TIAA-CREF Launches $100M Microfinance Program

TIAA-CREF, the leading provider of retirement savings services in the academic, medical and cultural fields with over $380 billion in assets, has announced a landmark commitment to microfinance – the practice of loaning small amounts of money to people to help them develop their own businesses.

Rather than giving loans, however, TIAA-CREF is breaking ground with its new $100 million Global Microfinance Investment Program (GMIP), which will take equity stakes in selected Microfinance Institutions (MFI’s) around the world. The first investment is a $43 million private equity stake in ProCredit Holding AG, one of the world’s leading microfinance companies.

In another precedent-setting move, TIAA-CREF announced that funding for the ProCredit investment would come from its mainstream branch, TIAA Traditional – a guaranteed fixed annuity account with nearly $160 billion and 2.3 million investors – rather than from its $8 billion socially responsible investing option, CREF Social Choice Account. By using assets from its larger, traditional accounts, TIAA-CREF is taking a major step in mainstreaming microfinance.

“We subscribe to the view that microfinance investing can contribute to a double bottom line,” said Ed Grzybowski, TIAA-CREF’s Chief Investment Officer. “GMIP, and this investment in ProCredit, gives us an opportunity to seek competitive returns through socially responsible investments that we believe have a low correlation to traditional equity and fixed income markets.”

GMIP is part of TIAA-CREF’s recently formed Social and Community Investing Department, which develops new socially oriented products, oversees the screening methodology of social screened funds, formulates policies around key social issues and manages community investment programs. GMIP is expected to invest $100 million over the next four years in a range of investment structures, asset classes and risk levels through MFI’s.

Says Scott Budde, Managing Director, head of the Social and Community Investment Department and manager of GMIP, “Our recent participant survey showed significant interest in proactive social investing and a desire to promote human rights and economic development. We believe GMIP and investments in microfinance institutions like ProCredit are an important step in that direction.”

“GMIP found ProCredit an attractive investment opportunity because it has been one of the leading institutions in bringing a commercial approach to microfinance,” said Budde. “They have a solid, profitable, and rapidly-growing business model with strong focus on economic development in emerging economies, including operations in post-conflict countries in Africa.”

CP Zeitinger, Chairman of ProCredit Holding Supervisory Board says, “The capital provided by TIAA-CREF will help us to expand in Africa, Latin America and Eastern Europe, providing responsible banking services to many more low income families and small businesses. ProCredit is a fast growing, profitable institution and we had many options for raising capital but felt that TIAA-CREF was the best capital source.”

The largest portion of TIAA-CREF’s ProCredit investment will be in newly issued shares of ProCredit Holding while the remainder will be in shares purchased from the International Finance Corporation, the largest multilateral provider of financing for private enterprise in developing countries. IFC will retain a significant minority shareholding in ProCredit Holdings AG, and continue to support the growth and development of the ProCredit Group.

ProCredit Holding is the parent company of a global group of 18 microfinance banks, collectively known as the ProCredit group. Through July 31, the group had an outstanding loan portfolio of Euro 1.9 billion comprised of some 670,000 loans, 95% of which are for amounts of less than Euro 10,000, issued to micro entrepreneurs and small businesses. The group’s deposit base is roughly Euro 1.5 billion held in just over 1.8 million accounts, 80% of which are for amounts less than Euro 100.

www.procredit-holding.com