| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
 |
advertisement | ||
Thursday July 6, 10:17 PMHigh finance reaches Bangladesh's poorLONDON/DHAKA, July 6 (Reuters) - Tiny loans for Bangladesh's rural poor became part of a groundbreaking financial product on Thursday through one of the world's first "microcredit" securitisations.BRAC, a Bangladeshi anti-poverty non-governmental organisation (NGO), said the securitisation would provide it with $180 million of financing over six years, helping it to make small loans to some of the poorest people in the world. BRAC's deal is the latest example of the microcredit industry, which lends to people too poor to get bank loans, adopting sophisticated financing techniques. Earlier this year BlueOrchard Finance SA securitised $106 million of unsecured loans to microfinance institutions. The deal is structured by a Bangladesh arm of Citigroup and a set of international partners. In a typical securitisation, a company raises low-cost debt by selling investment-grade bonds and promising to repay borrowers with a steady stream of cash set aside for that bond issue. Banks are the most frequent securitisation issuers, because they can securitise payments due on mortgages or credit cards. But champagne, David Bowie's music royalties, and takings from London theatres have also backed deals in the developed world. "As one of the largest financing efforts ever dedicated to advancing poverty focused microcredit, this is a landmark for the micro-finance industry," said Fazle Hasan Abed, chairperson of Dhaka-based BRAC. In BRAC's deal, a special purpose trust buys microcredit receivables denominated in taka. The trust then sells investors taka-denominated certificates, which are rated triple-A by the Credit Rating Agency of Bangladesh. Robert Annibale, Citigroup's global director of micro-finance, said the certificates entitle investors to the pool of small BRAC loans, averaging $100, which back the securitisation. FUNDING COSTS CUT "As BRAC's chairman stated today, the all-in-cost of financing for the first $15 million of this deal is just over 11 percent," Annibale told Reuters from Dhaka. "If BRAC were to borrow that money commercially here in Bangladesh, it would probably cost them nearer to 13 percent." RSA Capital, a financial boutique based in Dhaka and Boston, is the lead arranger. Citibank N.A. Bangladesh and two development banks, FMO of the Netherlands and KfW Entwicklungsbank of Germany are co-lead arrangers. BRAC has sold three tranches of certificates worth $15 million, to FMO, Citibank N.A. Bangladesh, and local banks Pubali Bank and City Bank Ltd. Citigroup's Annibale said the return investors receive from the certificates will vary, and the exact premium is not available. Over the next six years, the trust will issue 1 billion taka ($15 million) of certificates every six months with a maturity of one year. |
|||
|
Copyright © 2005 Reuters Limited. All rights reserved. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of Reuters Limited
|