|
|  |
| FONDEP 2 |
|
| Summary of Proposed Investment |
| This Summary of Proposed Investment is prepared and distributed to the public in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only. |
| Project number | 27158 |
| Company name | FONDEP MicroCredit |
| Country | Morocco |
| Sector | Finance & Insurance |
| Environmental category | FI |
| Department | Global Financial Markets Group |
| Status | Pend FAP |
|
| Date SPI disclosed | June 24, 2009 |
| Projected board date | September 30, 2009 |
|
| Overview |
Sponsor/Cost/Location |
Development Impact |
Contacts |
Attachments |
| Project description |
The project is a repeat transaction with Fondation pour le Développement Local et le Partenariat (“FONDEP” or the “Client”), a successful existing microfinance client in Morocco, which IFC has been supporting since 2006. Due to its rapid growth, FONDEP is in need of capital, which under the current regulatory constraints can only be raised in the form of quasi-equity. As the private sector has been reluctant to invest in this type of instrument, IFC will be playing a key role in enabling FONDEP to continue to source debt on the local market and maintain its growth.
As of December 31, 2008, FONDEP had a loan portfolio and total active clients of $65 million and 139,207 clients respectively. The Client has 11% and 9% market share in terms of clients and portfolio outstanding respectively. FONDEP has been granting primarily loans based on the solidarity group lending methodology to groups of 4 to 25 members, primarily in semi-urban and rural areas. As of December 2008, the portfolio was composed of 73% solidarity loans, 17% individual loans and 10% housing loans. FONDEP has 186 branches and 953 employees. |
|
| Project sponsor and major shareholders of project company |
| Founded by Mr. Mouatassim Belghazi, academic and entrepreneur, FONDEP began its operations in Rabat in 1996 as a non-government organization (“NGO”). It was among the first movers in the Moroccan market to establish a financial institution dedicated to providing credit services to micro and small enterprises. In 2000, FONDEP was granted its license to operate as an MFI. FONDEP was founded on two main principles: to contribute to the integration of low-income households and individuals into the formal financial system and to contribute to the improvement of the livelihood of such households and individuals. |
| Total project cost and amount and nature of IFC's investment |
| The proposed investment is a up to $10 million subordinated debt to FONDEP. The debt will have an 8 to 10 year maturity and will be in the form of either (a) a funded US$ or € loan or (b) a 100% Guarantee on a local currency bank loan. |
| Location of project and description of site |
| FONDEP’s head office is based in Rabat, Morocco. The company has 186 branch offices located across the country. |
|
| Anticipated development impact of the project |
The proposed investment is expected to have a high impact in facilitating micro and small enterprises access financial services – an area of key strategic priority to IFC. As IFC assists FONDEP with sourcing additional funding, this project addresses the need to serve those segments of the population that lack access to credit, including the small business segment; hence seeking to (i) reduce income disparities in the country, and (ii) contribute to job creation in underserved regions.
Assuming a conservative target leverage ratio of 5x, the proposed subordinated loan will allow FONDEP to source an additional $50 million equivalent on the local market. Based on projected average loan size and asset turnover, the Project is expected to increase FONDEP’s lending outreach by about 200,000 new clients over the project’s life. |
| IFC's expected development contribution |
| FONDEP, as all MFIs in Morocco, has an NGO status. As a result, it can only grow its equity base through retained earnings. Due to market demand, FONDEP’s assets are growing faster than its equity thus increasing its leverage. In order to maintain adequate leverage to be able to borrow on the local market and maintain growth, FONDEP has no choice but to strengthen its capital with debt with Tier II characteristics. As of today, Moroccan banks and investors are still reluctant to take subordinated risk on the microfinance sector. The proposed project will therefore be critical for FONDEP to pursue its growth strategy. |
| Environmental and social issues - Category FI |
This project has been classified as a Category FI project according to IFC’s Environmental and Social Review Procedure. As an existing IFC client FONDEP is required to develop a Social and Environmental Management System (SEMS), nominate staff and report to IFC annually. FONDEP is in the process of developing an appropriate SEMS to screen investments against IFC’s microfinance exclusion list under the existing project (24441), which will likely need to be enhanced to also ensure compliance with the applicable Moroccan social and environmental laws and regulations. The development of a satisfactory SEMS is a condition of disbursement for this project. FONDEP is also overdue on its annual S&E reporting to IFC and the submission of the 2008 Annual Environmental Performance Report is therefore a condition of commitment. To summarize, FONDEP will be required to:
Develop a SEMS prior to disbursement to the satisfaction of IFC,
Retain responsible, qualified staff to manage and implement the SEMS,
Commit to implement the SEMS, to ensure that the activities supported by IFC financing are in compliance with the Applicable Performance Requirements to be determined, and
Continue to submit a periodic report to IFC as per a format to be provided by IFC. |
|
| For inquiries about the project, contact: |
Mr. Zine El Abidine Otmani, General Manager
Telephone: +212 537 756 281
Fax: +212 537 756 318
Address: 17, rue Cadi Sanhaji – Pinède, Souissi II – Rabat 10000, Morocco
Email: contact@fondep.com |
|
| For inquiries and comments about IFC, contact: |
General IFC Inquiries
IFC Corporate Relations
2121 Pennsylvania Avenue, NW
Washington DC 20433
Telephone: 202-473-3800
Fax: 202-974-4384
E Mail: Webmaster |
| Local access of project documentation |
Mr. Zine El Abidine Otmani, General Manager
Telephone: +212 537 756 281
Fax: +212 537 756 318
Address: 17, rue Cadi Sanhaji – Pinède, Souissi II – Rabat 10000, Morocco
Email: contact@fondep.com |
|
|
|
|