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Microfinance as an Asset Class

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The Microfinance Investment Summit, Geneva Edition 2010 held on 10th and 11th March brought together some of the key stakeholders from across the globe to dwell deep into the state of microfinance and its future.  It was a great platform to interact and network with thought leaders sharing diverse perspectives.

Andre Laude, Chief Investment Officer, IFC, who was among the speakers at the inaugural panel spoke about microfinance as an asset class.  Detailing the criteria that defines an asset class, he was of the view that while microfinance has yet to become an established asset class for institutional investors, its homogeneity to what defines an asset class makes it very promising.  However a critical mass of exposure among large number of investors was essential to create liquidity.

Being uncorrelated to other emerging market assets, further involvement of rating agencies in rating MFIs and CDOs, increasing participation of banks and IFIs were some of the factors that would help microfinance develop its investor base. Discussing the challenges and the new opportunities that are available to develop microfinance as an asset class, he stressed on the role that IFIs could play in the process.

As a part of his presentation, Andre discussed two case studies on path breaking structured transactions in microfinance – one on ‘Compartamos’ that tapped into the local bond market in Mexico and the other on IFMR Capital’s Mosec transaction.

View the presentation below:

The Mosec structure drew a lot of questions from the audience which consisted of a mix of microfinance institutions and investors in microfinance.  Of the four MFIs involved in the Mosec transaction, representatives from Satin Creditcare Network Ltd were present in the audience.

Kshama Fernandes, IFMR Capital (presently known as Northern Arc Capital), contributed to this post.

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