Asset finance Company  Srei Infrastructure Finance Ltd, India leading private sector infrastructure financing institution has entered into an agreement to raise 70 M$ senior loan syndicated by the Nederlands based FMO, one of the world’s largest bilateral private sector development banks. Proparco, the private sector investment arm of Agence Française de Développement (AFD), the leading French development finance agency, will take part of the loan through a 20 M$ funding dedicated to renewable energies and energy efficiency.

Due to the recent global financial crisis and limited channel of credit, project developers in the infrastructure sector have been adversely affected; the worst hit are small and medium size companies who depend on Non Banking Financial Companies (NBFCs) like Srei for their funding requirement. The government of India has set up a fiscal and monetary stimulus package with a focus on infrastructure creation. In this framework, a special refinance window has been opened allowing Infrastructure NBFCs like Srei to raise External Commercial Borrowings.
 
This syndicated loan will be used for funding infrastructure projects directly and also for leasing of infrastructure equipment. It will ensure that long term funds are available so that Srei can continue lending.

Proparco funding is in line with the strategy of the AFD Group in India focusing on promoting renewable energies. Srei has a long track record of investment and innovation in this sector.

This credit facility reinforces the financing of SMEs, an essential part of Vietnam’s economy, and thereby contributes to the country’s effort to boost the economy in an environment where long term financial resources are scarcer.

On November 13th, 2009, Mr Tran Xuan Huy, Chief Executive Officer of SACOMBANK, and Mr Jean-Michel SEVERINO, Chief Executive Officer of Agence Française de Développement (“AFD”), and Chairman of PROPARCO, the private sector arm of AFD, have signed a credit facility agreement of USD20 million between SACOMBANK and PROPARCO. This credit facility agreement was signed during the Franco-Vietnamese Forum of Entrepreneurs, in presence of members of the Vietnamese government and of the Prime Minister of France, Mr. François Fillon.

The objective of this USD20 million credit facility is to reinforce the medium and long term lending capacity of SACOMBANK, to support its small and medium enterprises (SME) lending activity. Lending to SMEs is the prime focus of this leading joint stock bank founded 1991 which has a portfolio of over 30,000 SMEs and a network of 287 branches and transaction points in 45 provinces of Vietnam.

Moreover, this dollar financing contributes to the stimulus package deployed by the Vietnamese authorities, in an environment where the international financial crisis has made long term financial resources scarcer, illustrating PROPARCO’s counter cyclical role. Facilitating access to credit for SMEs is indeed one of the critical aspects of the Government’s plan given the essential role of these enterprises for the country’s economy.

As part of this financing, PROPARCO also participates to the improvement of SACOMBANK’s environmental and social practices by assisting the bank to implement a monitoring of the environmental and social impacts of its lending activities.

This transaction is part of the different programs conducted by AFD to participate to the development of Vietnam’s financial sector. AFD has committed in total in excess of EUR900 million to public and private sector projects in Vietnam since it started its operation in this country in the late 90s.

About SACOMBANK

Founded in 1991, Ho Chi Minh City-based SACOMBANK is one of Vietnam’s major banks with about 3% of system assets and total assets of VND 98,243 billion (USD 5,519 million) as of September 2009. Its strategic shareholders are Australian and New Zealand Banking Corporation and Dragon Financial Holdings, with 10% and 9% respectively. Sacombank was furthermore the first bank in Vietnam to receive the funding and technical assistance from IFC (International Finance Corporation), the private sector arm of the World Bank group. The bank has an extensive network of 287 branches and transaction offices in 45 out of 63 Vietnamese provinces. After 17 years of operation in Vietnam, the bank moreover decided to serve cross border traders in the Greater Mekong Region and set up offices in China, Laos and Cambodia. SACOMBANK received four awards in 2008, including “Best Bank in Vietnam 2008” by FinanceAsia UK; “Best Bank in Vietnam 2008” by Global Finance US; “Best Domestic Bank in Vietnam 2008” by The Asset Hong Kong; and “Vietnam Retail Bank of The Year 2008” by The Asian Banking and Finance UK.

About PROPARCO

PROPARCO is the subsidiary of Agence Française de Développement (France’s main provider of bilateral overseas’ development aid) for the financing of the private sector. Founded in 1977, PROPARCO provides long term financing in the form of debt or equity to banks, infrastructure and industrial projects in over 60 emerging and developing countries. PROPARCO combines developmental objectives and profit sector profitability requirement. It has extended EUR800 million of new commitments in 2008.

