Citi and the IFC are to provide a US$22mn local currency facility to underpin a microlending programme in Bangladesh. The scheme is run by Brac, one of the largest NGOs in the world.
The term facility will be made available in Bangladeshi taka, carries a five-year tenor and features an amortizing structure.

Brac will be using the facility to support its efforts to manage its balance sheet, diversify its sources of funding and access longer-tenor financing.

The loan also forms part of a wider financing package being arranged by Citi for Brac. Citi won the mandate to arrange a US$55mn equivalent term financing last year, and will be providing a total of US$42mn to the NGO.

This recent US$22mn jointly-arranged tranche incorporates a US$18mn partial credit guarantee from IFC. The involvement of the IFC means some of the risk taken on by Citi can be shared out and the bank is then able to extend additional long-term currency funds to Brac.

"To finance the growth of our microfinance operations, we need local currency financing. Support from IFC and Citi, as well as our partnership over the years, has been invaluable,” explains Fazle Hasan Abed, chairman of Brac.

“With this guarantee, Brac will be able to reduce its dependence on grants for growth and expand its outreach to people, particularly to women borrowers,” adds Lars Thunell, IFC Executive vice president and CEO. Brac specialises in providing microloans to women, as well as providing general microcredit services to more than 40,000 Bangladeshi villages, where 50% of the population live below the poverty line. 

This deal builds on a long-standing relationship between Citi and Brac, with previous deals including the issuing of the world's first triple A-rated local currency securitisation of microcredit receivables in 2006.

It is IFC's first investment in the NGO, although the two institutions have worked together previously on jointly-arranged projects in housing finance and SME lending in Bangladesh.
Bangladesh’s microfinance sector has typically been financed through contributions from donors and subsidised government funds. But as these sources of funding decline, the sector is beginning to turn to commercial banks for loan facilities.