MICROCAPITAL STORY: Akiba Commercial Bank of Tanzania to Receive a Total of $5.2m in Capital from Accion Investments in Microfinance, the Hivos-Triodos Fund Foundation, Incofin, Inter-Consult, the Netherlands Development Finance Company, the Parastatal Pension Fund, the Triodos-Doen Foundation, and 70 Private Tanzanian Individuals

Based in Dar Es Salaam, Tanzania, Akiba Commercial Bank (ACB) will receive a total of USD 5.2 million in a capitalization program which includes investments from ACCION Investments in Microfinance (ACCION Investments), the Hivos-Triodos Fund Foundation (HTF), Incofin, Inter-Consult, the Netherlands Development Finance Company (FMO), the Parastatal Pension Fund (PPF), the Triodos-Doen Foundation (TDF), and nearly 70 private Tanzanian individuals. The capitalization effort is coupled with a contract between ACB and ACCION International (ACCION) in which the latter of the two will provide short-term technical assistance and a senior management team.

Reporting a total microfinance loan portfolio of TZS 25 billion, or USD 21.3 million, ACB offers group, individual, and consumer loans to its microfinance customers, whom total 16,000. ACB was established in August 1997 by a group of over 300 Tanzanian nationals and, since its founding, has been guided by the mission of providing financial services to all levels of income. On December 31st, 2006, ACB had total assets of almost USD 29.4 million and the MIX Market, the microfinance information clearinghouse, reports a return on assets (ROA) of negative 0.22 percent and a debt to equity ratio of 659 percent for the same year.

ACCION Investments is a microfinance investment vehicle (MIV), affiliated with ACCION International, which reports capital and capital commitments, from both public and private investors in Europe and the United States, of nearly USD 50 million. The segregated portfolio company will capitalize up to USD 2.5 million in shares to support the expansion of ACB and the deal will be worth 20 percent of total shares in the bank. Launched in 2003, ACCION Investments is incorporated in the Cayman Islands and invests in microfinance institutions (MFIs) in Africa and Latin America and the Caribbean, mostly through equity transactions, according to the MIX Market.

As a component of ACCION’s contract with ACB to provide a new senior management team, the organization hired John M. Lwande, a current member of the board of the Tanzania Association of Microfinance Institutions (TAMFI), to take over as ACB’s new Managing Director. Over the past 19 years, Mr. Lwande has worked with Cooperative for Assistance and Relief Everywhere International (CARE International) in Zimbabwe, Development Alternatives, Inc. (DAI), the National Microfinance Bank (NMB) of Tanzania for which he served as the Chief of Microfinance, and the Foundation for International Community Assistance (FINCA) for which he served as the Regional Credit Manager of the Africa Hub.

Established in 1961 and employing microfinance activities since 1973, ACCION works to aid the poor in their climb up the economic ladder into an income level where they can access mainstream financial services. In 2007, ACCION’s partners reported more than 3.1 million active clients and a loan portfolio of nearly USD 3 billion. ACCION is active in 23 countries and reports to the MIX Market.

The remaining USD 2.7 million in investments is spread across the following funds and organizations and information on the specific amounts of their individual contributions was unavailable.

Founded in 1994, the HTF is based in The Netherlands and is a joint initiative of the Triodos Bank and the Humanist Institute for Development Cooperation (Hivos) allowing Dutch people to invest in global microfinance “through special savings accounts and by giving guarantees.” Managed by Triodos Investment Management BV (TIMBV), the HTF utilizes equity investments, loans and debt securities, according to the MIX Market, and reports 2007 fund assets of over USD 57 million, all of which is allocated to microfinance investments.

Also formed in 1994 and managed by TIMBV, the TDF is a partnership between Triodos Bank and the DOEN Foundation (DOEN), a donor organization targeting the areas of culture, social cohesion, sustainable development, and welfare. According to the MIX Market, the TDF reports 2007 fund assets of USD 71.6 million, all of which is allocated to microfinance investments.

MicroCapital recently reported on both HTF and TDF here.

