Source(s) of financing Cofinanced: 6493685.56 FAPA: 589138.54
Implementing Agency: ADVANS BANQUE CONGO
The objective of the project is to support the creation and expansion of a microfinance bank (Advans Banque Congo) in the Democratic Republic of Congo. The demand for microfinance services in DRC is huge, but the supply of financial services to low-income populations is minimal.The project includes an investment in privileged shares of US$ 1.100.000 (17% of the total equity of US$6.5 million) and US$ 940.000 Technical Assistance grant. The equity investment would give AfDB up to 17% stake in Advans Banque Congo and a right to nominate a member to the Board of Directors. The technical assistance funding would, through the presence of an international management team, support the introduction of microfinance best practices, ensure adherence to high social, environmental and anti-money laundering standards, introduce effective MIS system and allow for the training and grooming of local staff.The expected US$ internal rate of return on AfDB investment is 21.4%, assuming exit in 10 years at a price of 1.0 x book value. ROE is projected to be 29.2% in year 5.
The project will have a high development impact considering that microfinance has been shown to play a major positive role in reducing poverty and unemployment in developing countries. The initiative will strengthen the provision of microfinance services in the Democratic Republic of Congo, where access to finance is virtually nonexistent for low-income populations. By creating a new financial institution able to sustain microfinance on commercial terms and following best practices, the project has the potential to generate a substantial increase in the long-term availability of financial services for the poor. With a population of 53.2 million of which 75% is living below the poverty line (less than USD 1 per day), ADVANS Congo is likely to support MSEs' creation and growth which would consequently enhance income generation and therefore reduce poverty. Over 5 five years, Advans Banque Congo is expected to reach 20,157 active loan clients and 39,734 voluntary depositors in Kinshasa and suburbs. The following indicators will be monitored: Number of loans outstanding;Volume of loans outstanding; Average loan size; Number of deposit accounts; Volume of deposit accounts; Percentage of women clients;Portfolio quality; Implementation of AfDB Social and Environmental requirements.
The ABC project is well aligned with a number of Bank policies and strategies. ABC is a valuable instrument to implement the Bank Group#s policies for microfinance and assistance to fragile states.As a matter of facts, the investment in ABC is consistent with the objectives for improving the living conditions of the vulnerable population groups that are articulated in the Bank#s country strategy for the DRC; indeed, the proposal has received strong support from the DRC country team.The project is also in line with the Bank#s strategy for private sector development and supports the strategic pillars for: (i) strengthening the financial sector and (ii) supporting private enterprises. It is consistent with the Bank#s private sector operations strategies for increasing support to commercially sustainable financial intermediaries and for collaborating with other development partners. The LFI business model upon which the ABC proposal is based is fully convergent with the Bank#s strategy for seeking economies of scale in microfinance with seasoned technical partners.