, the increase in PAR may also be as a result of pressures on household incomes resulting from significant increases in the costs of food, fuel and declining remittances.

In some of the biggest markets, such as India, Indonesia and Bangladesh, there have been fewer issues of liquidity impacting MFIs.  Those that have been more impacted by liquidity were those in markets that were most integrated with the banking sector.  This is the situation, for example, in Central and Eastern Europe, especially Bosnia, where there was a great deal of bank and foreign currency borrowing (sometimes unhedged), which has been compounded by indications of over indebtedness.

We also saw that institutions that were in the process of tapping the capital markets generally delayed issuances and sought other sources of funding.  Access to bank financing tightened and capital markets almost everywhere became very thin last year for all types of borrowers. We are starting to see some markets reopen again. For example, Citi recently arranged a bond issuance for Mexico’s Banco Compartamos.  While targeting a placement of 500 million pesos of three year bonds, demand proved much higher and the issue was 1.2 times oversubscribed.  Citi ultimately placed a billion pesos with domestic retail and institutional investors.  The issue was also priced at a tight spread of only 200 basis points over the local benchmark rate.

MC: What is the story behind Citi with regards to the Microfinance unit and its founding?  How has that vision evolved?

Bob Annibale: Citi has a long history in microfinance.  The bank began working with the sector some 30 years ago through the Citi Foundation. It has been a supporter of groups such as Accion International, Women’s World Banking, SEEP Network and Grameen Foundation for many years in capacity building, local and regional network strengthening, financial education, training, etc.  I have worked in treasury, risk and investment banking for many years, covering Africa, the Middle East, Asia and Eastern Europe in the field and in London and NY.  I was in a very different role five years ago, Citi’s Senior Treasury Risk Officer, when I became most interested in microfinance.

It was the awareness that a number of MFIs were increasingly looking for a relationship with Citi beyond philanthropy, to be served as clients, supporting their needs in  areas such as  accessing  domestic markets, cash management, hedging foreign exchange risk or developing products together, such as remittances, savings and micro-insurance. This led to my launching Citi Microfinance with a group of colleagues that also had diverse banking skills and from a number of countries.  Citi Microfinance is focused on proving financial services to the microfinance sector – MFIs, investors, donors and networks. We believe in partnership, leveraging our respective expertise, capital, products and international presence, so that we can support the microfinance sector to expand in scale and scope.

Citi Microfinance works across geographies and businesses to serve the sector and, as Citi is present in over 100 countries, our relationships with MFIs are primarily managed locally. For example, BRAC is one of the largest MFIs, which Citi has worked with on a number of innovative financing structures, and our colleagues in Citi Dhaka maintain the primary relationship contact with the organization.  Since we operate locally in the same countries as many MFIs, we benefit from knowing the domestic market, regulators and can to work in local currency, under local law, and in local languages.

We have also embedded microfinance into Citi’s credit policies and risk procedures, with specific policies and debt rating models specifically designed to assess MFIs so that we can partner and develop products and services appropriate to the sector.

MC: Please tell me more about the scope of financial services that your group provides, such as capital markets, structured products or any principal investments?

Bob Annibale: Citi has arranged a significant amount and diversity of financing for microfinance institutions.  In the beginning we provided loan financing services but then realized very quickly that many MFIs had the quality of performance and scale to engage a wider spectrum of investors.  Understanding the needs of specific institutions and markets, we structure finance for MFIs as we have long done for other financial institutions. MFIs very often have not accessed their local capital markets before, either as an institution nor was there investor familiarity with the microfinance sector, despite so many of them delivering impressively on both financial and social impact.

One of the ways that we have broadened the range of funders to MFIs, for example, has been to arrange syndicated local bank funding, including for ProCredit (Romania), Kashf (Pakistan) and Buro (Bangladesh).

Very early on Citi arranged the first investment grade bond issue for Banco Compartamos, when it was still a quarter of its current size, and a private placement for MiBanco (Peru).  Citi also worked with, FMO (Netherlands) and Kfw (Germany) to structure the first AAA rated local currency securitization of microfinance loans.

I think what distinguishes Citi from other providers is that we really deliver locally.  Almost all the financing that we arrange is in the local market and local currency or it provides the hedging and structuring necessary to achieve local funding for MFIs.  Perhaps Citi having a dedicated microfinance group, and the extensive number of countries where we are present in the same local markets, are of greatest value to our relationships.

MC: Last month the Board of Directors of the Overseas Private Investment Corporation (OPIC) approved up to USD 250 million to expand a successful partnership with your organization that provides microfinance lending to borrowers in emerging markets worldwide.  As mentioned, the deal is reported as a USD 250 million Citi fund guaranteed by OPIC.  Can you provide additional details regarding the fund, such as how much is Citi committing?  Have there been subscriptions or is the fund capitalized by Citi itself?  Can you provide additional information with regards to what OPIC is committing?  Lastly, can you tell me the nature of their commitment?

Bob Annibale: It’s more a facility than a fund.  It’s not a SPV (Special Purpose Vehicle) structure based on levels of senior/junior debt, such as a MIV, CLO or CDO — often located offshore and denominated in US Dollars or Euros.  About two or three years ago we announced a USD 100 million dollar partnership program with OPIC that was a risk sharing program.  In this deal, Citi fully underwrites, manages the MFI relationship and funds the loan in the local market (Citi is the lender) and OPIC takes a risk participation in that facility for up to 70 percent of the credit risk which is similar to reinsuring the facility. As such OPIC is participating in the Citi loan to an MFI.  OPIC’s participation allows us to go further than our own capacity in terms of loan amount and tenor. We have done deals and transactions with other agencies also.

By Zoran Stanisljevic 

 

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