With more than half of the world’s population living on less than two dollars a day, there is an urgent need to alleviate poverty. Microcredit, the extension of very small loans (microloans) to those who lack collateral or a credit history, is proving to be a revolutionary model in enabling people to rise from poverty. Small loans to small businesses and individual entrepreneurs foster self-reliance and community-wide economic development. Small loans to families can also provide opportunities for education and training.

Deutsche Bank has been active in microcredit since 1997. It was the first bank to offer an investment fund for microfinance and embraces social investing as a specialized investment banking business with dual objectives of profitability and social return. Combining the Bank’s social financing expertise, investment banking skills, structuring capabilities, business resources and worldwide relationships creates financial instruments that benefit social enterprises – and in the process, transfer financial know-how among both clients and investors.

The Bank manages four funds:

The Deutsche Bank Start Up Fund provides early-stage, commercially focused microfinance institutions (MFIs) with loan capital to expand lending activities. This fund is capitalized through grants and soft funding.

The Deutsche Bank Microcredit Development Fund (DB MDF) provides catalytic financing to MFIs to attract resources on a leveraged basis from local commercial banks. This fund is capitalized through grants and soft funding.

The Global Commercial Microfinance Consortium provides long-term, local currency funding at commercial rates to established MFIs. This fund is capitalized mainly through investments from institutional investors.

DB Microfinance Invest No.1 provides the first microfinance investment fund
for German investors. This fund is capitalized through investments from high net worth clients, pension funds and foundations, KFW (The German Development Bank) and Deutsche Bank.

The Deutsche Bank Start-up Fund

Mission: To support early-stage, privately funded commercially oriented microfinance institutions.

The Deutsche Bank Start-up Fund seeks to identify start-up microfinance institutions in underserved markets with strong management. It provides flexible financing to support portfolio growth, and works to build governance and financing capacity.

Fund Size: $1,000,000

Products: Direct loans, guarantees to local financial institutions.

Currency: Loans are issued in US dollars. The Start-up Fund is willing to share foreign currency risk with its borrowers, with interest & principal payments linked to a benchmark index.

Interest rates: Rates on Start-up Loans are quite flexible. Loans are typically structured with a base rate, which may be set low if the institution is not yet profit-making. As it reaches sustainability, the rate adjusts based on 1) the level of net income, and 2) the relative share of the Start-up Loan in the institution’s capital structure. The maximum rate is capped at a pre-agreed level.

Size: $25,000 to $100,000

Amortization: Bullet Maturity

Tenor: 1-5 years.

To Apply: For an application package, please contact Asad Mahmood at Asad Mahmood@db.com

Investors: The Start-up Fund is supported by the Deutsche Bank Americas Foundation and CORDAID, a Dutch NGO. Donations in any amount are accepted. Program Related Investments from foundations are welcomed, with terms to be discussed on a case-by-case basis. Interested donors or investors should contact Asad Mahmood at Asad.Mahmood@db.com.

Client Showcase – Rwanda Microfinance Limited S.A.R.L.

Founded in 2004 to provide loans to low-income salary earners and micro-entrepreneurs, Rwanda Microfinance Limited (RMF) is part of Micro Africa, an East African microfinance group based in Nairobi, Kenya. At the time of the DB Start-up Fund loan in mid-2006, RMF had not yet reached operational self-sufficiency, and had a total loan portfolio of half a million dollars. The Start-up Fund provided a letter of credit in the amount of $100,000, which secured a Rwandan franc loan from a local lender. Since receiving the loan, RMF has become profitable, and now serves over 1300 clients with a portfolio over $1 million.

Helping Small Businesses Grow

Now a restaurant owner, Nsengiymva Gilbert was selling milk and mandazi
(fried dough) before he obtained his first RMF loan in November 2005. He started
his milk business to help lift himself and his mother out of the devastating poverty they both faced after the 1994 genocide.

“The genocide brought the destruction of my parents’ retail shop. It ended in ruins and in the brutal killing of my father. After the war, I dropped out of school, crisscrossed Kigali in search for a job to no avail. Then the idea of selling milk to a nearby kindergarten school near my home came to me. However, the earnings from this business were not enough to buy me a refrigerator and enable me rent a bigger place to start a restaurant,” Gilbert says.

“I tried to get a loan from other banking institutions, but the conditions were a little too harsh and couldn’t provide an immediate solution to my desperate situation. That’s when a friend of mine told me about RML quick loans,” he explains.

After Gilbert took out a business loan of about $500, things improved. He bought a refrigerator for his dairy products and moved to a bigger place that he turned into a restaurant. The income generated from his restaurant business helped him build a decent home for his mother. “This business has served as a lifeline for me and my family‘s financial and social livelihood. Now my aged mother will no more spend sleepless nights when it rains,” he affirms. With additional support from RMF, Gilbert plans to expand his business.

