Grameen Mutual Fund One : Enabling the poor to enter the capital market

Grameen Bank has established the 'Grameen Mutual Fund One', a Trust Fund constituted under the Trust Act 1882 and the Registration Act 1908. Grameen Fund, a venture capital financing company of the Grameen family, limited by guarantee, will act as the Trustee of the Fund. The Standard Chartered Bank is the Custodian and AIMS Bangladesh Limited is the Manager of the Fund.

The women from the poor households of the rural areas, who are the target group of all Grameen Bank initiatives, will be the primary beneficiaries of the Mutual Fund, according the objectives being set forth in these deeds and agreements of the Fund.

Grameen Bank believes that the quality of life of the poor can be enhanced inculcating the habit of savings and providing them with opportunities to invest in suitably structured high-yielding investment vehicles, which can add value to their wealth over time. The rural population has limited scope for investing their savings in urban-centered industrial ventures, mainly due to the small size of the individual savings and lack of appropriate vehicles of opportunities.

The 'Grameen Mutual Fund One' will provide the rural poor with a unique vehicle to lock their savings in attractive investment opportunities, where the downside risk is well cared for. Simultaneously, the wealth-creating projects can attract savings from all over the country at a comparatively low cost. In another way, the Fund should be able to create opportunities for free flow of capital, through integrating the urban and off-urban economies.

Structure
The final size of the first scheme of the Fund is being contemplated at around Tk 120 to Tk 150 million, depending upon the interest generated from the Grameen depositors and private placement. Since Grameen depositors will be the primary beneficiaries, a substantial portion of the Fund will be earmarked for them. In addition a sizable amount, will also be offered to institutional investors through private placement and a portion will be made available to the general public for subscription under IPO.

Features
Dividend Policy: The first scheme will provide an assured minimum 10% dividend per annum. This would be the floor limit of dividend, keeping the ceiling open. Necessary annual cash flow, to ensure the minimum dividerd, will be ensured under contractual agreement that will be hedged though long term fixed interest securities (FIS) investment. The scheme will meet its obligation from the proceeds of the investment, which will be kept under lien till maturity.

Closed-end: The first scheme will be a closed end mutual fund, i.e., the scheme will not accept any new capital or redeem existing capital during its term.

Maturity: The life of the first scheme will be 10 years.

Investment Policy: The first scheme will invest in both equity and FIS by way of a balanced investment policy.

Face value & Market Lot: The face value (FV) and market lot (ML) will be kept at a low denomination, enabling the small investors to buy the units.

Liquidity: The closed end scheme will be listed with both Dhaka and Chittagong Stock Exchanges, as required by the Regulations. The unit holders of the scheme will have an option to dispose off their holding at a fair price as and when they desire to liquidate their investment.

Benefits to GB
The micro-credit borrowers of Grameen Bank are encouraged to save a small portion regularly. The idea is to create a capital base for them. The savings currently generate a return of 8.5% for the depositors. The small savings of the micro-credit borrowers have now reached an enormous figure of about Tk. 6 billion.

Investing a portion of the savings in the Mutual Fund will provide an assured minimum dividend of 10% each year to these depositors, which will act as an old age pension scheme for the poor women.

Since the Mutual Fund will invest in stocks of different selected companies with fundamentals, by purchasing units of the scheme, the rural savers will ultimately be came the owners of the companies in the stock market.

Brief for the press released by Grameen Bank, Grameen Fund and AIMS of Bangladesh Limited; May 09, 2001; Dhaka, Bangladesh.