Microfinance Investment Funds : Leveraging Private Capital for Economic Growth and Poverty Reduction

The surge in new investment funds - nearly 60 funds at last count - is an exciting sign that microfinance is attracting mainstream financial markets. Foreign investors bridge a crucial gap for MFIs and greenfield banks not yet able to attract deposits, debt or equity from local sources. Recognizing the ultimate goal of building those local financial markets that serve the poor, some foreign investors and funds are facilitating local intermediation with incentives like guarantees for local banks to lend to MFIs in local currency. Such contributions to local market building, combined with strengthening governance, increasing transparency and rigor make the new funds potentially very positive forces in microfinance. __Elisabeth Littlefield, Director and CEO, CGAP__ Microfinance investment funds organised as mutual funds and structured finance products are bringing the vast resources of capital markets to the world of microfinance, which is about empowering poor people through provision of user-friendly financial services. These funds and structured products are superb means of producing a combination of financial and social returns. Individual and institutional investors are increasingly interested in the characteristics of microfinance loan portfolios. Progress in defining microfinance investments as an asset class is underway. In order to attract more commercial investors to microfinance, new financial instruments will have to be developed that satisfy commercial risk-return criteria while achieving the social benefits of microfinance activities. __Jean-Philippe de Schrevel, Founder and Director, BlueOrchard Finance S.A.__ Microfinance Investment Funds: Where Wealth Creation Meets Poverty Reduction....Pages 1-6 Front Matter....Pages 7-9 Microfinance Investment Funds: Objectives, Players, Potential....Pages 11-45 The Market for Microfinance Foreign Investment: Opportunities and Challenges....Pages 47-63 Micro-bubble or Macro-immunity? Risk and Return in Microfinance: Lessons from Recent Crises in Latin America....Pages 65-72 ProCredit Banks in Southeast Europe: Successful Public-Private Partnership in Microfinance....Pages 73-75 Front Matter....Pages 77-79 Commercial Investment in Microfinance: A Class by Itself?....Pages 81-93 Investing in Microfinance Investment Funds — Risk Perspectives of a Development Finance Institution....Pages 95-114 The Management of Foreign Exchange Risk by Microfinance Institutions and Microfinance Investment Funds....Pages 115-146 Governance, Transparency, and Accountability in the Microfinance Investment Fund Industry....Pages 147-174 Front Matter....Pages 175-178 Sustainability in Microfinance — Visions and Versions for Exit by Development Finance Institutions....Pages 179-191 The European Fund for Southeast Europe: An Innovative Instrument for Political and Economic Stabilisation....Pages 193-212 Mainstreaming Microfinance — Quo Vadis Microfinance Investments?....Pages 213-226 Commercial Investment in Microfinance: Fears and Fulfillment....Pages 227-230 Microfinance Investment Funds: Looking Ahead....Pages 231-252 A Donor-Investor’s Vision for Enhancing the Future of Microfinance....Pages 253-256

microfinance Investment Funds Are A Recent Development That Will Grow In Importance. These Funds Expand The Range Of Opportunities For Financing Microfinance Institutions, Enabling Them To Offer Greater Outreach And Diversity Of Products For Microentrepreneurs And Small Businesses. Microfinance Now Spans The Range Of Finance, From The Most Simple Enterprise To The Complexity Of Capital Markets. Kfw Actively Promotes Microfinance Investment Funds And Other Activities That Facilitate The Growth Of Microfinance. This Book Is An Expression Of Kfw's Role As Information Broker And Trend Setter. The Authors Who Contributed To This Collection Offer A Comprehensive Range Of Perspectives And Themes Related To Microfinance Investment And Its Promotion.

Microfinance spans the range of finance, from the most simple enterprise to the complexity of capital markets. KfW actively promotes microfinance investment funds and other activities that facilitate the growth of microfinance. This book is an expression of KfW's role as information broker and trend setter. It offers a comprehensive range of perspectives and themes related to microfinance investment and its promotion. Proceedings of a symposium held by KfW Entwicklungsbank in Berlin in 2004.