Annul Reports of Grameen Fund

Board of Directors

The main focus of Grameen Fund (GF) is on financing venture projects which traditional banks shun. Private enterprises/industries that bring new technology for the benefit of masses and overall economic welfare of the country get priority with the GF. It provides equity and loan or both, depending on the requirement and prospect of the project.

The Fund inherited majority of its loan portfolio from the erstwhile Social Venture Capital Fund (SVCF) of Grameen Bank. Ever since, GF had been monitoring these 40 projects of SVCF worth BDT 391.2 million to recover the old loans and provide more loans if needed. During the year under review, the whole portfolio of SVCF has been adjusted resulting in zero balance in our balance sheet.

In addition to the above projects, after commencement of its operation in 1994, GF has promoted and financed thirteen companies holding substantial shares in them in sectors like Internet Service, Equipment Manufacturing, Information & Communication Technologies, Textile and Garments, Dairy, Merchant Banking, Information Technology (IT) Education etc. At present, twelve of these ventures are on the list of our portfolio.

GF uses innovative ways of financing its own companies through commercial banks. First GF sets up the company and a management team. As soon as the company goes into commercial operation with a bridge loan from GF and becomes eligible, it is encouraged to go to commercial banks to borrow on commercial terms and repay the loan of GF. Grameen Fund being in the management, banks have better reasons to finance these companies. Foreign financing, although quite meager, is, however, becoming available.

Schemes of GF

GF goes for financing under its two schemes namely, (1) Venture Financing Scheme and (2) Micro-enterprise Loan Scheme.

VENTURE FINANCING SCHEME

Objective of the Scheme

To provide capital in the form of direct equity, equity plus loans, or bridge loans to the risky and technology based innovative projects, sponsored by private entrepreneurs that bring direct or indirect benefits to the poor.

GF has facilitated the formation of a software development and export oriented company namely Grameen Software Ltd. This company is engaged in development and production of software for export to US and European markets as well as for local market.

To finance new projects/ventures sponsored by the Grameen's in-house companies as joint -ventures with the Grameen Fund.

With this in view, GF has participated in Grameen Knitwear Ltd., which is a 100% export-oriented composite knitwear project with knitting, dyeing & finishing and garment production facilities, is sponsored by Grameen in-house companies. Grameen Fund is the owner of 32% of the common equity share.

To finance ongoing companies/ projects of Grameen Fund which require expansion, modernization and development of new products.

Grameen CyberNet Ltd. (GCL) is a good example. Grameen Fund formed GCL, with 51% equity and loan financing. Today it is one of the leading Internet Service Providers (ISP) in the country with more than 11,700 registered connections.

Business Policy

The company will give priority to a small-scale industry if it has the following features:

	o	uses of innovative and untested technology
	o	produces high returns, but having high risks in non-traditional sectors
	o	applies local invention/ product and process
	o	uses indigenous and innovative raw materials
	o	export orientation and international competitiveness
	o	has a potential for rapid growth
	o	enhances skills

Policy of Venture Financing

	o	The new projects/ventures may be sponsored by other Grameen companies or private entrepreneurs as joint ventures, with Grameen Fund and/or with other in-house companies of Grameen Bank, providing equity.

	o	Preference for private enterprises with innovative and untested technology, which brings benefits to the poor and which is generally denied credit from more traditional lending institutions.

	o	In case of equity financing, a substantial shareholding remains with Grameen Fund. However, sponsor (private entrepreneur) or an independent professional actually runs the project under guidance & supervision of the Board of Directors of the enterprise.

MICRO-ENTERPRISE CREDIT SCHEME

Objective of the Scheme

	o	To extend loans to small rural enterprises.
	o	To provide working capital and fixed capital investment to on going as well as new small scale industries.

Purpose of loan and its size

Loan financing is provided to small enterprises/ manufacturers both as term-loans and working capital loans, provided for 1 to 3 years term. The loan size ranges between BDT 50,000 and BDT 500,000.

Mechanism of disbursement and repayment

Grameen Bank network is used to execute this scheme. Under this scheme, potential enterprises identified and referred by Grameen Bank Branches to Grameen Fund, are financed through loans subject to meeting Grameen Fund's investment selection criteria.

The initial identification of small enterprises and data collection regarding those enterprises is the primary task of Grameen Bank branches. The appraisal and selection of small enterprises are done under Grameen Fund's own appraisal and selection system. After approval of the loan the specific branch becomes responsible for collection of loan installments and to continuously monitor ongoing activities. The ultimate responsibility for project execution lies with Grameen Fund.

Business Policy

Grameen Fund will give priority to a micro-enterprise if it has the following features:

	o	involved in a business that creates value
	o	comes within the scope of the encouraging list set by Grameen Fund
	o	provides eco-friendly products
	o	creates social benefits
	o	creates job opportunities

TIME DEPOSIT LOAN SCHEME

Objective of the Scheme :

Grameen Fund started this new scheme during the fourth quarter of 2005. This scheme is launched to provide loan to the non-member time deposit holders at the Grameen Bank branches. This will enable them to utilize their deposit for urgent situations without liquidating the time deposit before maturity.

Purpose of loan and its size

Loan financing is provided to time deposit holders for not more than one year and is renewable after interest payment at the end of the year. The maximum loan size is up to 80% of the deposit and interest earned. Time deposit holders may use the loan for personal or business purpose.

Mechanism of disbursement and repayment

The prospective customer can fill up and send the loan form and time deposit receipt making it encashable by Grameen Fund in case s/he fails to repay. A loan booklet is available at all the branches presently offering this facility. The loanee has the liberty to choose one time repayment or repayment by installments.

EXTERNAL FUNDING

The fund raising policy of Grameen Fund includes sourcing of different types of development funds in the form of soft loan or grant. Under this policy currently we have access to the fund of Calvert Social Investment Foundation for utilization in our Micro-enterprise Credit Program. Calvert Foundation is a US based socially responsible investment organization that support community development organizations, across the US and around the world.

GF is also in discussions with UAE Bangladesh Investment Company for possible joint program and sourcing of fund.