StanChart group in Asian loan deal

Dec 2007
London, United Kingdom, December, 03 2007 - A consortium led by Standard Chartered of the UK yesterday signed a $55m loan to BRAC, Bangladesh's largest microfinance institution - measured by borrowers - underscoring keen interest from commercial banks in the burgeoning industry that makes small loans to the poor.

The motivation is that this is a sustainable business," said Asheque Moyeed, director and head of capital markets at Standard Chartered in Dhaka.

The deal is part of Standard Chartered's global strategy to increase its microfinance loan portfolio to $500m by 2010 in Asia and Africa.

The structure of the loan - unsecured loan over seven years - is highly unusual in a country where loans from international lenders rarely carry more than five-year terms.

Standard Chartered has never before made a similar loan to a non-government entity in Bangladesh.

"This kind of combination in Bangladesh is the first of its kind," said Mr Moyeed. "It shows big confidence from international lenders in BRAC, microfinance models and investment in Bangladesh."

The other lenders include RSA Capital, a financial firm based in Boston and Dhaka; Norfund, FMO and KfW, development finance agencies of Norway, the Netherlands, and Germany respectively.

BRAC, the Bangladesh Rural Advancement Committee, which began making microfinance loans in 1974, is venturing into new forms of raising funds to boost aggressive growth, including last year's groundbreaking $180m securitisation led by Citigroup.

SN Kairy, finance director for BRAC, said the nongovernmental organisation plans to issue more than $200m worth of bonds in Bangladesh next year, pending regulatory approval.

Over the past year BRAC has increased its number of branches in Bangladesh from 1,400 to 3,000. Like many microfinance peers in south Asia, it claims a 98 per cent recovery rate.

Source : Financial Times

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