Bank Sri Partha, a local commercial bank based in Bali, was officially transformed into Bank Andara, an Indonesian microfinance wholesale bank, after raising USD 5 million in capital from social investors. Bank Andara will operate as a “bank of banks,” with a focus on assisting microfinance institutions such as cooperatives, rural banks, and rural credit agencies.
The launch of Bank Andara has been in the works since May 2008, when local and international investors signed an agreement to establish one of the first wholesale banks in Indonesia with a focus on microfinance. The four main investors made a USD 5 million equity investment which included the acquisition of Bank Sri Partha, and the seed capital for Bank Andara’s start up. No specific information on the valuation of the investments was provided.
The largest investor, contributing 42 percent of the new capital, is Mercy Corps, the US-based relief organization. The investment in Bank Andara falls under Mercy Corps’ MAXIS (Maximizing Financial Access and Innovation at Scale) program which seeks to increase access to financial services for nearly 45 million people in Indonesia and the Philippines. The MAXIS program was established with the explicit objective of creating a wholesale bank to provide innovative financial services and products to microfinance institutions, and replicating the model regionally. The program also expands the work of the Mercy Corps-founded MICRA (Microfinance Innovation Center for Resources and Alternatives) Foundation, which provides MFI ratings, research and technical assistance to the microfinance sector. Mercy Corps has also sought to build the microfinance sector in remote communities, through their Xacbank in Mongolia, and in post-conflict environments such as Bosnia-Herzegovina, Kosovo and Afghanistan. In the ten years since it began offering microfinance services, Mercy Corps and its twelve partners have disbursed USD 1.1 billion in loans to over one million clients. Read more about Mercy Corps’ work on microfinance in this MicroCapital article. Specific information on Mercy Corps’ investment in Bank Andara can be found in this MicroCapital story.
The International Finance Corporation (IFC), a multilateral organization under the World Bank Group that promotes private sector investment in developing countries, contributed 20 percent of the new investment in Bank Andara. The IFC was involved in this project from early on, with a Summary of Proposed Investment first disclosed in November 2007. The IFC is also looking to invest in other small banks in the country in order to increase its microfinance business.
The Hivos-Triodos Fund (HTF) and the Catholic Organization for Relief and Development Aid (CORDAID) contributed 17 percent and 13 percent of the capital respectively. HTF is a joint initiative of Triodos Bank and the Humanist Institute for Development Cooperation (Hivos) that has invested over USD 57 million in microfinance institutions. The Netherlands-based CORDAID has invested close to USD 59 million in MFIs through its Entrepreneurship sector.
The new investment brings the total capital of Bank Andara to Rp 135.9 billion (USD 12.5 million). The bank is hoping to raise an additional Rp 39.1 billion (USD 3.6 million) in the next two months, and expects capital to reach Rp 275 billion (USD 25.3 million) by 2010. Andara CEO Paulus Wiranata has explicitly stated that there are “several” third party funds planning to invest additional funds, however he refused to name names.
Bank Andara plans to provide credit to MFIs, as well as other innovative financial products such as remittance services, micro-insurance, and technology-enabled services such as ATM networks and mobile banking services. The bank will initially target 200 MFIs in Indonesia, with a focus on those operating in Java and Bali, and hopes to reach one million customers in the next three years. The microfinance sector in Indonesia is among the world’s largest, with an estimated 40,000 MFIs operating in the country, leaving room for growth and the possibility of replicating the Andara model.
By Jaclyn Berfond
Additional Resources:
The Jakarta Post: Bank Andara launched, with help of global social investors
Jakarta Globe: IFC Buys Andara Stake, Eyes Small Banks by Ardian Wibisono
Viva News: Mercy Corp. and IFC Acquire Bank Sri Partha
Triodos Bank: Hivos-Triodos Fund Invests in Indonesia
Mercy Corps: Program Details: Equal Access to Economic Opportunity
IFC: Summary of Proposed Investment
MIX Market: Homepage
MicroCapital Story: Mercy Corps Buys a Commercial Bank in Bali to Service the Microfinance Sector in Indonesia
MicroCapital Story: Mercy Corps Recognized by Fast Company for its Innovative Microfinance Program “The Bank of Banks”
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