“Volume Growth and Valuation Contraction: Global Microfinance Equity Valuation Survey 2012;” by Jasmina Glisovic, et al; published by CGAP (Consultative Group to Assist the Poor) and JP Morgan; May 2012; 16 pages; available at: http://www.microfinancegateway.org/gm/document-1.9.57526/VolumeGrowth.pdf
This report summarizes the changes in asset quality, share transaction volumes and equity valuations of microfinance institutions (MFIs) in India, Bosnia and Latin America and the Caribbean during 2011 and the beginning of 2012. The first section examines a survey of private equity investments done in the study, and finds that the number of transactions nearly doubled in 2011 as compared with 2010. It also finds a 43 percent increase in capital invested from 2010 to 2011. The authors attribute this growth to an increase in volume of transactions, an improved regulatory environment in India and lower valuations. The second section examines publicly traded commercial institutions known as lower-income financial institutions (LIFIs) that provide financial services to lower-income clients but do not necessarily have a stated social mission. The client base for LIFIs often overlaps with that of MFIs, and the 11 LIFIs studied focused largely on microfinance. The study found that these LIFIs had higher earnings than traditional banks. The study also notes a continued compression of valuation multiples for both MFIs and LIFIs from 2009 but predicts stable valuations in most markets for 2012.
“Measuring Governance in Microfinance: Initial Findings from a Pilot Project;” by Micol Pistelli, et al; published by Microfinance Information Exchange (MIX); April 2012; available at: http://www.themix.org/publications/microbanking-bulletin/2012/04/measuring-governance-microfinance
This document reviews the results of a 2011 test performed by the US-based nonprofit Microfinance Information Exchange (MIX) on a new set of indicators regarding the governance of 162 MFIs across 57 countries. The indicators were selected by the Institutional Governance Working Group of the World Microfinance Forum of Geneva, a group that aims to make microfinance providers more sustainable and resilient to crises by organizing a global movement to improve the governance of MFIs. The study found that the indicators demonstrated a positive correlation with factors such as the presence of risk management functions, internal auditing and board committees, which the authors believe suggests that good governance procedures are not isolated from each other. The report found no significant correlation between governance and financial performance among MFIs in the study. The authors cite a widespread concern among MFI boards regarding social performance management but little commitment to the topic. The authors conclude that these indicators could be useful over time but that more research is needed to identify the best governance practices.
“Microinsurance Podcast #1-The Role of Brokers;” produced by the Microinsurance Network; May 2012; available at: http://soundcloud.com/microinsurance-network/mircoinsurance-podcast-role-of
This audio interview with CEO Richard Leftley of MicroEnsure, a subsidiary of the nonprofit Opportunity International that serves as a microinsurance intermediary. The podcast discusses Mr Leftley’s opinions on the role of brokers in microinsurance. First he explains why MicroEnsure chose to use the broker business model, in which brokers bring buyers and sellers together to perform transactions. He explains that this model was chosen in order to get up and running quickly. Mr Leftley then goes on to discuss four problems that MicroEnsure faces: (1) developing products and processes that meet the needs of the clients; (2) training and educating consumers and the firm’s sales force; (3) storing, reporting and managing information; and (4) managing claim administration. Mr Leftley concludes the interview by answering questions from the community about microinsurance and the broker model, including balancing client value against profitability, motivating brokers to enter microinsurance and the potential role of investors in the sector.
By Charlotte Newman, Research Associate
About CGAP (Consultative Group to Assist the Poor)
CGAP (Consultative Group to Assist the Poor) is a US-based nonprofit policy and research center dedicated to providing financial access to poor people worldwide. CGAP is supported by approximately 30 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. CGAP reports taking in USD 20.9 million in total revenue for fiscal year 2010.
About Microfinance Information Exchange (MIX)
The Microfinance Information Exchange (MIX) is a US-based nonprofit provider of performance data and analysis on microfinance institutions (MFIs), funders, networks and service providers dedicated to serving the financial needs of low-income clients. The mission of MIX is to strengthen the microfinance sector and financial inclusion in general by promoting transparency. The organization’s MIX Market website offers access to financial and social performance information covering approximately 2,000 MFIs. MIX publications include the MicroBanking Bulletin and MIX Microfinance World, which feature periodic research and data analysis. Incorporated in 2002, MIX is headquartered in Washington, DC, with regional offices in Azerbaijan, India, Morocco and Peru. Its supporters include the Bill & Melinda Gates Foundation, CGAP (Consultative Group to Assist the Poor), Omidyar Network, The MasterCard Foundation, the UN’s International Fund for Agricultural Development, the Michael & Susan Dell Foundation, Citi Foundation, Ford Foundation and Deutsche Bank.
About Microinsurance Network
Originally established in 2002 as the CGAP (Consultative Group to Assist the Poor) Working Group on Microinsurance, the Microinsurance Network was spun off as an independent organization in 2009. Based in Luxembourg, the membership organization aims to promote the development of insurance products for low-income populations by providing a platform for information sharing and stakeholder coordination. As of 2011, it reports 52 member organizations.
MicroEnsure was founded in 2005 in the UK as a wholly-owned subsidiary of Opportunity International, a US-based nonprofit microfinance network created in 1974. MicroEnsure was known as the Micro Insurance Agency until 2008. As an insurance intermediary, it provides a range of products including health, life, property and weather index-based insurance to approximately 3.5 million poor clients in Ghana, India, Bangladesh, Mozambique, Malawi, the Philippines, Tanzania and Kenya as of 2011.
Sources and Additional Resources:
“Volume Growth and Valuation Contraction: Global Microfinance Equity Valuation Survey 2012,” http://www.microfinancegateway.org/gm/document-1.9.57526/VolumeGrowth.pdf
“Measuring Governance in Microfinance: Initial Findings from a Pilot Project,” http://www.themix.org/publications/microbanking-bulletin/2012/04/measuring-governance-microfinance
“Microinsurance Podcast #1-The Role of Brokers,” http://soundcloud.com/microinsurance-network/mircoinsurance-podcast-role-of
MicroCapital.org story, May 23, 2012, “MICROFINANCE PUBLICATION ROUND-UP: Microfinance Information Exchange Diamond Rating System; Savings-Linked Microinsurance in India; Banking Correspondents in Brazil,” https://www.microcapital.org/microfinance-publication-round-up-microfinance-information-exchange-diamond-rating-system-savings-linked-microinsurance-in-india-banking-correspondents-in-brazil/
MicroCapital Universe Profile: CGAP
MicroCapital Universe Profile: Microfinance Information Exchange
MicroCapital Universe Profile: Microinsurance Network
MicroCapital Universe Profile: MicroEnsure
MicroCapital Universe Profile: Opportunity International
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