BRAC, the renowned NGO based in Bangladesh, has helped create another groundbreaking financial product with the world’s first micro-credit securitisation programme. While microlending operations have proliferated in recent years, securitization had been difficult to arrange as most microcredit loans are typically so short term. However, this deal structured by RSA Capital, Citigroup, the Netherlands Development Finance Company (FMO) and KfW of Germany provides $180 million USD of financing over six years, helping it to make small loans to some of the poorest people in the world, who are often ignored by commercial banks. Under the program, BDT 1 BN (US$15mm equivalent) will be disbursed every six months to BRAC, with a maturity of one year. Mr. Fazle Hasan Abed, Chairperson, BRAC, claims:
“We have brought the global financial markets to the doorsteps of nearly 1.2mm households in Bangladesh. As one of the largest financing efforts ever dedicated to advancing poverty focused microcredit, this is a landmark for the micro finance industry.”
If this works well it might prove a model to expand financial services to the poor and strengthen local capital markets. Read more.