MICROCAPITAL BRIEF: Microfinance Institution (MFI) Equity Valuations Rise in 2009 as Portfolio Quality Falls, Says Report by JP Morgan and CGAP (Consultative Group to Assist the Poor)

A new report by CGAP (Consultative Group to Assist the Poor) and JP Morgan shows that despite the global financial crisis, microfinance institution (MFI) equity valuations continued to rise across all regions during 2009. The report states that MFIs in the private equity market were trading at a median of 2.1 times their book value, a 62 percent increase since 2007.

Nevertheless, MFIs were not impervious to the global financial crisis: portfolio delinquency levels rose from a median of 2.2 percent to 4.7 percent during the beginning of 2009; and the median return on equity (ROE) dropped from nearly 18 percent at year-end 2008 to 6 percent by May 2009.

“There’s no doubt the crisis did have an impact on MFIs, and a significant one, so the strength in equity valuations is a surprise,” says Mr Xavier Reille, a co-author of the report.

By Stefanie Rubin, Research Associate

About CGAP (Consultative Group to Assist the Poor):

Housed at the World Bank Group, CGAP (Consultative Group to Assist the Poor) is an independent policy and research center dedicated to providing financial access for the world’s poor. CGAP is supported by over thirty development agencies and private foundations. Its mission is to provide market intelligence, to promote standards and to offer advisory services to governments, microfinance providers, donors and investors.

Additional Resources:

Source Article: CGAP: Investors Backing Microfinance Despite Impact of Crisis: http://www.cgap.org/p/site/c/template.rc/1.26.12906/

CGAP/JP Morgan Report: “All Eyes on Asset Quality: Microfinance Global Valuation Survey 2010,” http://www.cgap.org/gm/document-1.9.42531/OP16.pdf

MicroCapital Universe: CGAP (Consultative Group to Assist the Poor): https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=CGAP+%28Consultative+Group+to+Assist+the+Poor%29

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