MICROCAPITAL STORY: Bangladesh-based ASA to Allocate Funds from Historic $150m Equity Deal Toward Microlending Outside Bangladesh

ASA International, a holding company managed and partially owned by ASA, one of Bangladesh’s largest NGOs, has announced it will use USD $150 million of equity raised from foreign investors to expand commercial lending outside Bangladesh.

ASA’s expansion to international markets is the latest development in the story of ASA International’s historic equity offering, as reported by MicroCapital. At $150 million, the deal represented the largest equity offering in commercial microfinance to date, dwarfing the size of previous deals such as SKS’ USD 37 million offering (MicroCapital story here), USD 27 million investment in Share Microfin by Legatum Capital (MicroCapital story here) or TIAA-CREF’s USD 43 million equity investment in Pro Credit (MicroCapital story here). Investors in the deal included private individuals as well as a number of institutional investors such as Dutch pension fund ABP, TIAA-CREF and the Bill Gates Foundation. Private Equity firm Catalyst Micro-finance Investors (CMIC), partner of ASA and another investor in the venture, will manage the fund.

One possible rationale behind ASA’s decision to target the new funds at foreign MFIs is the unfavorable environment that exists in Bangladesh for commercial microfinance institutions. Scholars and researchers point to Bangladesh as a nation in particular need of regulatory reform that would induce greater commercial lending within the country. According to Margeurite S. Thompson, researcher at the Boulder Institute of Microfinance, Bangladesh’s relatively large amount of government subsidies to microfinance institutions discourages competition among lenders, and ultimately retards the process of achieving a sustainable commercial microfinance industry (p. 56).

Established in 1979 in Dhaka, ASA is a non-profit organization that provides micro-lending services throughout Bangladesh. At year end 2006, ASA held USD 355.3 million in total assets and had a gross loan portfolio of USD 305.3 million that served over five million clients. Its debt/equity ratio was 76.84 percent and its return on assets was 14.40 percent. As reported by MicroCapital.org, ASA International was recently rated number 1 on Forbes Magazine’s list of top 50 MFIs worldwide.

TIAA-CREF is a US-based financial services group that caters to clients in academic, medical, cultural and research fields. As of December 2007 it held total assets of USD 435 billion. The organization first ventured into the microfinance asset class when it made a USD 43 million investment in Pro Credit in 2006. Pro Credit is a group of 22 commercial banks operating in Africa, Latin America, and Eastern Europe. TIAA’s Chief Investment Officer described the rationale behind the investment: “we subscribe to the view that microfinance investing can contribute to a double bottom line. GMIP, and this investment in ProCredit, gives us an opportunity to seek competitive returns through socially responsible investments.” Since its first foray, the pension giant has steadily increased investments in the microfinance asset class . Following TIAA-CREF’s initial investment, other prominent institutional investors such as Citigroup and AXA have begun investing in microfinance.

ABP is the world’s third largest pension fund, holding USD 217 billion in invested assets as of December 2007. ABP made its first microfinance investment in 2005 with USD 7.3 million, and has grown its microfinance portfolio to USD 32 million as of December 2007.

CMIC is a Mauritius-based private equity firm founded in 2005. It is a partial owner of ASA International Holdings, and partners with parent NGO ASA on several initiatives. As of October 2007, CMIC held USD 50,000,000 in fund assets, all of which were allocated toward equity investments in microfinance institutions.

By Ryan Benson, Research Assistant

Additional Resources:

ASA: Home

Catalyst Micro-finance Investment Company: Home

ABP: Home

TIAA-CREF: Home

Bill Gates Foundation: Home

MIX Market: ASA

MicroCapital Story: ASA International Secures $125m in Largest Microfinance Equity Commitment to Date, by Jacob Keller, February 15, 2008.

MicroCapital Story: SKS Microfinance Raises $37 Million in Equity Sale, by Jacob Keller, February 4th, 2008.

MicroCapital Story: SHARE Microfin Ltd. Receives Historically Largest Indian Microfinance Equity Investment from Legatum and Aavishkaar Goodwell, May 17, 2007.

MicroCapital Story: TIAA-CREF Creates $100 Million Global Microfinance Investment Program (GMIP). GMIP’s first investment to be with ProCredit Holding AG, September 21, 2006.

“The Future Of The Commercial Microfinance Industry In Asia” Presentation by Marguerite S. Thompson to the Asian Development Bank. 2005.

The Daily Star: Bangladeshi NGO Goes Global For Commercial Lending, Sajjadur Rahman, May 27, 2008.

Financial News: “ABP and TIAA Commit to Microfinance” Joanna Simmons. February 15, 2008.

TIAA-CREF: TIAA-CREF Adds International Equity Investments to CREF Social Choice Account

Press Release: TIAA-CREF Creates Global Microfinance Program

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