CDC has made two commitments totalling $30 million to microfinance funds. The commitments of $15 million each have been made to Catalyst Microfinance Investors and the India Financial Inclusion Fund.
Catalyst Microfinance Investors is a vehicle managed by Bangladeshi microfinance institution ASA and venture capital firm Sequoia in the UK and Netherlands. The fund will invest in greenfield microfinance institutions in countries including India, Pakistan, Nigeria and Ghana.
The India Financial Inclusion Fund is managed by Caspian Capital Partners, an independent microfinance adviser based in Hyderabad, India. The fund will focus on towns in rural India with low microfinance penetration.
“CDC commits to private equity funds investing in [microfinance instiutions] with the knowledge that such funds help small businesses and individuals gain access to capital,” the firm said in a statement.
CDC, formerly the Colonial Development Corporation, was established in 1948. It makes private equity fund commitments from its own balance sheet with the remit of stimulating economic growth in the world’s poorest nations. It now has around $4 billion of assets.
Microfinance, which gives low income people and businesses access to financial products, is viewed as an increasingly important driver of “double bottom line” returns, yielding both a financial and a social return. Leapfrog Investments, a firm focusing on investment in the microinsurance industry, recently reported a warm reception from investors for its debut fund. It has raised half of its $100 million target.