Indonesia: IFC proposes to provide up to $50m debt to microfinance institution MBK

Photo: Reuters

The International Finance Corporation (IFC) has proposed to provide financing of up to $50 million to Indonesia-based microfinance institution PT Mitra Bisnis Keluarga Ventura (MBK), a disclosure said.

The funding is expected to support the growth of the company’s microfinance portfolio, mainly targeting underserved rural women borrowers.

The proposed investment comprises $10 million loan from IFC’s own account and a parallel loan of up to $40 million, according to the disclosure.

Jakarta-headquartered MBK started operations in 2003. As of September 30, 2017, its asset base stands at $179 million and it serves close to a million clients. MBK targets the bottom 25 per cent of the population in Indonesia by income, with a focus on rural women not traditionally banked by commercial banks and other finance institutions, it added.

Indonesia has a large microfinance sector, with a range of commercial banks and over 60,000 microfinance institutions (MFIs) reaching more than 50 million people, as per industry estimates. The country has more than 50 million MSMEs, representing some 97% of all enterprises.  However, many of these do not have adequate access to the bank financing they need to grow their businesses, particularly in rural areas.

MBK has close to 475 branches spread across 5 provinces, mainly in rural areas of Java Island. MBK employs over 4,300 people, of which 99 per cent are women. The company will continue to expand its operations in rural and select urban areas of Indonesia, the disclosure said.

The project is expected to create 3,000 further job opportunities for women as the proposed funding will facilitate outreach expansion through deployment of additional human resources. IFC shall also mobilize medium tenor funds from other development finance institutions and impact investors and help to diversify MBK’s sources of funding, it added.

IFC has been quite active in providing financial assistance to microfinance institutions in Southeast Asia. In fiscal year 2014, IFC committed $519 million in 47 projects with MFIs. Its cumulative investment portfolio in microfinance exceeded $3.5 billion, with outstanding commitments of $1.68 billion, according to its website.

Some of its recent investments included a $35 million debt facility to Indonesia’s Indosurya Inti Finance, a loan of up to $40 million to Dhaka-headquartered Bank Asia Ltd, an equity investment of up to $10 million in Gurgaon-based Power2SME, a $13.5 million financing to three Myanmar-based MFIs including Maha Agriculture Public Company, Fullerton Finance (Myanmar) Company, and Early Dawn Microfinance, and a $57 million convertible loan to Vietnam’s VPBank. It is also planning to extend $6 million in loan to Delhi-based Sohan Lal Commodity Management Pvt Ltd (SLCM) to grow its commodity-backed finance facilitation operations in Myanmar.

PT. Bina Usaha Keluarga (BUK) is a majority shareholder in MBK with 99.7 per cent share, while the remaining 0.3 per cent shares are held by Nahruddin Alie, an Indonesian investor.

BUK in turn is 20 per cent owned by IFC, while Shafiq Dhanani and Elizabeth Sweeting hold 40 per cent each in the company. Dhanani is also the president director and founder of MBK, while Sweeting is the deputy president director and co-founder of MBK.

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