Microfinance fund makes final close on $125m

TIAA-CREF and ABP are among those backing a private equity fund being billed as the largest ever dedicated to microfinance.

Catalyst Microfinance Investors (CMI) held a final close on $125 million (€86 million), after approximately three years of fundraising. CMI, backed by microfinance firm ASA of Bangladesh and European financial advisor Sequoia, asserts it is the largest collective equity capital commitment ever made to microfinance.

CMI is a private equity investment fund, managed in partnership by ASA of Bangladesh and Sequoia, an independent, international corporate finance advisory and investment firm, dedicated to investing in microfinance institutions in Asia and Africa. The final closing of CMI’s fund follows a first close on $3 million in August 2005 and a second close on $50 in October 2007.

Among the investors are $320 billion Dutch pension fund ABP and US investor financial services organization, TIAA-CREF which has $435 billion in assets under management.

ABP views its investment as socially conscious as well as a source of profit and diversification. Paul Spijkers, chief investment officer for the alternative investments of Stichting Pensioenfonds ABP, stated “These investments are particularly fit for a pension fund as a risk diversifier. They are relatively non-correlated with most other asset classes”.

For TIAA-CREF, this investment is the second made by the company’s Global Microfinance Investment Program according to Scott Budde, TIAA-CREF social and community investing managing director.
CMI defines microfinance broadly as “the practice of providing banking services to the economically active poor” and estimates the market for microfinance to be more than 1 billion individuals of which less that 120 million are being served.
CMI intends to use the majority of raised funds to rapidly grow its investment vehicle, microfinance institution ASA International, which is managed in partnership with microfinance institution ASA of Bangladesh. The firms will establish and grow ASA International in the Asian and African microfinance markets.

CMI and ASA International have already commenced microfinance operations in Cambodia, Ghana, India, Nigeria, Pakistan, the Philippines and Sri Lanka, and they expect to become operational in China and Indonesia later this year.

ASA of Bangladesh was founded in 1979 as an NGO in Bangladesh and has provided microfinance services to more than five million borrowers in Bangladesh since 1991.