Microfinance Investment: A Primer

Only available in Spanish.

Funding of microfinance institutions (“MFIs”) by private foreign investors is at last coming into its own. But foreign funds rarely flow directly to MFIs. During the last few years a new type of intermediary has evolved, that mobilizes funds from investors in rich countries and channels them to MFIs in the developing world. Popularly known as “Microfinance Funds”, entities that raise money and channel it to microfinance institutions (MFIs) are only rarely “Funds” in a legal sense. They are therefore collectively referred to as Microfinance Investment Vehicles (MIVs). These microfinance investment vehicles (“MIVs”) are the subject of this review.

The purpose of this document is to share impressions on the performance of African MFIs and their year-end expectations regarding the development of the sector and their own operations.

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In this podcast, Maria Belén Effio, CEO of MicroRate, gives a summary of the most relevant things MicroRate observed in the microfinance sector during 2021.

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The objective of this document is to share impressions on the evolution of the situation of MFIs by August 2021. It also presents the expectations regarding the development of the sector.

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In order to keep the main actors of the Microfinance Sector informed, information was gathered on what is happening inside the MFIs, the internal and external factors that influence their current operations as well as their short and medium term perspectives.

The results were divided into two regional blocks: Latin America and the Caribbean (LAC) and Africa and the rest of the world.

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In this report we share the main findings and most notable changes in the Social Performance of MFIs as of December 2020 compared to the year prior to the pandemic, as part of the content of our Social Performance Benchmark now available.

Only available in Spanish: Link

BEST PRACTICES IN CREDIT RISK MANAGEMENT IN TIMES OF CRISIS

MicroRate highlights some good practices identified in the MFIs it has rated in the midst of this scenario, which focus on containing credit risk and taking care of their financial sustainability. 

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In this report we present the results of the survey conducted with the executives of the Microfinance Institutions (MFIs) based in Africa to know their expectations for the year 2021, in light of what happened in 2020 and the impact of Covid-19 on their activities.

Read the report here.

This article is only available in Spanish. (Link)

This article is only available in Spanish. (Link)

This article is only available in Spanish. (Link)

This report is only available in Spanish. (Link)

SHARING BEST PRACTICES IN AFRICA AND ASIA

Excellent strategic planning, clear customer orientation, and ongoing staff training summarize the best practices observed at top Financial Institutions (FIs) evaluated by MicroRate in Africa and Asia.

RISK MANAGEMENT SYSTEMS - REQUIREMENTS FOR COLOMBIAN SOLIDARITY ENTITIES

Only available in Spanish

GROUP METHODOLOGY, MAIN RISKS AND THREATS

While the placement of microcredits in a group expresses the essence of microfinance by its attention to the base of the pyramid, it may be the placement mechanism that is most exposed to operational as well as reputational risk.

Only available in Spanish.

Only available in Spanish.

Only available in Spanish and Portuguese

Only available in Spanish and Portuguese

This document gives the interpretation and calculation of the industry’s 18 most commonly used performance indicators.Four new indicators focus on social performance.

For each indicator, the Guide provides the definition, interprets its meaning, identifies potential pitfalls in its use, and provides regional benchmark values. Additionally, MicroRate added a section for each indicator, “How this relates to the traditional banking sector” to make the guide more useful to investors who are new to microfinance.

The indicators included in this guide are organized into five sections: portfolio quality, efficiency and productivity, financial management, profitability, and social performance. While many other indicators could be considered, the ones included are important indicators that, when taken together, provide a reasonable overview of the performance, risk and financial condition of an MFI as well as insight into its social performance.

Since this Technical Guide was first introduced in 2000, it has been adopted as a training manual and reference tool for the standardization of key indicators. We hope this document serves as a useful resource for investors to evaluate MFI performance.

This marks the 8th consecutive year that MicroRate has conducted its survey of microfinance investment vehicles (MIVs), which play a key role in connecting private and public capital with microfinance institutions (MFIs) around the world. Despite the ups and downs of the microfinance market, these market intermediaries have consistently continued to play this important role and we look forward to providing continued coverage of their activities in the years to come.

