To provide cost-effective, capital strengthening, Tier 2 compliant subordinated debt to microfinance institutions (MFIs), thereby providing a platform to increase their outreach and attract new lending and equity relationships.
VG Microfinance-Invest Nr. 1 was a EUR 60 million fund launched by Deutsche Bank with the support of KFW of Germany that provided an investment vehicle for German investors. Senior notes in this first-ever German microfinance fund were rated by Fitch Ratings. The portfolio comprised 20 microfinance institutions and banks in 15 countries in Africa, Latin America, the Caucuses, Central Asia and Southeast Asia.
The goals of the fund included the provision of reasonably priced debt that garners full or partial equity credit without increasing clients’ weighted average cost of capital. This enables MFI clients to present a fairer picture of their financial strength to investors. The subordination layer should also enable clients to attract senior debt through strengthened capital ratios. Many microfinance institutions also transformed from unregulated into regulated financial entities and the fund's subordinated debt provided quasi-equity that helped MFIs to meet their regulatory requirements in the transformation process.
Fixed and floating rate financial products; interest, currency and credit swaps; loan guarantees; direct loans
Locally demanded currencies, USD or EUR
Commercial-like microfinance rates
Single or multiple draws up to $10,000,000
7 ½ years, but no later than December, 2014.
This fund is currently closed to new loans
This fund is currently closed to new investment
VG Microfinance-Invest Nr. 1