The Deutsche Bank Microcredit Development Fund

Mission: To support the development of local microfinance systems that serve the working poor.

The Deutsche Bank Microcredit Development Fund, a registered 501 (c) 3 non-profit, helps established microfinance institutions reach scale and long-term sustainability by encouraging relationships with local financial institutions. The DB MDF provides catalytic funds as collateral for leverage loans, typically 2:1.

Fund Size: Approximately $4,000,000

Products: Deposits and guarantees to local financial institutions

Currency: Loans are issued in US dollars. The client places the funds on deposit as collateral with a local financial institution, which provides a local currency loan. When the local loan is repaid, the deposit is liquidated and repaid to the DB MDF. This minimizes the foreign currency exposure of the borrower.

Interest rates: Interest rates reflect the philanthropic nature of the DB MDF. In the case of loans, the interest income earned on the deposit is retained by the microfinance institution, offsetting some or all of the interest expense of the loan.

Size: $25,000 to $250,000

For qualifying borrowers, loan amounts can be doubled through co-lending from other Deutsche Bank managed philanthropic funds.

Amortization: Bullet Maturity

Tenor: 1- 5 years.

To Apply
For an application package, please contact Asad Mahmood at Asad Mahmood@db.com.

Investors
The DB MDF is supported by social investors, private clients of Deutsche Bank, and the Deutsche Bank Americas Foundation. Donations in any amount are accepted. Program Related Investments from foundations are welcomed, with terms to be discussed on a case-by-case basis. Interested donors or investors should contact Asad Mahmood at Asad.Mahmood@db.com.

Client Showcase –Sero Lease & Finance Ltd., Tanzania

Sero Lease & Finance (Selfina) has been a client of the DB MDF since 2006. The company provides financing to its clients in the form of leased equipment. This creates automatic collateral, as Selfina retains ownership of the equipment until the end of the lease, while giving clients access to capital equipment for their businesses. Selfina was originally founded in 1997, but encountered difficulties. It was re-founded in 2002, and has worked hard to rebuild its reputation among clients and lenders. Deutsche Bank believed that management had a strong business proposal and deserved a second chance, and lent $100,000 to the institution. To date DB’s faith in the institution has paid off, as it has continued to grow and prosper.

Selfina Client Showcase - Betty Matarimo Bisama. A producer of clothing based on traditional African designs, Ms. Bisama took out her first loan with SELFINA in November 2004 when she leased an embroidery machine worth TSh. 1,400,000 ($1400 at the time). This was followed by a generator, necessary business equipment thanks to Tanzania's unpredictable electricity supply, worth TSh. 1.0 million ($1000). Bisama secured a third loan in 2006 worth TSh. 3.0 million to continue growing her business.

The loan has had a great impact on her family. Bisama is a strong woman who, through building up her own business, has managed to raise her children and her nephew on her own. With the income, she has increased the volume of her business but also has managed to send her children and her nephew to school, even to college level, which would have been very difficult otherwise. One of her daughters is now working and guarantee’s her mother's borrowing.

The Global Commercial Microfinance Consortium

Mission: To develop indigenous financial systems by facilitating linkages between MFIs and local financial institutions or through direct lending.

The Global Commercial Microfinance Consortium is a $80.6 million fund that serves as a platform to combine high risk catalytic development agency resources with the scale and execution efficiency of the private sector. Deutsche Bank created the Consortium in recognition of the pivotal roles that the private sector can play in the development arena in partnership with development agencies. In so doing, the Consortium harnesses resources available through the growing corporate social responsibility sector as an investment rather than as an expense.

The Consortium’s partners include three leading development agencies, 14 institutional investors and 12 venture philanthropists.

Fund Size: $80,600,000.

Products: Fixed and floating rate financial products; interest, currency and credit swaps; loan guarantees; direct loans.

Currency: Locally demanded currencies, USD or Euro.

Interest rates: Commercial-like microfinance rates.

Size: Single or multiple draws up to $4,500,000.

Amortization: Bullet Maturity

Tenor: Up to 5 years but no later than November, 2010.

To Apply For an application package, please contact Asad Mahmood at Asad Mahmood@db.com

Investors: This fund is currently closed to new investment

Client Showcase – Crystal Fund, the Republic of Georgia

The Consortium approved a $2 million loan to Crystal Fund to help to finance its portfolio growth. The Investment Committee was impressed by Crystal’s excellent portfolio quality as well as the social purpose of the organization. The loan was disbursed in tranches of around $500,000 in order to match the client’s absorption capacity and help it to avoid negative carry. Crystal Fund was spun-off in 2004 as the microfinance arm of the Charity Humanitarian Center Abkhazeti (CHCA).

Crystal’s vision is to build up a transparent, financially stable, professional and client-oriented microfinance institution, which serves the economically active and low-income population of Georgia. The goal of the Fund is to raise economic self-reliance and ensure an optimal balance between financial and social objectives.

