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Supporting financial inclusion in Sub-Saharan Africa through microfinance
Project


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Signature date
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Location
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Multi-Country, Liberia, Uganda, Sierra Leone, Tanzania
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Financing tool
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Financing amount (Euro)
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1928019
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Customer
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BRAC Uganda Finance Limited
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Type of customer
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Microfinance
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Country of headquarters
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Uganda
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Project number
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PZZ1728
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Environmental and social ranking
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IF-C

This information is given at the time of signature, without prejudice to any developments in the operation/project.
Proparco has contributed $13 million to the Series 2 of the debt program launched by BRAC International Microfinance to enable it to expand its microfinance activities in Africa.
Client presentation
BRAC International is one of the leading platforms in terms of financial inclusion, with a strong presence in Africa and a distinguishable vocation for social impact. Founded in Bangladesh in 1972 by Sir Fazl Hasan Abed, the BRAC Foundation (Bangladesh Rural Advancement Committee) has supported over 150 M beneficiaries worldwide (including Bangladesh).
Microfinance, a major focus of BRAC's strategy, was launched in 1974 (2 years after the establishment of the NGO). After becoming a leading NGO in Bangladesh, the BRAC group established a microfinance holding company (BRAC International Holdings B.V. - BIHBV) to expand its financial inclusion activities outside its home country.
BRAC Foundation and BRAC International are both non-for-profit, but returns from their MFI operations help them increase their global reach, strengthen the institutions and fund technical assistance and subsidies programs.
- In 2006, BIHBV launched its African subsidiaries, the "historic leaders" BRAC Uganda and BRAC Tanzania,
- In 2008, BIHBV established its West African subsidiaries, BRAC Liberia and BRAC Sierra Leone, smaller entities that lead their markets.
BRAC's approach, based on a holistic method, combines social and economic activities to help the most vulnerable populations escape poverty. Thus, the BRAC network operates through its NGOs (in areas such as education and health), its social mission-driven businesses (such as dairy farms), and its MFIs.
Project description
Proparco authorized a subscription of USD 13m in Series 2 of the USD 32m Debt Program initiated by BRAC International. The investors’ consortium consists of Proparco (USD 12m), BIO (USD 14m) Global Partnership (USD 5m) and Ceniarth (USD 2m). This initiative aims to provide financing to the subsidiaries of BIHBV, specifically the following MFIs: BRAC Tanzania (USD 20m), BRAC Uganda (USD 5m), BRAC Sierra Leone (USD 3.5m), and BRAC Liberia (USD 3.5m).
The current transaction follows the successful previous Series 1 Debt Program of USD 40m, where Proparco led the investor table (with 25 MUSD) alongside the Global Partnership impact fund ('GP'), Series 2 has attracted two additional investors: an Anglo-Saxon family office (Ceniarth) and a DFI (BIO). The project aims to support four subsidiaries located in fragile areas in Africa. The structuring of the operation enables Proparco to support MFIs that could not be directly financed due to the size of their balance sheets (in particular in Sierra Leone and Liberia).
The project is in line with the FARM initiative: this financing will support private players in the agriculture and agri-food sector. BRAC has become a leading player in agricultural finance (i) because it benefits from extensive geographical coverage and is seeking to further develop it through branches located in remote regions. This will enable it to reach small producers and processors, most of whom had never previously had access to credit, and (ii) because BRAC has developed a customized product geared to the constraints of the financial cycle of small producers, as well services for the associated assistance, both financial (insurance products) and non-financial (including financial education, training in sustainable agricultural practices and market research).
Project impact
The expected impacts of this financing are as follows:
- 57,333 jobs supported over the next 5 years through micro-credits to finance income-generating activities and MSMEs (indirect jobs) and more than 424 direct jobs in the MFI
- More than 2,184 microenterprises supported
- Contribution to gender equality through a commitment to finance companies qualifying for the 2X Challenge (100% of Proparco’s financing). The financing is aligned with the 2X Challenge on the basis of the criteria #2 “Leadership” (the representation of women in management positions is close to 62%), #3 “Employment” (women account for 87% of the total workforce), #5 “Products and services” (BRAC offers group loans exclusively for women in rural areas, as well as training in financial literacy) and #6 “Portfolio” (97% of the total portfolio is allocated to women)
- Support for providing new or improved access to micro-credits over the next 5 years for 90,580 beneficiaries
- Contribution to the reduction of socio-economic inequalities through the branches located in remote regions, and a total portfolio of more than 30% in the agricultural value chain for smallholder farmers in rural areas. The financing thus targets the Bottom 40 with 68% of clients living in poverty
The project will thereby contribute to the achievement of SDG 1 (“No poverty”), SDG 5 (“Gender equality”), SDG 8 (“Decent work and economic growth”) and SDG 10 (“Reduced inequalities”).