"Our human destiny is inextricably linked to the actions of all other living things. Respecting this principle is the fundamental challenge in changing the nature of business."
- Paul Hawken, The Ecology of Commerce


- = Sustainable Economy Initiatives = -


ShoreCap International invests capital in local financial institutions that provide loans to micro and small businesses in developing and transitional economies.

Origins of Microlending
In most rural and urban areas in the developing world, the poor receive no banking services at all. If they need to borrow money to cover the cost of sickness, a wedding or a funeral, they have to resort to local moneylenders, who may charge as much as 20% a day (350% a week). If they are unable to repay the loan, they usually forfeit whatever land they own, and are forced to move to the slums of the cities. For most people, the concept of being able to borrow to get ahead simply does not exist. The regular banks lend only to middle and upper class people whose loans are big enough to cover the traditional cost of servicing them.

All this began to change when Muhammad Yunus, a Professor of Economics at Chittagong University in Bangladesh was shocked at the poverty of nearby village women following the famine of 1974, and decided to leave his classroom, and his economic theories, to find out what was happening.

When he learnt what a grip the money-lenders had on the village women, and how little money they needed to break free and get ahead, he persuaded a local bank to lend him the money they needed, putting his own name up as guarantor for the small loans (£10-20) they needed to buy an extra cow, or the bamboo they needed to make bamboo stools. He discovered that they were able to repay his loans with a 99% repayment rate, and in 1983 he set up the Grameen Bank.

To get around the cost of servicing a bank loan, involving personal interviews and loan analysis, he set up a system of peer group loan guarantees, in which a group of five women would meet with a Grameen bank worker to receive training, and then meet with each other to discuss their business ideas. Each loan to one of the five women had to be approved by the group. The first two women would get their loans, and if they were regular in their payments for six weeks, the next two would get theirs. If they were also successful, the fifth woman would get her loan. The system of peer group lending drew on strong traditional bonds of interdependency among village women to achieve its success.

As the system developed, the women were asked to agree to the Grameen Bank’s 16 Resolutions, which include commitments to keep their families small; to educate their children; to live in well-built houses; to stop paying dowries for the weddings of their daughters; to drink water that is either boiled or from a tube-well, and to grow vegetables year round.

Since then, the Grameen Bank has expanded massively. In September 2002, it had 2.4 million borrowers, 95% of whom were women. With 1,175 branches, it provided services in 41,000 villages, covering more than 60% of the total villages in Bangladesh. It has also weathered a major crisis, following the flood of 1998, and emerged stronger after undergoing a systematic re-organization. The bank now provides basic loans, higher education loans, and housing loans. Villagers can insure their loans in the event of death, and all borrowers with loans above US$ 138 contribute $0.86 a month to a pension fund for their old age. According to one study, 5% of the borrowers move out of poverty every year. At the end of 2003, the Grameen Bank had total assets of US $464 million. It is owned 90% by its own borrowers, and 10% by the government of Bangladesh. Its loan repayment rate is 98.4%

As the word spread about the Grameen Bank’s success, microlending programs were established in developing nations around the world, and the system is now seen as one of the essential keys to economic progress among the poor. There are now around 7,000 micro-lending institutions, that reach 25 million of the world’s poorest people. In order to reach the other 500 million of the world’s poorest, over $250 billion is needed, so the simple provision of capital has become a critical task.

ShoreCap’s Origins
ShoreCap’s origins lie with the ShoreBank Corporation, a for-profit community development and environmental bank based in Chicago (see LEDIS ****). ShoreBank’s international work began in 1983 advising Muhammad Yunus, and for 10 years doing the financial feasibility work for major institutional donors to the Grameen Bank in Bangladesh.  In the 1990’s ShoreBank also began advising banks in post-Soviet bloc countries like Poland to develop small business lending skills, as they prepared for privatization.  These capacity building activities led to the creation of the international unit ShoreBank Advisory Services.  Over twenty years, ShoreBank Advisory Services consultants have worked in more than 25 countries, focusing on small business lending and microfinance, and overseen $250 million in lending to small enterprises by 45 different banks in 9 emerging market countries.  They have helped more than 20 microfinance institutions to increase their capacity.

Working in collaboration with a group of other investors, in 2003 ShoreBank embarked on a major new initiative when it established ShoreCap International to bring increased support to local microlending institutions that are often starved of capital.  While several other similar investment vehicles exist, ShoreCap is the first permanent company of its kind to be sponsored by a regulated bank holding company. 

