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Microfinance

In our efforts to build a sustainable business, we continue to widen access to financing for people who remain unbanked or underbanked by the mainstream financial sector. With the provision of basic financial services, these people are able to fund education, benefit from healthcare and engage in economic activity to achieve a better quality of life. Our microfinance business allows us to serve this segment of the population and contribute to poverty reduction and economic development in our markets.

Since 2005, we have provided more than USD720 million in finance to 70 microfinance institutions (MFIs) in 17 countries, benefiting approximately 4.8 million people. This exceeds our Clinton Global Initiative commitment to provide USD500 million worth of credit and financial instruments to support MFIs by 2011.

Strategy

Our strategy is to provide a full range of banking products and services to MFIs across Asia, Africa and the Middle East, helping them to expand their coverage and deepen their impact. Our presence in the Americas and Europe enables us to work with development organisations and social investors to increase the flow of funds to the microfinance sector.

We invest in technical assistance initiatives, building on our expertise in governance, risk management and human resources, to share best practices with our microfinance partners. We also support research and innovation, promote industry events and help influence regulatory policy.

Our commitment to microfinance is demonstrated by the expansion of our involvement with this market, despite the prevailing global economic conditions.

Table 1: Our Microfinance Initiative

Microfinance Initiative : Key Performance Metrics 2005 2006 2007 2008 2009 2010
Cumulative amount of loans extended (USD million) 24 70 170 385 540 720
Average MFI funding (USD million) 1 2 4 7 8 10
Number of individuals impacted* 160,000 470,000 1.2m 2.6m 3.6m 4.8m
Number of MFIs** 21 31 45 52 63 70
* Based on an assumption of average loan size of USD150 in local currency
** Cumulative data

Our achievements in 2010

  • Overall, we provided an additional USD180m to MFIs in 2010
  • We expanded into three new microfinance markets, and provided credit to four MFIs in Indonesia, Pakistan and the Philippines
  • We strengthened existing relationships in key markets in Asia and Africa and provided additional funding to MFIs in countries such as India, Bangladesh, and Kenya
  • In India, we facilitated European investors’ participation in three deals to raise capital for MFIs. In Tanzania, we carried out a landmark transaction in partnership with USAID, representing the first listing of a MFI on the Tanzania Stock Exchange. The four deals raised a combined USD40 million, and are estimated to benefit 250,000 people
  • We leveraged our relationship with socially responsible investors in Europe and the Americas in the microfinance sector. In addition, we offered our product and network capabilities and helped investors access MFIs in Asia and Africa

Microfinance: Case study

Supporting microfinance institutions in Kenya

Standard Chartered has a long-standing relationship with Faulu Kenya, one of Kenya’s leading microfinance institutions. Since 2006, we have provided more than USD20 million in local currency funding to Faulu Kenya. The success story of David Mwangi Gakere illustrates the positive impact of this borrowing.

Having started a kerosene selling business after losing his job in a factory, David approached Faulu Kenya in 2003. Joining a savings group comprising 14 entrepreneurs, he started saving USD2.50 a week. After eight weeks, each member was eligible for a USD250 loan. David injected his loan into his business and quickly repaid it.

Although the kerosene business was performing well, David‘s operations were hampered by the lack of automation. In 2010, David borrowed USD625 from Faulu Kenya to invest in new shop premises with a modern pump. He also hired an employee to assist him.

The business has gone from strength to strength and David has been able to take further loans to purchase his own pump, establish another kerosene outlet and open a restaurant in Ruiru. In the near future, he has plans to establish another business – a wholesale shop in Ruiru.

Says David: “I may have been disillusioned when I lost my job, but it turned out to be a blessing in disguise. Nevertheless, my success would not have been possible without the assistance I have received from Faulu Kenya”.

Microfinance: Case study

Creating capital market access for the microfinance sector in Tanzania

In 2010 Standard Chartered acted as the lead arranger for a bond issue by microfinance institution Promotion for Rural Initiatives and Enterprise (PRIDE). Listed on the Tanzania Stock Exchange (TSE) on 15 November, PRIDE was the first microfinance institution to issue a local currency bond traded on the TSE.

Our role was to utilise our local and international capabilities in order to assist PRIDE in structuring the bond issue, obtain regulatory approval and market the bond to potential investors.

The landmark transaction was made possible through a partnership with the United States Agency for International Development (USAID), which provided credit enhancement through a 75 per cent risk-sharing guarantee for the benefit of the purchasers. This guarantee enabled us to successfully market PRIDE’s bond issue on affordable terms with the desired maturity and principal amount.

The bond, which was 22 per cent oversubscribed, enabled PRIDE to raise a total of USD12.23 million and reach out to a wider population in both towns and rural areas by providing more loans to small-scale business entrepreneurs.

Speaking after the launch event at TSE, Jeremy Awori, Standard Chartered’s Chief Executive Officer in Tanzania, said: “Our work on this bond issue is in line with our goal to support the economic development of Tanzania and ties in well with our brand promise Here for good. We remain confident in our strategy to deliver long-term, sustainable economic growth in the countries where we operate”.

Annual Report and Accounts 2010