MICROCAPITAL BRIEF: Grupo Fortaleza Places $17.9m Closed-End Fund on Bolivian Stock Exchange to Finance Small Microfinance Institutions (MFIs)

Grupo Fortaleza, a Bolivian financial services company that caters to small and medium enterprises (SMEs), has placed a BOB 125 million (USD 17.9 million) closed-end fund on the Bolivian stock exchange (Bolsa Boliviana de Valores) with the purpose of financing small microfinance institutions (MFIs). Managed by Fortaleza SAFI, the division of Grupo Fortaleza responsible for managing investment funds, the fund aims to make local currency loans to tier two and tier three MFIs. According to Grupo Fortaleza, the fund, called the Microfinanzas Fondo de Inversión Cerrado (Microfinanzas FIC), is the first of its kind to be listed in the Bolivian capital markets.

Microfinanzas FIC was structured and placed by Fortaleza SAFI and CAISA Agencia de Bolsa, the investment-banking arm of Grupo Fortaleza. It has a five-year term, extendable for up to two additional periods of two years each. Eighty percent of the fund’s shares received an AA+ rating from FitchRatings. Investors in these senior shares include Bolivian pension funds and other local institutional investors. The remaining 20 percent of the shares received a BB+ rating from FitchRatings. Investors in these shares include the Multitaleteral Investment Fund, which is housed in the Inter-American Development Bank; CAISA Agencia de Bolsa; and Banco de Desarrollo Productivo, the Bolivian government-owned development bank.

By: Stefanie Rubin, Research Assistant

About Grupo Fortaleza:

Grupo Fortaleza is a Bolivian financial services company that caters to small and medium enterprises (SMEs). It was founded in 1994 as Compañía Americana de Inversiones S.A. (CAISA Agencia de Bolsa). It currently consists of five divisions: CAISA Agencia de Bolsa, the investment banking and consulting division; Fortaleza SAFI, the investment fund division; Fortaleza FFP, the division responsible for providing financial services such as trusts, credit and savings accounts; Fortaleza Seguros y Reaseguros, the insurance and reinsurance branch; and Fortaleza Leasing.

Additional Resources:

Grupo Fortaleza: http://www.grupofortaleza.com.bo/

Multilateral Investment Fund: http://www.iadb.org/mif/

Source Article:

On October 22 of this year, the capital market division of Grupo Fortaleza placed the first close ended Fund in the Bolivian capital markets (Bolsa Boliviana de Valores) whose aim is to finance small microfinance Institutions. The Fund is a Bs125 million (USD17.9 million) one country vehicle, managed by Fortaleza SAFI, whose aim is to lend in local currency to MFI that have limited access to the local capital market.

In Bolivia, as in many Latin-American countries, there is excess liquidity in the capital markets but limited investment opportunities. Bolivian institutional investors (pension funds, insurance companies and investment funds) have almost USD5 billion for investments and are used to invest in Tier 1 MFIs, such as Banco Sol and Banco Los Andes. However, less known MFIs have not been benefited by having access to these resources due to size and level of risk.

Recognizing this opportunity, CAISA Agencia de Bolsa and Fortaleza SAFI structured and placed Microfinanzas Fondo de Inversión Cerrado. The structure consists of a two tranches shares. Senior shares represent 80% (AA+.bo FitchRatings) of the Fund; the investors that invested in these shares are mainly Bolivian pension funds as well as other local institutional investors. Subordinated shares represent 20% (BB+.bo FitchRatings) of the Fund and the main investors are the Multilateral Investment Fund, which is housed in the Inter-American Development Bank, the state owned development bank (Banco de Desarrollo Productivo) and CAISA Agencia de Bolsa.

The innovation of this Fund is twofold. First, it enabled to channel local savings for local development. Second, Microfinanzas FIC will provide local currency financing to Tier2&3 MFIs. Thus, the Fund provides a different approach to solve the foreign exchange risk faced by microfinance institutions.

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