MICROCAPITAL STORY: MicroCred Holding Establishes Microfinance Institutions in China and Senegal, Backed by IFC, AIG and KfW Bankengruppe

MicroCred SA of France (MicroCred Holding) has established two new subsidiaries: MicroCred Nanchong in the southwestern Sichuan Province of China and MicroCred Senegal in Dakar.

MicroCred Senegal began operations on September 17. The official inauguration ceremony will be held in January 2008.

According to Managing Director of the microfinance institution (MFI), Bernard Tissot, only 5 percent of Senegal’s population has access to traditional financial services. During its first years in operation, MicroCred Senegal will provide its clients with three main products: savings products, insurance products and loans which will range from CFA Francs 100,000 to 20 million (USD 221 to USD 44,320).

Arnaud Ventura, president of the Board of Directors and Chief Executive Officer of MicroCred Holding, stated that after six weeks in operation, more than 778 savings accounts had been opened. These accounts amount to CFA Francs 32.4 million (USD 71,800) in total. MicroCred Senegal plans to open three new agencies in 2008 and intends to create a network of a dozen agencies throughout the country by 2012.

MicroCred Nanchong is the first pilot MFI to target micro, small and medium-sized enterprises in Sichuan Province. The MFI began operating with an aggregate investment of CNY 55 million (USD 7.37 million) from MicroCred Holding, the International Finance Corporation (IFC), KfW Bankengruppe of Germany and American International Group (AIG). MicroCred has a 49-percent shareholding, AIG, an 18-percent shareholding, KfW, an 18-percent shareholding, and IFC, a 15-percent shareholding (slide 19) in the company.

MicroCred Nanchong targets small firms, rural households and self-employed businessman. MicroCred Holding estimates that there are approximately 118,000 micro businesses in the Nanchong Municipality (slide 20). Currently, the MFI offers credit loans, secured loans and mortgage loans at a monthly rate of 1.1 percent. The loans range in size from CNY 5,000 to CNY 75,000 (USD 670 to USD 10,000), and loan periods vary from 3 months to 18 months. More outlets and services can be expected if the trial operation goes smoothly.

MicroCred Nanchong obtained a business license from the Sichuan Provincial Bureau of Industry and Commerce to begin trial operation, but has yet to acquire the license required to operate as an official financial institution. Until the MFI procures this license, it is unable to accept deposits. The Nanchong Bureau of the China Banking Regulatory Commission is responsible for monitoring the organization’s activities.

Managing MicroCred Nanchong is a group of local and international staff with prior experience in micro and small business lending. MicroCred Holding will provide technical assistance.

MicroCred Holding is a Paris-based microfinance investment company with the objective to create commercial finance institutions. PlaNet Finance, Société Générale, AXA Bank Belgium and the IFC, are the founding shareholders of the company. The European Investment Bank and the French Development Agency joined the shareholders structure in February 2007. MicroCred Holding was founded in 2005 and is designed to invest equity and subordinated debt in around 15 MFIs over the next 5 years. As of 2006, the company had EUR 4.6 million (USD 6.7 million) in total assets (pg 26). MicroCred Holding currently has subsidiaries in four countries: Mexico, Madagascar, China and Senegal.

The IFC is a member of the World Bank Group which supports private sector growth in developing countries. In 2006, the organization had USD 28.49 billion in total assets, a return on assets (ROA) of 4.33 percent, and a return on equity (ROE) of 11.23 percent.

KfW is a German government-owned development bank. In 2006, the total financing volume of the bank amounted to EUR 76.8 billion (USD 111.8 billion).

AIG is a major American insurance corporation. According to the 2007 Forbes Global 2000 list, AIG is the sixth-largest company in the world with over USD 979 billion in assets. AIG operates in over 130 countries, and its common stock is listed on the stock exchanges in New York, London, Paris, Switzerland and Tokyo.

Additional Resources:

MicroCred SA

MicroCred SA: Press Release: “MicroCred Group officially launches operations in Senegal: On September 17th, MicroCred Group launched its third microfinance institution: MicroCred Senegal.”

MicroCred SA: Press Release: “MicroCred Inaugurates First Branch of its Microfinance Company in China -MicroCred Nanchong.”

MicroCred SA: 2006 Annual Report

MicroCred Senegal

China Daily: “First foreign microfinance firm set up in Sichuan.”

The Microfinance Gateway: Job Details: Senior Operation Director- MicroCred Nanchong

International Finance Corporation (IFC)

IFC: East Asia & the Pacific: Summary of Project Information: MicroCred Parallel Facility- Nanchong

IFC: About Us: Moody’s Credit Report

KfW Bankengruppe