BRAC PCG

completed

Bangladesh is considered the pioneer of microfinance and has the world’s largest microfinance sector. However, despite the prevalence of close to 1,200 NGOs with microcredit services operating in more than 40,000 villages in Bangladesh, Bangladesh continues to remain one of the world’s poorest nations. Poverty is pervasive in the country with almost half the population living below the poverty line on less than $1 per day. BRAC is one of the largest microfinance institutions in Bangladesh, covering all 64 districts and a population of a 100 million (of the total population of 140 million) through its microfinance and development programs. It was started in 1972 by Mr. Abed to rehabilitate returning refugees after the liberation War in a remote area in a northeastern district of Bangladesh. As of December 31, 2006, BRAC had cumulative microfinance loan disbursements of $3.72 billion, with outstanding loans of $349.72 million to 4.55 million borrowers. To finance the growth of its microfinance operations, BRAC needs local currency financing from domestic banks. Due to single client exposure limits and small size of such local banks, relative to the financing required, the local banks are not able to satisfy the funding needs of large institutions like BRAC. To address such constraint, IFC is proposing an $18 million partial credit guarantee issued on a $22 million local currency loan extended by Citibank, Dhaka to BRAC (BRAC or the company). IFC’s partial credit guarantee would provide 81.82% coverage to Citibank’s local currency loan of US$22 million loan. The project would support BRAC’s expansion of its microfinance lending to reach out to the poor, which continues to be underserved by the financial sector in the country.