Grameen Makes Business Ownership Possible for Poorest Women Worldwide

Grameen Foundation USA (GF-USA), BlueOrchard Finance s.a., and Developing World Markets, Inc. are preparing to release millions of dollars into the hands of micro-entrepreneurs through microfinance institutions (MFI) in nine developing countries. This financial deal, the largest transaction of its kind to date, is a true landmark. Though bond offerings for international microfinance have often been talked about and even attempted prior to today, this is the first and largest transaction in U.S. capital markets to exclusively fund microfinance.

An equity investment from GF-USA enabled BlueOrchard Finance and Developing World Markets to consummate a $30 million guarantee from Overseas Private Investment Corporation (OPIC) for a bond offering with proceeds used to fund MFIs. The anticipated $40 million in total bond proceeds will be the largest microfinance offering to date. JP Morgan Securities will service the guaranteed bonds. Because they are guaranteed, this capital is considered as safe of an investment as an equivalent U.S. Treasury Note (commonly called T-bills). The proceeds will make available affordable loans for more than 40,000 micro-entrepreneurs – mainly women – in Latin America, Eastern Europe and Southeast Asia.

American institutional investors will be able to purchase guaranteed bonds offering market rate returns where the capital raised helps reduce poverty for tens of thousands of individuals living on less than $2 a day in the poorest countries around the world. In addition, via a ‘demonstration effect,’ by showing such a transaction is not only possible but profitable, it will serve as the bellwether for similar undertakings in capital markets.

“This is a solid investment for investors and a sound strategy for reducing poverty among the poorest people in the world,” remarked John Anderson, acting President of GF-USA.

Microfinance is considered one of the most effective strategies in the fight against global poverty. The majority of microfinance borrowers are women who take small loans, starting as low as $50, typically to expand existing or begin small, self-sustaining businesses. From these loans provided by MFIs, very poor women purchase items such as sewing machines, milk cows, or buy dry goods in bulk for resale.

Microfinance has a desirable investment profile, offering lower risk than many might imagine. “Our statistics show that properly-managed microfinance loans average repayment of 97%, better than U.S. credit card and student loans, which experience default rates of 5% respectively,” disclosed Drew Tulchin, GF-USA’s manager of Capital Market Programs.

According to Mr. Tulchin, microfinance has entered a new phase in its development. “We are changing the perception that microfinance institutions are funded only by charitable donations,” he states. “This success expands the equation to include investors as viable partners through commercial financing. This landmark deal, we anticipate, is just the first of many.”

GF-USA is a non-profit organization that combines microfinance, technology and innovation to help empower the world’s poorest to escape poverty by spurring small, private enterprises. GF-USA sprang from the deep heritage of the Grameen Bank of Bangladesh and works to replicate the bank’s successes around the world. In just seven years, GF-USA has impacted several million lives. Today the GF-USA network includes 46 partners in 20 countries serving more than 800,000 clients.

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