MICROCAPITAL STORY: ING Review of Citigroup’s Microfinance Activities and Its Syndicated Loan Securitizations for Compartamos, SKS Microfinance, and BRAC

The Dutch Bank ING published its updated 2008 study on commercial bank microfinance activity, called “A Billion to Gain? The Next Phase”. A MicroCapital summary of the paper can be read here. MicroCapital is reviewing the microfinance activities of several of large international banks covered in the study, such as Citigroup (Citi).

Citi was the largest global finance institution by market value as of June 2007 and offers a complete array of financial services. With over 200 million customer accounts, Citi operates in over 100 countries and employees over 370,000 people. In 2007, it reported revenues of USD 81.7 billion and a net income of USD 3.6 billion.

Citi’s microfinance activities include establishing a London-based Citi Microfinance unit in 2005. The group works with some 65 microfinance institutions (MFIs) in 35 countries to develop appropriate structured products, distribution mechanisms, technical assistance, financing, remittances, insurance, and foreign exchange and interest rate hedging.

Regarding debt financing, Citi’s Banamex provided a 5-year, USD 50 million, local currency structured investment-grade bond for Mexico’s largest MFI, Compartamos Bank. In July 2006, Citi was also the co-lead manager and investor of the world’s first AAA microcredit securitization. The deal provided USD 180 million of local currency financing over 6 years to the world’s largest national NGO, BRAC. Further details of this transaction can be found in the following MicroCapital story.

Other local currency syndicated loan arrangements include the first ever private sector facility of USD 63 million for ProCredit Bank Romania in 2006. That same year, Citi also arranged a global USD 100 million medium-term facility for various MFIs with risk participation from the Overseas Private Investment Corp. While in 2007, Citi announced the first local currency loan syndication for the Kashf Foundation in Pakistan and a USD 44 million financing program with Indian SKS Microfinance, in which it purchases individual loans originated by SKS and shares the credit risk.

In 2005, Citi’s Mexican insurance company, Seguros Banamex, began offering micro-insurance. At the end of 2007, Seguros Banamex provided over 1 million life insurance policies to Compartamos’ 750,000 microcredit clients, representing 15 percent of total life insurance policies in Mexico. Click here for a MicroCapital story on this product.

Regarding other products, Citibank US has developed partnerships with Banco Solidario in Ecuador to expand its remittances services. Also in July 2007, Citi Bangladesh signed a remittance distribution agreement with BRAC. Citi India launched Citi Pragati, a micro savings product, which uses technology to increase access to savings accounts via biometric ATMs for illiterate clients.

The Citigroup Foundation has also granted over USD 40 million to over 200 partners in over 50 countries in the last 7 years. This funding has supported training and capacity building programs to groups such as the Microfinance Information eXchange, Microcredit-Based Women’s Cooperatives Program of Saahasee India, and ACCION International. In addition, the Foundation donated USD 92 million to the following projects in 2006: Financial Education, Educating the Next Generation, and Building Communities and Entrepreneurs.

by Jennifer Lee

Additional Resources:

ING Microfinance: “A Billion to Gain? The Next Phase”, by Matthijs Boúúaert, March 2008.

Citigroup: Home, Microfinance, 2007 Annual Report, Foundation

MicroCapital Story: “World’s First Microcredit Securitization: $180 Million Deal Between Bangladesh Rural Advancement Committee, RSA Capital, Citigroup, Netherlands Development Finance Company, and KfW Entwicklungsbank”, July 11, 2006.

MicroCapital Story: “Microinsurance Offerings Increase in Mexico Through Seguros Banamex and Seguros Azteca”, January 9, 2007.