A story that came to our attention through the courtesy of Mark Straub.
Sequoia Capital, the famous venture capital firm for its early stage investments in Google, Yahoo, Paypal, YouTube and others leads the $11.5mn equity investment in SKS Microfinance, one of the fastest growing microfinance institutions in the world. According to the press lease of SKS Microfinance, Sequoia Capital is the lead investor with $6.5mn. Other investors include Unitus Equity Fund, Vinod Khosla, Ravi Reddy, and Odyssey Capital.The funds will provide the stimulus that SKS needs to achieve its ambitious goal to provide financial services to over 5 million poor families by 2010. Another example of convergence in the investment world.

According to the FT(March 30th) Danone plans to launch next month with the help of Credit Agricole a novel mutual fund to invest in microfinancing projects in the world’s poorest countries. The idea is to raise initially 100mn Euro and it will be named Danone Communities Fund. This move follows the pioneering social business, Grameen Danone Foods Social Business Enterprise, a 50-50 joint venture established last year between the Grameen Group and Groupe Danone. This is probably the first private sector corporation (not a financial institution nor a foundation)that is launching a microfinance investment fund.

Procredit Holding AG, the parent company of the largest microfinance group in the world, announced a significant capital increase of EUR 74mn to make their paid-in capital a total of EUR 216mn. The new private sector investors are 1)TIAA-CREF, a US based asset management company with more than $380bn in assets under management and the leading provider of retirement saving products in the academic, research, medical and cultural fields and 2) the Omidyar-Tufts Microfinance Fund. These two American investors purchased non-voting preference shares amounting to EUR 40.5mn and the company’s existing shareholders Kfw, FMO , IFC and responsAbility Global Microfinance Fund also participated in the capital increase.
This seems so far the largest private equity investment in microfinance by a single private sector investor. TIAA-CREF invested $43mn in Procredit Holding AG. Development World Markets advised Procredit Holding AG on this transaction.
According to the press release of Procredit the additional capital will be used to expand Procredit activities in Sierra Leone, Honduras and Mexico. Procredit currently operates in 18 countries in Africa, Latin America and Eastern Europe. As of the end of July 2006, the Procredit group had a loan portfolio of EUR 1.8bn and deposits of EUR 1.5bn outstanding to more than half a million of micro and small entrepreneurs in developing countries and transition economies. News releases. Procredit, TIAA-CREF, DWM.

BRAC one of the largest microfinancial institutions with over 5mn borrowers and 100,000 employees has closed a landmark securitization deal structured by RSA Capital, Citigroup, FMO and KfW. This deal is denominated in Bangladesh Taka (BDT) and will provide a total of 12.6bn BDT over the course of 6 years. BRAC will receive 1bn BDT (US$15mn) financing every 6 months totalling US$180mn over 6 years. Read BRAC’s press release here
The microfinance industry continues to tap resources from the capital markets. This year 2 large CDOs were launched US$100mn by BlueOrchard Finance S.A. and a US$60mn by Development World Markets. Pure microcredit securitization deals have so far been very few.