United Kingdom: CDC Invests $30 million in Minlam Microfinance Local Currency Fund
United Kingdom, , October, 17 2007 -
CDC Group (“CDC”), the UK Government-backed private equity emerging markets fund of funds investor, today announces it has committed $30 million to the Minlam Microfinance Offshore Fund (“The Minlam Fund” or “the Fund”), a commercial microfinance debt fund.
The commitment to the Fund takes CDC’s overall investment in microfinance-related funds to $42.7 million since 2004, including investments in AccessHolding, Lok Capital and ShoreCap International.
CDC’s commitment provides a cornerstone investment for the Fund, with $20m of the commitment going into the Fund immediately, and an additional $10m being provided, on a matching basis, once the fund has raised $40m.
Minlam Asset Management launched the Fund earlier this week which will act as a provider of local currency credit to microfinance institutions (“MFIs”) operating in emerging markets. In their initial close of $39.5 million, Minlam has secured commitments from several foundations, companies and family offices such as the Opus Group and the family office of John Muse.
The Opus Group is a multi-billion dollar, full-service real estate development firm involved with community stewardship since it was founded in 1953. John Muse is the Chairman and Co-founder of HM Capital Partners, formerly Hicks, Muse, Tate & Furst, a private equity firm based in Dallas, Texasfounded in 1989.
The Minlam Fund differs from CDC’s other investments in microfinance as it acts as a credit provider to underlying MFI’s. The Fund will manage both the credit risk of the underlying MFI’s customer bases, as well as the currency risks of lending in a diverse group of countries.
Microfinance – typically small loans of several hundred dollars to entrepreneurs in developing nations – is drawing increasing interest from commercial financial services groups, having traditionally been an industry supported by Non-Government Organisations. Recent World Bank estimates show the sector achieving compound growth rates of 13%, with commercial MFIs achieving repayment records of up to 97%. Current microfinance demand is estimated to be $250-300 billion with 1.2 billion potential clients.
Microfinance operations have also shown excellent social and economic impact on the communities in which they operate, fostering sustainable businesses and assisting poverty reduction. Around 65% of microfinance borrowers are women making decisions on property, family and education, and borrowers families have shown to receive better nutrition than non-borrowers.
Commenting on its commitment to the Minlam Fund, Hywel Rees-Jones, Investments Director at CDC, said:“The investment in the Minlam Fund marks a new-type of investment for CDC. It is not a traditional MFI, but an investment in a provider of debt capital to MFI’s. In providing finance to a sector which has traditionally struggled to attract financial support, Minlam Fund meets CDC’s development goals well. The experienced staff at Minlam Asset Management have an excellent track record in combining macroeconomic expertise with fundamental investment analysis, and we believe they will achieve excellent returns”