SPECIAL REPORT: Evaluating the Current Mindset of Investors Globally and Their Attitude to Microfinance as an Asset Class – Observations by Microfinance Investors at the Global Microfinance Investment Conference

“Raising Capital: Evaluating the Current Mindset of Investors Globally and Their Attitude to Microfinance as an Asset Class” was a panel discussion topic at the recent Global Microfinance Investment Conference which was held in New York. The conference was attended by a variety of participants in the microfinance sector: microfinance investors, representatives of microfinance institutions (MFIs), bankers, lawyers and researchers. The panel commentators were Joan Trant, executive director of the International Association of Microfinance Investors (IAMFI); Christina Leijonhufvud, managing director of Social Finance JP Morgan; Michael Hokenson, managing director of Minlam Asset Management LLC; and Margot Brandenburg, associate director of the Rockefeller Foundation, with microfinance lawyer Howard J. Finkelstein serving as moderator.

The panelists discussed recent trends in microfinance investing. Mr Hokenson from Minlam said that he has observed investors that are typically more mainstream (i.e. asset managers, family offices and pension funds) showing a growing interest in investing in microfinance. However, on the flip side, Ms Brandenburg from the Rockefeller Foundation commented that there is an over-saturation of investors that have similar risk appetites and are investing in the top-tier MFIs. Another trend that the panelists identified was investors requesting MFIs to provide social performance metrics. However, the panelists agreed that a balance must be found between what social performance data is important to gather and what is too costly to provide. Mr Finkelstein asked what concerns were being expressed by investors, and Ms Leijonhufvud replied investors are emphasizing governance at MFIs. She also noted that investors need to be staffed appropriately to be able to sufficiently monitor MFI investees. Ms Trant from IAMFI commented that MFI debt default and the resulting need for restructuring is starting to become a concern.

When the panel was asked whether or not concerns about MFI quality were going to push investors into adjacent sectors, i.e. small and medium-sized enterprise (SME) investing, education and agriculture, Ms Leijonhufvud commented that the challenge to growing the broader impact investment space is finding qualified asset managers.

By: Christine Chang, Research Associate

About International Association of Microfinance Investors (IAMFI):

International Association of Microfinance Investors (IAMFI) is a New York-based non-governmental organization launched in early 2008. The firm received start-up capital from DOEN Foundation, Gray Matters Capital and the Omidyar Network. IAMFI is a global membership organization with the goal of increasing capital flows to microfinance. IAMFI helps commercially oriented microfinance investors achieve their goals by offering industry information from an objective viewpoint, conducting independent research, hosting educational and networking events, and facilitating dialogue among industry actors to improve the global environment for microfinance.

About JP Morgan Social Finance:

JP Morgan’s Social Finance (SF) unit provides investment and capital markets services to social enterprises, funds, foundations, non-governmental organizations, development finance institutions and other investors serving the base of the economic pyramid. The unit was launched in November 2007, as part of JP Morgan’s investment banking division. The group serves as the client contact for social impact investment opportunities.

About Minlam Asset Management LLC:

Minlam Asset Management LLC is a US-based alternative investment advisor that created and manages the Minlam Microfinance Fund. Minlam Microfinance Fund is a hedge fund that invests exclusively in microfinance institutions (MFIs). The fund provides long-term local currency financing to microfinance institutions (MFIs). The fund targets MFIs that have a loan portfolio of at least USD 2.5 million, are operationally self-sufficient and have a portfolio at risk less than 5 percent. The loans provided by the fund range from USD 500,000 to USD 5 million and are provided at a rate competitive with the local market.

About Rockefeller Foundation:

The Rockefeller Foundation, founded in 1913, is a US-based non-profit organization whose mission is to “promote the well-being” of humanity through “smart globalization”. The Foundation operates around the world. Its efforts are overseen by an independent Board of Trustees and managed by its president through a leadership team drawn from scholarly, scientific and professional disciplines. By year-end 2008, total assets were USD 3.1 billion, up from USD 4.6 billion in 2007, with annual grants of USD 137 million.

Additional Resources:

MicroCapital Universe: International Association of Microfinance Investors (IAMFI): https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=International+Association+of+Microfinance+Investors+%28IAMFI%29

MicroCapital Universe: JP Morgan Social Finance: https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=JP+Morgan+Social+Finance

MicroCapital Universe: Minlam Microfinance Fund: https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Minlam+Microfinance+Fund

MicroCapital Universe: Rockefeller Foundation: https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Rockefeller+Foundation

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