Founded in 1992, Incofin is a limited liability co-operative company based in Antwerp, Belgium which strives to reach “small entrepreneurs, farmers or artisans in developing countries” by providing loans, equities and guarantees to 47 MFIs in 19 countries, according to its web site. Incofin employs five funds (listed here), the first of which takes the organization’s namesake and is the relevant one for this deal. As reported by the MIX Market, Incofin had 2006 fund assets of USD 10.6 million. MicroCapital recently reported on Incofin here.

Based in Dar Es Salaam, Inter-Consult is a consultancy firm with in-house architects, engineers, financial consultants, and public project managers. The company has completed over 400 projects since its founding in 1982. Financial information was not available.

The FMO was created by the Dutch government in 1970 to replace, and expand upon, the investment development activities of the previously operating Netherlands Overseas Financing Association. The FMO offers a variety of financial products and programs including the Small and Micro Enterprise Fund (SME Fund) which lends to MFIs across several regions. The FMO had 2007 total assets of EUR 2.7 billion and a loan portfolio of EUR 1.3 billion (page 4). MicroCapital recently reported on FMO here.

Established in 1978, the PPF is a Tanzanian pension fund which provides social security coverage to its members and utilizes their contributions by making investments in equities, fixed income assets, and properties. Financial information as of 2005 is available through a 450 MB file found here.

With a gross national income (GNI) per capita of USD 340 in 2005, a relatively high inflation rate in 2006 of over 9.1 percent, and a “growing informal sector that supports more than 60 percent of the population, the majority of whom earn less than one US dollar a day,” according to the Director of Microfinance at the Bank of Tanzania, Ms. Grace Rubambey, the demand for microfinance services is high in this East African country.

MicroCapital previously posted the Accion press release here.

By Anthony Busch, Research Assistant

Additional Resources:

ACCION International: Home, Who We Are, Key Statistics, Where We Work, MIX Market Profile“ACCION Invests in Tanzania’s Akiba Commercial Bank”, by Bruce MacDonald, May 22, 2008

ACCION Investments in Microfinance: Home, MIX Market Profile

Akiba Commercial Bank: Home, Microfinance Services, MIX Market Profile

Doen Foundation: Home, About

Foundation for International Community Assistance: Home, Annual Report 2006

Hivos-Triodos Fund Foundation: Home, MIX Market Profile

Incofin: Home, For Investors, MIX Market Profile

Inter-Consult: Home, Architects, Engineers, Project Managers, Financial Consultants, About

Khanya-African Institute for Community-Driven Development: Home, “Institutional Support for Sustainable Livelihoods in Zimbabwe”, July 1999

MicroCapital press release, May 29, 2008: “ACCION Investment in Tanzania’s Akiba Commercial Bank to Expand Microfinance Services”

MicroCapital article, May 19, 2008: “Incofin of Luxembourg Lends $2m to Guatemalan Microfinance Institution (MFI) FUNDEA, $1m to Bolivian MFI FADES, and $300k to Ghanaian MFI Sinapi Aba Trust”

MicroCapital article, April 2, 2008: “The Netherlands Development Finance Company (FMO) Lends $1.1m to Fundación Internacional para la Asistencia Comunitaria de Guatemala (FINCA Guatemala)”

MicroCapital article, May 22, 2008: “Triodos-Doen and the Hivos-Triodos Fund Invests $1.3M in HUMO Micro Lending Fund, Alter Modus Montenegro and Kazakhstan Microcredit Organization Bereke”

Microfinance Gateway: Home, Tanzania Country Profile, “Implementation Completion Report on a Credit in the Amount of US$2 Million to the United Republic of Tanzania for a Rural and Micro Financial Services Project”, by The World Bank, June 30, 2005; “Policy, Regulatory and Supervisory Environment for Microfinance in Tanzania”, by Grace C. Rubambey, December 2005

MIX Market: Home, Tanzania

Netherlands Development Finance Company: Home, Organization, Annual Report 2007, MIX Market Profile

OANDA: FXConverter

Parastatal Pension Fund: Home, Investments, Annual Report 2005

Triodos Bank: Home, Triodos Investment Management BV

Triodos-Doen Foundation: Home, MIX Market Profile

“Reorganising and Refocusing Commercial Banks”, by Matthew Gamser, September 4, 2001

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