This issue of the magazine Private Sector and Development is being published at a time when Haiti has been struck by a powerful earthquake which has thrown the country and its capital, Port-au-Prince, into chaos. This disaster carries serious consequences for a country which remains one of the most vulnerable in the world, despite efforts to help it emerge. Thanks to an evaluation study conducted a few months ago, we had planned to highlight - in this issue of the magazine dedicated to the developmental impacts of the mobile phone sector - the encouraging lessons to be learned from the development of telecommunications on the Island. We have decided to go ahead with the publication of this article because we see it as an example that should be promoted and a sign of hope and encouragement to send to Haiti. In most South countries, the mobile phone sector has developed – under the impetus and supervision of public regulatory authorities – via the private sector. A considerable number of developing countries ha ve seen a remarkably rapid establishment of mobile phone networks; for example, over the past four years Africa has recorded an average annual growth rate in the number of subscribers of over 40%. This success – in a context where the share of available income for these new services would appear limited – demonstrates that the right model is being implemented and, more generally, it bears witness to the dynamism of Africa’s
I am consequently very pleased to share this fourth issue of Private Sector and Development with you. I would like to extend my warmest thanks to each of the authors for their contributions which provide readers with a summary of the various impacts that the development of the mobile phone sector has had in recent years. First, they estimate its macroeconomic impact by taking a look at the link between the development of this service and GDP growth in the relevant countries. Its microeconomic impact can then also be measured by assessing the extent to which the mobile phone sector facilitates interactions between economic agents, and contributes to developing income-generating activities. Finally, the mobile phone sector has unquestionably positive social impacts: it increases social ties, makes certain households less vulnerable, gives access to new services such as mobile banking… Unfortunately, as we can see in some articles, it is not free of negative effects, which are specifically related to the weight of phone expenditures on household budgets. Moreover, some of the poorest populations – particularly in rural areas – continue to be deprived of access to the network. Many challenges remain. Operators need to reinforce customer loyalty and provide more services with high added value. For public authorities and users, population coverage needs to be extended and the cost of access to the service needs to come down. Finally, international donors must play a role in ensuring there is a balance between players, they must help reduce the negative effects of the mobile phone sector and – at the same time – make sure its developmental impacts are maximized. They must also provide their financial support to the expansion of broadband connections in order to give easier access to Internet, which would appear to be an even more important factor for economic growth in developing countries than the mobile phone itself. 

You can find articles of the following authors: Guy Zibi (AfricaNext), Christine Zhen-Wei Qiang (Banque mondiale), Jenny C. Aker (Center for Global Development), François-Xavier Roger (Millicom), Annie Chéneau-Loquay (CNRS), Samir Satchu (Roshan), Guillaume Barberousse (PROPARCO), Tanguy Bernard (Agence française de développement), Véronique Pescatori (PROPARCO)

ABOUT

Private Sector & Development is a bimonthly magazine that compares the views of experts in different fields on issues relating to the role the private sector plays in the development of low-income countries of South countries, particularly in Sub-Saharan Africa. By comparing complementary approaches, Private Sector & Development aims to help us get a better grasp of the mechanisms through which the private sector can contribute to the development of these countries.

 Building on the success of the second issue of Private Sector and Development, which covered the topic of access to water, Proparco has chosen to devote this issue to the challenges facing the microfinance sector today. The overarching virtue of microfinance is that in recent years it has managed to demonstrate that it is not only possible and necessary to implement services tailored to the poorest – it can also be profitable. Indeed, to quote the “Bottom of the Pyramid” concept coined by the economists S.L. Hart and C.K. Prahalad, moving into the market of low-income populations – and serving them – may constitute “the biggest business opportunity in the history of commerce” and at the same time helps combat poverty. Microfinance would seem to embody this concept. Although it may lead to higher costs in order to reach the poorest borrowers, this can be offset by the profitability of the investments financed. The microfinance sector has also often proven more “resilient” than the banking sector, particularly in crisis countries – this is, for instance, the case in the Democratic Republic of Congo. However, the current crisis has brought several systemic weaknesses in the sector to the fore and underscored the need to consolidate fundamentals, strengthen sector regulation and better control microfinance institutions’ (MFIs) quest for growth and profitability. Without these improvements, there is a real risk of client overindebtedness and the sector will develop at the expense of its poverty reduction targets.

You can find articles of the following authors: Iris Lanao Flores (FINCA Peru) and Philippe Serres (Agence française de développement), Fouad Abdelmoumni (Al Amana), Esther Duflo (J-PAL (MIT)) and William Parienté (UCL and J-PAL), Élodie Parent (Proparco), Jacques Attali (PlaNet Finance), André Laude (International Finance Corporation), Jérôme Audran and Yannis Berthouzoz (Symbiotics S.A.), Dr. Claus-Peter Zeitinger (ProCredit Holding AG),Elizabeth Littlefield (CGAP) and Luc Rigouzzo (PROPARCO)

ABOUT

Private Sector & Development is a bimonthly magazine that compares the views of experts in different fields on issues relating to the role the private sector plays in the development of low-income countries of South countries, particularly in Sub-Saharan Africa. By comparing complementary approaches, Private Sector & Development aims to help us get a better grasp of the mechanisms through which the private sector can contribute to the development of these countries.

The financing agreement between Proparco and Yes Bank for a USD20M subordinated loan was signed on 14 September 2009 in the presence of the French Ambassador, His Excellency Mr. Jérôme Bonnafont, Luc Rigouzzo, Chief Executive Officer of Proparco and Mr. Rana Kapoor - Founder, Managing Director and CEO of YES BANK . This is Proparco’s first banking project in India.

The project is fully in line with Proparco’s mandate in India to finance local players that play a positive role in terms of energy issues and to support businesses or banks that are models from a social and/or environmental perspective.

Yes Bank enjoys satisfactory financial indicators and is also a model bank in terms of social and environmental responsibility. It has made this a cornerstone of its strategy and has developed activities in the sectors of carbon finance, financing renewable energies and microfinance by providing innovative financing to the rural world, participating in international initiatives and financing anti-pandemic industries.

Thanks to this operation, Proparco is building a partnership with India’s most dynamic private bank in terms of social and environmental responsibility. Indeed, Yes Bank provides advisory services and financing in sectors that are core to AFD Group’s mandate in India: carbon finance, renewable energies and microfinance. This subordinated financing will allow Yes Bank to increase its solvency ratio.

Yes Bank could also - via a partnership with UBI France - become a key channel for French businesses seeking to establish themselves in India and/or export to the country. This possibility is worth exploring and would also allow Proparco to enhance its range of financing for French businesses that are interested in the Indian market.