ShoreCap brought together eleven investors from the private and public sectors in the U.S., Europe, Asia and Africa, including the Netherlands Development Finance Corporation, the Belgian Investment Company for Developing Countries, the Finnish Fund for Industrial Cooperation Ltd., ABN AMRO (Holland’s biggest bank), The Ford Foundation, the World Bank’s International Finance Corporation, the UK-based Gatsby Charitable Foundation,  the Calvert World Values Equity Fund, the Evslin Family Foundation, the Asian Development Bank and ShoreBank itself. It raised $23.3 million from these investors, to create an investment company to provide equity to the banks that finance micro-entrepreneurs in struggling economies in Asia, Africa and Central Europe.

ShoreBank has teamed up with the International Finance Corporation (IFC), which is part of the World Bank, before.  In 1999, the IFC was a founding shareholder with ShoreBank in K-Rep Bank Ltd. in Kenya, which has gone on to become Kenya’s leading commercial micro-business financial institution. In 2002, they partnered up to provide technical support in Romania for the launch of the Ro-Fin Mortgage Loan Company, a housing finance institution, and to set up a $10 million small loan program.

The Dutch bank ABN AMRO has a longstanding relationship with ShoreBank. ABN AMRO provides microfinance in Brazil through its subsidiary Banco Real. The British Gatsby Charitable Foundation supports charitable trusts in Kenya, Uganda, Tanzania and Cameroon that provide a range of services to small-scale enterprises, including credit facilities, technology transfer and consultancy.

ShoreCap’s goal is to provide for the socially responsible appreciation of capital through investments that enhance the growth and capacity of financial institutions serving micro and small enterprises in developing countries and transitional economies.

ShoreCap made its first investment in BRAC Bank in Bangladesh in December, 2003.  BRAC Bank aims to become one of Bangladesh’s leading lenders in the small business sectors.  ShoreCap has also approved investments in institutions in Kenya, India and Armenia that specialise in offering credit and other services to small farmers, women, low-income entrepreneurs and/or small businesses.

ShoreCap plans to make equity investments of between $500,000 and $2MM in other financial institutions in Asia, Africa, and some parts of Eastern-Europe. ShoreCap will make 15-18 investments over three to four years, for an expected rate of return to its shareholders of 7%.

In exchange, ShoreCap will help to build the network of sound and transparent local banks that is essential to a growing economy. The main reason why local banks are the investment target of ShoreCap’s managers is because they know the market, are capable of judging risk and getting repayment, and have local relationships that do not interest conventional banks.

Large international banks, however, notably the Dutch bank ABN Amro, are beginning to realise that micro-business can be profitable, and that they are able to cover the cost of doing small transactions by charging higher rates. Low income borrowers are willing to pay the higher interest rates because they have small financial requirements, and little access to outside capital.

Following its successful tradition of establishing affiliated non-profit organizations alongside its for-profit initiatives, ShoreBank has also established the ShoreCap Exchange, to provide technical and capacity-building services to the banks it invests in. ShoreCap Exchange works with each institution to identify its needs which are often in internal systems and governance, as well as on increasing loan officers’ efficiency. ShoreCap International and ShoreCap Exchange may be viewed as catalysts for increased economic activity in underinvested local communities. Together, they intend to provide the capital, operating systems, and institutional values that can create a local institutional presence and drive the first cycle of credit availability. Thereafter the deposit of local savings into a trusted institution should sustain and increase economic activity as those deposits are converted into additional credit for development.

ShoreCap is a for-profit company, managed by ShoreBank Corporation based in Chicago, USA. Its Board of Directors is elected by the shareholders. ShoreCap Exchange is an affiliated non-profit advisory service. Half of its directors are elected by its donors, and the other half are appointed by ShoreBank.

ShoreCap is now closed to new investors for a period of four years while it focuses on investing the capital it has raised. ShoreCap expects to offer a 7.1% internal rate of return, and to draw on a growing number of investors who are willing to accept a reduced rate of return for their investment, in exchange for measurable social returns: the successful reduction of poverty among the world’s poorest people.

For further information contact:
Paul Christensen
ShoreCap International Ltd.
403 Coppergate House
16 Brune Street
London E1 7NJ


Written by Guy Dauncey, Victoria, B.C., Canada