This year’s survey includes responses of 92 MIVs, out of a total 102 contacted. Of the estimated $8.5 billion in total global assets under management (AUM) as of year-end 2012, the 92 MIVs represented here account for $8.1 billion, or 95% of global AUM. We would like to thank every survey participant for his or her time and contributions.

MicroRate proposes a tier system that defines MFI peer groups by institutional maturity to provide a foundation for industry analysis and informed dialogue.

The system is based on a three-tier structure that applies three simple, objective indicators that, together, act as proxies for MFI maturity. The three indicators are sustainability (return on assets, RoA), size (total assets in U.S. dollars) and transparency (level of regulation/reporting).

Only available in Spanish and Portuguese

The objective of this study is to identify the main problems faced by the Latin American microfinance sector in reporting and using credit bureaus as a tool to reduce the risk of over indebtedness. Furthermore, the study seeks to identify best practices that have been implemented in various countries to mitigate or avoid these difficulties.

This study is funded by the Multilateral Investment Fund (MIF), the Development Bank of Latin America (CAF), and Calmeadow, and is executed by MicroRate Inc.

This study examines whether investment contributed to recent microfinance repayment crises, and whether measures of investment activity might serve as early warning signals for future microfinance crises.

The State of Microfinance Investment 2011, surveys microfinance investment vehicles (MIVs) to highlight the trends and outlook for the industry. Based on interviews with executives of the major microfinance investment funds and a survey of the 100+ active MIVs, this report examines the key factors that affected the microfinance fund market in 2010 and the trends that are likely to drive growth in 2011 and beyond.

MicroRate’s 5th annual Survey of microfinance investment vehicles (MIVs) measures the development of a relatively new category of funds and other intermediaries that mobilize investments in rich countries and channel them to microfinance institutions (MFIs) in the developing world. 

Available only in spanish.

The purpose of this study is to gauge the impact of the global financial crisis on the microfinance sector in Latin America and the Caribbean (LAC). The situation is still clearly

evolving. For example, in October 2008, when interviews with microfinance institutions (MFIs) first began, a majority of responses reflected that growth had slowed somewhat, but not dramatically.

MicroRate’s State of Microfinance Investment: The 2009 MIV Survey, analyzed information from 68 of the 74 microfinance investment vehicles (MIVs1) identified. The impact of the financial crisis was reflected in a significantly lower growth rate. In 2008, MIV assets grew 31%, from $3.8 billion to $5.04 billion, compared with an average growth of 80% from 2005-2007. Total outstanding microfinance assets grew 29%, from $3.04 to $3.91 million, compared to an average growth of 108% from 2005-2007. The number of new MIVs in 2008 remained constant as did the ratio of microfinance assets to total MIV assets which held at 78%.

This is the fourth consecutive year MicroRate has conducted the Survey to assess the impact of Microfinance Investment Vehicles (MIVs) as a funding channel for microfinance institutions (MFIs).

The main objective was to identify new MIVs and gather up to date information about the portfolios of new and existing MIVs. Information was collected through a structured E-Survey. 

The rapid growth of foreign private lending to microfinance institutions (MFIs) in the last several years has led to a surprising reversal of roles between government-owned development institutions and private lenders. Development institutions (International Financial Institutions -“IFIs”1 ) are concentrating their loans in the strongest MFIs, leaving private lenders to look for opportunities among smaller, riskier borrowers. Development institutions are “crowding” private lenders out of the best MFIs.

Only available in Spanish.

Funding of microfinance institutions (“MFIs”) by private foreign investors is at last coming into its own. But foreign funds rarely flow directly to MFIs. During the last few years a new type of intermediary has evolved, that mobilizes funds from investors in rich countries and channels them to MFIs in the developing world. Popularly known as “Microfinance Funds”, entities that raise money and channel it to microfinance institutions (MFIs) are only rarely “Funds” in a legal sense. They are therefore collectively referred to as Microfinance Investment Vehicles (MIVs). These microfinance investment vehicles (“MIVs”) are the subject of this review.