MICROCAPITAL STORY: ASA International Secures $125m in Largest Microfinance Equity Commitment to Date

Catalyst Microfinance Investors (CMI) of Mauritius announced on Tuesday that it had raised USD 125 million through the largest microfinance equity sale to date. Investors included private individuals as well as a number of institutional investors such as the Dutch pension fund, ABP and the US financial services organization, TIAA-CREF. The majority of the funds will be channeled to ASA International of Bangladesh, who will use the increased capital to expand operations in Africa and Asia.

The USD 125 million dollar investment was structured as a private equity fund managed by a joint venture of ASA of Bangladesh and Sequoia of the Netherlands. According to a report provided by the Microfinance Congress the majority of the capital was provided by four types of investors: 43 percent came from investment funds, 28 percent from pension funds, 18 percent from private investors, and 11 percent from investment managers. The majority of the investment will solidify CMI’s majority owned stake in ASA International with the remainder to be used to purchase 30 percent or higher shareholder interest in emerging microfinance institutions. A focus will be on MFIs that have the potential to merge with ASA in the future. CMI intends to achieve commercial financial returns on the fund by means of a sale or IPO of ASA and any additional investments.

To put the size of this deal in perspective, the SKS round of equity financing for USD 37 million (as reported by MicroCapital earlier this month) was one of the largest microfinance equity investments ever. Other large deals included the USD 27 million investment in Share Microfin by Legatum Capital in May, 2007 and the 50 million investment in CMI in October, 2007.

Catalyst Microfinance Investors is a private equity fund managed by ASA in Bangladesh and Sequoia in the UK and the Netherlands. This is CMI’s third deal since Microcapital.org reported on its founding in 2005. In October of 2007, they announced a USD 50 million closing in which USD 10 million was invested in ASA and the rest spread throughout MFIs in Asia and Africa. As of December, 2007, CMI had equity interest in 7 MFIs thoughout Asia and Africa including full ownership of ASA.

Established in 1979 by Mr. Shafiqual Haque Choudhury, ASA International is a subsidiary of CMI. As reported by MicroCapital.org it was recently rated number 1 on Forbes Magazine’s list of top 50 MFIs worldwide. ASA has provided microfinance services since 1991 and currently serves over 6 million clients through more than 3,000 branches in Bangladesh, Cambodia, Ghana, India, Nigeria, Pakistan, the Philippines, and Sri Lanka and expects to commence operations in China and Indonesia later this year. As of March, 2006, they reported a total loan portfolio of USD 305.3 million, a return-on-assets of 14.4 percent, and a debt-to-equity ratio of 76.84 percent.

Founded by Dirk Brouwer in 2002, Sequoia is an independent finance advisory and private equity firm with offices in the Netherlands and the United Kingdom specializing in mergers and acquisitions as well as private equity investments. It has advised on numerous assignments with a combined transaction value of over USD 5 billion. It plays a key role in the management of CMI by using these specializations to conduct matters related to due diligence, valuation, deal structuring, corporate governance and exit management. Sequoia also contributes significantly to CMI’s fund raising, administration and reporting duties.

A major contributor to the fund, the Global Microfinance Investment Program (GMIP) is part of TIAA-CREF’s Social and Community Investing Department. As reported by Microcapital, it was founded in 2006 with the goal of investing USD 100 million in the following four years. This was its second investment, the first being a USD 43 million stake, amounting to a 10 percent share, in ProCredit of Germany. TIAA-CREF is a financial services group for those in the academic, medical, cultural and research fields. It currently has approximately USD 400 billion in total assets.

Another major contributor, the Dutch pension fund, ABP, is the third largest pension fund in the world with an invested capital of 215 billion Euros, the equivalent of over USD 314 billion. At the end of 2007, ABP had USD 32 million invested in microfinance institutions worldwide.

By Jacob Keller

Additional Resources:

Forbes: Home, announced

Catalyst Microfinance Investors: Home

ASA International: Home

Microfinance Congress: Home, report

Sequoia: Home

TIAA-CREF: Home, USD 400 billion

ABP: Home

Mix Market: ASA International, Catalyst Microfinance Investors

Global Pensions: http://globalpensions.com/showPage.html?page=gp_display_news&tempPageId=701266

VC Circle: http://www.vccircle.com/2008/02/13/bangladeshi-microfinance-firm-asa-to-get-125-million-funding/

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