Bamboo completes 2x Mongolia exit

The microfinance-focused private equity firm has sold its remaining holding in TenGer Financial Group’s Xac Bank, shortly after launching its second vehicle targeting $200m.

Bamboo Finance has exited its investment in Mongolia’s Xac Bank, the flagship subsidiary of financial services firm TenGer Financial Group (TFG), in a sale to a group of investors led by Japanese financial services group Orix Corporation, according to the firm. 

Following the sale, Bamboo expects a 25 percent IRR and a 2x return multiple on its investment in local currency terms, according to the firm. 

Originally, Bamboo had acted as a lender to TFG, refinancing the organisation’s portfolio, Jean-Philippe de Schrevel, chief executive of Bamboo, told Private Equity International. The firm then invested about $15 million in the business in July 2009 and prior to the exit was Xac Bank’s second largest shareholder. 

Xac Bank started in 2001 as a nonprofit microfinance lender to Mongolia’s herding community. It is now a fully-regulated commercial bank and the country’s fourth largest in terms of assets, according to the firm. 

“[Xac] grew very fast, but [not due to] the hype that is surrounding Mongolia at the moment because of the booming mining sector and economy. It really started to fill a gap and offer financial services to a population that never had access to it before because the traditional commercial banks were not attending to this segment of the population,” de Schreval explained. 

[Xac] grew very fast, but [not due to] the hype that is surrounding Mongolia at the moment because of the booming mining sector and economy. It really started to fill a gap and offer financial services to a population that never had access to it before.

Jean-Philippe de Schrevel, chief executive, Bamboo Finance

Bamboo focuses on providing financial solutions to low-income consumers in emerging markets. Based in Geneva, the firm tries to deliver both social and environmental value, while maintaining attractive performance for its investors. 

“TFG-Xac Bank perfectly exemplifies the high standards successful social entrepreneurs apply to their companies. Management's persistence and sharp business acumen with no compromise on the ambition to improve financial inclusion for Mongolian citizens has transformed a small NGO started 12 years ago into one of the most regarded, transparent and ethical banks in emerging markets to date,” Sarah Djari, senior investment manager at Bamboo Finance in Asia, said in the statement.

Bamboo currently has about $250 million in assets under management over two vehicles.

The firm is planning to launch a new fund — its second to focus on the microfinance sector – with a target of $200 million. Bamboo will  invest in microfinance businesses in emerging markets globally, focusing on Latin America, Africa and Asia. The firm plans to invest 25 percent of the capital in each of these regions, with the balance invested in other emerging markets, PEI revealed earlier. 

In Asia, Bamboo has highlighted the Philippines, Indonesia, Myanmar and China as its key target geographies, the source said, noting that despite a tough regulatory environment, China has experienced an “explosion” of microfinance companies recently.