MICROFINANCE institution Center for Agriculture and Rural Development (CARD), Inc. has tapped the bond market for funds for relending to its clients, blazing the trail for similar institutions that seek an alternative financing source.
CARD, the largest microfinance institution in the country with outstanding loans of P1.8 billion as of July and 450 offices nationwide, raised P500 million last month by issuing fixed-rate corporate notes with a five-year maturity.
The funds raised would be used to expand its microlending business.
SB Capital Investment Corp., the investment banking arm of Security Bank Corp., acted as issue manager and lead arranger.
The institution's debt issuance was the first of its kind by a microfinance institution.
Microfinance organizations normally get grants from various foundations, if not, a credit line with one-year tenor from large banks.
"[CARD's debt issuance] was more than just a philanthropic issue; it was not just a CSR (corporate social responsibility) issue but a real commercial transaction," Conrado A. Gloria, Jr., SB Capital Investment executive vice-president, told a briefing yesterday.
Mary Jane A. Perreras, CARD MRI director for fund resources management, said the debt issuance was "a first step towards more sophisticated funding" for microfinance institutions.
CARD, Inc. was established in 1986 as a social development foundation. In time, CARD established CARD-Mutually Reinforcing Instutions (MRI) composed of the CARD Bank, CARD Mutual Benefit Association, the CARD MRI Development Institute, CARD Business Development Services, CARD MRI Insurance Agency and the Rural Bank of Sto. Tomas (Batangas), Inc.
CARD boasts of a repayment rate of about 98%.
"Microfinance in the Philippines still has a long way to go. Next time, we can probably do an IPO (initial public offering), as long as we have the support of the market," Ms. Perreras said.
Big banks flocked to CARD's debt float, noting the institution's track record in the microfinance business.
The banks also took into consideration the credit rating CARD obtained from Paris-based Planet Rating and the guarantee provided by Washington-based Grameen Foundation.
Planet Rating gave CARD an A(-), meaning "excellent" in its scale, noting the absence of risks in the short- and mid-term.
The notes were bought by four universal banks: Allied Bank Corp., Rizal Commercial Banking Corp. (RCBC), Security Bank Corp., and Banco de Oro Unibank, Inc. and its subsidiaries BDO Private Bank, Inc. and BDO Leasing and Finance, Inc.
"CARD is attractive because it has a clear idea of how it wants to expand and consolidate in the coming years. That is the pattern we have seen," Mr. Gloria said. — Gerard S. dela Peña