Crystal Fund Client Story

Zurab Dzneladze is from the village Partskhanakanebi in the Tskaltubo district of the republic of Georgia. The energetic 67-year old turned to Crystal Fund for a loan to help install a greenhouse on his agricultural smallholding.

Agricultural activity is a traditional occupation for the Dzneladze family, which traditionally has produced agricultural products on open farmland. However, as a result of climate change, harvest volumes decreased significantly causing a fall in the family’s income. The land also suffered, requiring ever-greater amounts of fertilizer.

Dzneladze’s family decided to move to greenhouse management. The new initiative required additional resources that they did not have, because there were three students, one pensioner and one small child in the family.

In December 2000 Dzneladze made a loan application to Crystal. He then successfully passed a four-day business-training course given by Crystal, developed a business plan and was given the loan of the amount of 1,270 GEL (around $750).

With the loan Dzneladze built a greenhouse, in which he produced different herbs such as parsley, coriander and others. As the business expanded, the overall income of the family increased, encouraging them to expand the business even more with the aid of a larger loan.

Over the years the family has diversified its products under cultivation to include tomatoes, cucumbers, green onions and different types of flowers. Dzneladze is now the proud owner of three greenhouses and is still a valued Crystal client. The family can also rely on a stable source of income from the climate-protected greenhouses.

DB Microfinance Invest No.1

Mission: To provide cost-effective capital strengthening Tier 2 compliant subordinated debt to microfinance institutions (MFIs) thereby providing a platform to increase their outreach and attract new lending and equity relationships

DB Microfinance Invest No.1 is a EUR60 million fund launched by Deutsche Bank with the support of KFW of Germany that provides an investment vehicle for German investors. Senior notes in this first-ever German microfinance fund were assigned a BBB rating by Fitch Ratings. The portfolio comprises 21 microfinance institutions and banks in 15 countries in Africa, Latin America, the Caucuses, Central Asia and Southeast Asia.

The goals of the fund include the provision of reasonably priced debt that garners full or partial equity credit without increasing clients’ weighted average cost of capital. This enables MFI clients to present a fairer picture of their financial strength to investors. The subordination layer should also enable clients to attract senior debt through strengthened equity ratios. Many microfinance institutions are also in the process of transforming themselves from unregulated into regulated financial entities and FGFM’s subordinated debt provides quasi-equity that helps MFIs to meet their regulatory requirements in the transformation process.

Fund Size: EUR 60,000,000

Products: Fixed and floating rate financial products; interest, currency and credit swaps; loan guarantees; direct loans

Currency: Locally demanded currencies, USD or Euro

Interest rates: Commercial-like microfinance rates

Size: Single or multiple draws up to $10,000,000

Amortization: Bullet Maturity

Tenor: 7 ½ years, but no later than December, 2014.

To Apply: This fund is currently closed to new loans

Investors: This fund is currently closed to new investment

Client showcase: Organización de Desarrollo Empresarial Femenino (ODEF)

The First German Fund for Microfinance approved a €1.4 million loan in US dollars to Organización de Desarrollo Empresarial Femenino (ODEF). The loan was aimed at assisting the organization in its transformation process into a “Financiera” (non-bank financial institution) and to help to finance its portfolio growth. ODEF was established in 1989 as part of an initiative to bring an integrated development credit scheme to poor Honduran women and ranks amongst the top three players in the Honduran microfinance market. ODEF transformed into a Private Financial Development Organization in 2005, which allowed it to start accepting deposits from its credit clients and lowering its cost of funding.

ODEF Client Story

Jose Francisco Funez is from Choloma, a rough suburb of San Pedro Sula, which owes its recent growth to the maquila industry. After several years as an employee for various US and Chinese operated maquilas, working in difficult conditions for an income insufficient to feed his family, Jose Francisco decided in 2005 to create his own business, recuperating and purchasing the textile remnants of the maquila industry in order to produce and sell women’s underwear.

Initiating the business was difficult, but he managed to purchase two sewing machines and started working from home with his wife. The couple was quickly overwhelmed by client demand. Lacking working capital, they approached ODEF and secured an initial loan of 5,000 Lempiras (USD 260) in June 2006 to purchase textiles.

They repaid the loan in eight weeks and subsequently secured four other loans of 10,000 Lempiras ($520), each repaid very quickly. The funding from ODEF allowed the couple to purchase additional sewing machines and to gradually hire three employees to meet the growing demand.

More recently, the company secured a 30,000 Lempiras loan (USD 1,550) to purchase a small vehicle in order to sell its production on the markets without the need of wholesalers.

Jose Francisco and his family’s standard of living has greatly increased thanks to his initiative and the funding provided by ODEF; the small business now derives enough revenues to pay three salaries and to put the couple’s children to school without requesting them to work in the evening. The family lives in a stone house, protecting themselves from the hot summer weather and the hurricanes which regularly affect the region.