Bamboo Finance sees 2x return on Mongolia XacBank exit

Bamboo first invested around $16 million in XacBank in 2009. It was set up in 2001 as a microfinance lender to Mongolia's herding community but has since evolved into a fully regulated commercial bank and the country's fourth largest in terms of assets.

It is the flagship subsidiary of TFG, which offers banking, leasing, insurance and investment banking services, principally in Mongolia.

"It is an organization we got to know well, so we knew how good they were at operating in this specific environment with this kind of density, providing financial services to a population that has low income but a number of productive micro entrepreneurs," Xavier Pierluca, CIO for financial services at Bamboo Finance told AVCJ.

Over the holding period, Pierluca says the business has seen its loan book grow from around $150 million to nearly $700 million as the product offering has broadened and lending to small and medium-sized enterprises (SMEs) has increased.

Today XacBank's core business includes current and savings accounts, various credit and lending products, as well as domestic and international remittances. In addition, the bank has also sought to expand into parts of China and Central Asia.

"The idea for us was not only to focus on the Mongolian economy but to use the knowhow and experience of the organization to expand operations abroad and bring financial services to populations that did not have access to them locally," said Pierluca.

This is not the first time Orix has invested in the Mongolian lender. In May the Japanese financial services group acquired a 16% stake in TFG for $24 million in a deal that valued the business at around $150 million.

"It was time for another type of player to take the lead and this is where Orix came into play," says Pierluca. "They can bring in their own leasing experience and product offerings and have the capability to deal with SMEs."

Investments in sectors such as financial services are seen as a way to leverage Mongolia's mining growth without being directly exposed to commodities risk.

Bamboo Finance has been investing in Asia's microfinance space since 2007.

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• Topics
• North Asia
• Financials
• Exits
• Mongolia
• Financial Services
• ORIX Capital
• Bamboo Finance
• Exit
• Trade sale