| 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.
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