Hong Kong-based mid-market firm Olympus Capital Asia will invest a minimum of $30 million in Netherland’s based microfinance operator CreditAccess Asia NV, it said.
The investment will be used to expand CreditAccess Asia’s operations in existing markets and to set up operations in Vietnam and another unnamed country in Asia. As part of the deal, Olympus will also acquire a seat on the company’s board.
The investment in CreditAccess Asia is Olympus’ fourth in the past year following a $45 million investment in electronic waste recycling company Li Tong Group in December, an investment in healthcare operator Tian Jian Hua Xia Medical Group Holdings, also known as Tendcare Medical Group, for $40 million and an undisclosed transaction.
Olympus declined to disclose which fund supplied the capital for its investment in CreditAccess Asia.
In April, the firm launched Olympus Capital Asia V with a target of $750 million, according to PEI Research & Analytics.
CreditAccess Asia operates in India, Indonesia and the Philippines with more than 450 branches. It currently has a total loan portfolio of €240 million, with over 1.3 million clients, which it plans to more than double over the next two years.
Over half of the world’s unbanked population resides in Asia, a population of two billion people, characterised by a highly entrepreneurial spirit, a strong credit culture and, in many areas, low financial penetration of the banking system.They represent over 200 million households that are credit worthy and demand customised financial services supporting their businesses, according to the statement.
The returns in investing in the microfinance industry – where companies make small loans to entrepreneurs in developing countries – is attractive for private equity, said Daniel Mintz, managing director of Olympus, which has managed over $2 billion in assets and invested almost a third of it in the financial and business services sector.
“Even when there is the opportunity to approach the market with very little credit risk, commercial banks typically don't have the cost structure or interest to pursue these markets with small ticket loans. This creates an opportunity for high quality MFIs [microfinance institutions] with on the ground connectivity to their customer bases, strong credit systems and low cost structures to earn high returns on equity,” Mintz told Private Equity International.
“Our investment in CreditAccess Asia is very consistent with our longstanding approach of investing in fundamentally strong and growing businesses with operations in Asia. In particular, we have a long track record of investing in financial services in India and Southeast Asia, and as we expect to do with CreditAccess, we are very active in helping our portfolio companies source and execute acquisitions and partnerships throughout Asia.”