Growing Investment in Microfinance

Publication Date: Jun 2007
Published by: Consultative Group to Assist the Poor (CGAP)
Document Type: Newsletter

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This CGAP publication offers insight into the latest microfinance investment trends.

Examining the latest microfinance trends, the publication states that there is growing investment in microfinance and presents the following details about the Mexican microfinance institution (MFI), Banco Compartamos’, initial public offering (IPO):

• Compartamos sold shares to public investors at an astounding profit and increased its outreach to poor clients.
• In 2000, it sold shares to private investors and this led to a conflict between the profits of private investors and the financial interests of Compartamos borrowers.
• High interest rates and profits of Compartamos have triggered a backlash from populist governments and politicians.
• The success of the IPO will make it easier for mainline MFIs to raise funds in the future and help microfinance be regarded as serious business.

The publication presents an interview with CGAP microfinance expert, Xavier Reille, who states that:

• The recent surge in foreign capital investment in microfinance can be attributed to:
  • The demand for capital from MFIs;
  • The growing interest of socially responsible investors.
• The challenges to investment in microfinance are:
  • Lack of transparency, adequate credit evaluation tools;
  • Expansion of the pool of investable MFIs.

The publication also:

• Explores whether MFIs are prepared for the increasing financing options they have;
• Identifies international financial institutions and private microfinance funds as the two main players in the booming foreign capital investment in microfinance, and offers a comparative analysis of the two.