ProCredit is IFC’s longest and largest partner in microfinance and small business banking. The ProCredit group consists of 21 banks operating in transition economies and developing countries in Africa, Latin America and Eastern Europe. Their core business is the provision of formal credit to micro and small enterprises. The ProCredit group is led by ProCredit Holding AG, a holding company based in Frankfurt am Main, Germany. It is an investment company that was founded in 1998 as "Internationale Micro Investitionen (IMI) AG", which was set-up by Internationale Projekt Consult (IPC), the founding consulting firm. IPC began in 1981 as a development finance company focusing on Latin America and Eastern Europe in NGO transformation and downscaling. It was created by Claus-Peter Zeitinger, Chairman of PCH’s Supervisory Board. IPC established its first greenfield bank in Bosnia and Herzegovina in 1997 before the creation of IMI. ProCredit Holding’s purpose is to provide strategic guidance and management for their 21 banks, which are growing rapidly. Its role includes support for refinancing, human resources, management information systems (MIS), auditing, controlling, marketing, retail operations, risk management, staff training, and the core business of lending. All 21 institutions are locally registered and regulated by the local banking supervisory agency. The banks are all integrated via the holding company into a worldwide group in which ideas and experience are exchanged and in which synergies are exploited. The current Supervisory Board consists of the following six individuals: (i) Claus-Peter Zeitinger (IPC); (ii) Doris Köhn (KfW); (iii) Sally Dungan (Omidyar-Tufts): (iv) Klaus Tischhauser (ResponsibAbility); (v) Ms Dörte Weidig (IPC Invest); and (vi) Mr Jasper Snoek (Doen). The management board is composed of Helen Alexander, Dr. Gabriel Schor and Dr. Anja Lepp. Before joining ProCredit Holding, Helen Alexander was with Bain and Company, the international business strategy consulting company based in London. Dr. Anja Lepp was a member of IPC’s management from 1995 until 2007. Dr. Gabriel Schor was a member of IPC's management until 2004.

This project consists of a EUR 25 million liquidity facility (“The Facility”) to PCH for particular subsidiaries for short-term liquidity management.

30.73 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	30.73
Equity

* These investment figures are indicative

ProCredit Holding is based in Frankfurt, Germany. It has 21 subsidiaries operating in 21 countries in Africa, Latin America, and Eastern Europe. This project will support a more efficient liquidity management across the group and make it more resilient against possible liquidity stress scenarios in individual countries.

Significant Direct Contribution to Poverty Reduction: IFC’s proposed project will support PCH’s liquidity management across its 21 bank network. In turn, this will help stabilize the network banks’ operations in providing financial services to MSMEs in a time of financial stress. Supporting productive small businesses will in turn stimulate growth, employment generation and poverty reduction (ProCredit banks currently provide access to financial services to nearly 1 million MSMEs). Scaling Up Microfinance: By supporting an institution sponsored by ProCredit, this project will help scale up microfinance institutions operating in LAC, ECA and Africa. The proposed product for the parent company will allow the institutions to tap into PCH in times of liquidity shortfall. If utilized, the proposed project will enable the group to further their deposit mobilization (which is the source of the volatility), and enable them to manage their liquidity to maximize on-lending. Demonstration Effect: This project will provide a signaling effect to stakeholders in the markets where ProCredit operates and provide comfort to its MSME clients if PCH activates the line. PCH will be able to tap into the IFC line and quickly inject liquidity in situations where a subsidiary faces a liquidity shortfall.

IFC role in this project is through supporting existing clients during the financial crisis through offering innovative solutions and products that meet client needs. The proposed project will allow IFC to provide ProCredit with a solution to liquidity constraints across the 21 bank network during the current and unprecedented market volatility. Unlike Bank sponsors, PCH, a parent company, does not generate deposits on its own to smooth any temporary liquidity strain throughout the network. By providing this facility, IFC will: (i) support PCH efforts to increase deposit mobilization; (ii) enable PCH to better manage liquidity; and (iii) help PCH maximize funds available for on-lending. Over the last year, both local and international commercial banks have significantly reduced the financing of MFIs, who continue to grow despite the credit crisis. The lack of consistent investment flows to microfinance and small business banks will significantly limit access to finance for low-income households and MSMEs. Although other international financial institutions are also looking to support ProCredit, no other IFI is able to bring its global network and experience in MSME finance and ability to offer innovative products for a global holding company. IFC role is supporting prudent institution building and liquidity management through providing a product not otherwise available in the market, to meet the specific needs of a microfinance player.

This project involves IFC support for the business of Microfinance and has been classified as a Category FI project. Under the existing project (#10396), ProCredit developed an organization-wide SEMS which has been implemented at each subsidiary. Confirmation of SEMS officers at all of its subsidiaries is still pending and will be a condition of commitment. In addition, compliance with the IFC Performance Standard 2: Labor and Working Conditions will be a condition of commitment. Considering the nature of activities supported, the project will be required to: (i) continue to implement a procedure to ensure that all investments by its subsidiaries are screened and processed to avoid supporting activities on the microfinance exclusion list; (ii) maintain qualified persons to manage and implement the procedures; (iii) apply the labor standards established by the IFC Performance Standard 2: Labor and Working Conditions, in all subsidiaries; and (iv) continue to submit a periodic report to IFC.