The Bill and Melinda Gates foundation is granting USD $9 Million and lending USD $20 Million to the African division of ProCredit, a subsidiary of the German organization ProCredit Holdings. The funding is earmarked for operations in Angola, Democratic Republic of Congo (DRC), Ghana, Mozambique, Sierra Leone and a country yet to be named.
This transaction sets precedent in three ways. First, the grant is of unprecedented magnitude, both for ProCredit and for the Foundation’s involvement with microfinance. Second, the Foundation to date has not engaged significant transactions directly with microfinance banks, but has worked with (non-profit) intermediaries. Third, the subordinated loan is Gates’ first significant “program related investment” (PRI) in microfinance. A PRI is different from a grant because it seeks a return on capital, although that return is usually concessionary.
The terms of the agreement stipulate that the grant be spent exclusively to increase the number of clients banking at the ProCredit institutions in Africa and will be drawn down over five years. Furthermore, no dividend will be paid from any African institutions for the duration of the contract (i.e. five years). All profits will be reinvested for the period.
The subordinated loan from Gates will be used to grow ProCredit’s loan portfolio, whereas the grant will support ProCredit’s training academy located in Ghana for the professional development of its employees in the region.
Similar Posts:
- MICROCAPITAL BRIEF: Verdant Capital Hybrid Fund Lending $9m to LOLC to Finance MSMEs in Africa
- MICROCAPITAL BRIEF: EBRD Purchases 5% Equity Stake in ProCredit from IFC, Increasing Exposure to SMEs in Europe, Ecuador
- MICROFINANCE EVENT: Enlit Africa Forum on Energy, Power and Water; May 16-18, 2023; Cape Town, South Africa
- MICROCAPITAL BRIEF: First Consult, Mastercard Foundation, Seek to Create 400k Jobs in Ethiopia via Access to Finance, Wraparound Support for MSMEs, Entrepreneurs
- MICROCAPITAL BRIEF: LOLC Buys 28% Equity Stake in Unguka Bank, Provider of Microfinance in Rwanda, from Incofin
