Building Domestic Capital Markets: BRAC’s AAA Securitization

BRAC, the largest national Non-Government Organization (NGO) in the world serving more than 5 million mostly women members in Bangladesh, is one of the most respected microfinance institutions (MFIs) globally. It has branches in all 64 districts of the country covering 170,277 village organizations, each having 30–40 members. These groups serve as forums where members can collectively address the principal structural impediments to their development, receive credit, and open savings accounts. Microloans average balance per borrower is US$165 in local currency. From its inception in 1972, BRAC has reached scale and diversity in its operations with over 42,263 regular staff and 53,205 BRAC teachers; and focusing on the issue of poverty alleviation and empowerment of the poor, especially women, in Bangladesh’s rural areas.

In a deal engineered by Citigroup, RSA Capital (Bangladesh), FMO (Netherlands) and KfW (Germany), BRAC completed the first ever AAA-rated local currency microcredit securitization in 2006. This landmark deal gave BRAC access to US$180 million of funding in local currency — Bangladesh Taka (BDT) — over a six year period, enabling it to provide more financing to more micro-entrepreneurs than ever before, and has paved the way of read more…