MICROFINANCE PUBLICATION ROUND-UP: Unrealistic Expectations in Impact Investing, Valuing Microfinance Institutions (MFIs), Banking Costs in Kenya

“Marginalized Returns,” by Mara Bolis and Chris West, published by the Stanford Social Innovation Review, Fall 2017, 3 pages, available at:

The authors of this article cite the Global Impact Investing Network’s (GIIN’s) “2016 Annual Impact Investor Survey,” which reports that 84 percent of 158 investors who seek “measurable social and environmental impact alongside a financial return” in particular are expecting “risk-adjusted market-rate returns.” Ms Bolis and Dr West state that netting annual returns of 10 to 15 percent would require “returns from individual transactions of at least 20 percent.” However, they state most successful social enterprises “generate only low-single-digit-financial returns.” As a result of this gap, investors are giving “priority [to earning higher profits] over the interests of the communities their funding seeks to benefit.”

To re-balance impact investors’ “predefined expectations of financial return that are both too high and too short term” the authors offer the following solutions: (1) increasing the transparency of both social and financial returns of impact investors; (2) shifting away “from the false binary of grants with no financial-return expectations…and investments seeking net-15-percent-or-greater return;” (3) improving the structure of impact investments to “match the needs of enterprises seeking to benefit marginalized communities;” and (4) agreeing on a “voluntary code of practice that enshrines how the [impact investing] field should evolve.”

“Valuing Microfinance Institutions: Where Are We Now,” by Danielle Piskadlo, published by the Center for Financial Inclusion (CFI) at Accion, July 2017, 7 pages, available at:

In this paper, Ms Piskadlo investigates the difficulties faced by equity investors in valuing microfinance institutions (MFIs). Based on interviews with members of the Financial Inclusion Equity Council (FIEC), whose members represent private firms that make equity investments in microfinance institutions, the author concludes that the amount of “valuation data and comparables…has actually worsened” over the past decade. She attributes this to “a slowdown in investor interest in microfinance” caused by “a global finance crisis; and several country-level microfinance crises.”

Ms Piskadlo argues that this lack of data has led to “a sense of conservatism in valuing investments…”. The discounted cash flow valuation method is unpopular with the surveyed institutions “because it can produce such a wide variation in valuations.” Instead, impact investors have been using multiples of price-to-book or price-to-earnings ratios. Ms Piskadlo concludes by asserting the need for “more shared, comparable data that can be used to effectively benchmark impact investments.”

The Price of Being Banked: A Study on Transparency and Cost of Leading Banking Services Sold in Kenya;” by E Totolo, F Gwer and J Odero; published by Financial Sector Deepening Trust Kenya (FSDK); August 2017; 28 pages; available at:

In 2015 and early 2016, the authors of this paper recorded the prices to open, maintain and close accounts at 11 banks in Kenya. Their goals were to learn: (1) how much it costs to hold a bank account in Kenya; (2) how difficult it is to compare costs between banks; (3) how customers can compare banking prices more easily; and (4) how the industry can reduce customer fees.

The authors find that the price to open a bank account ranged from KSH 155 (USD 1.50) to KSH 5,600 (USD 54), with an average of KSH 1,322 (USD 13). The cost to maintain an account, which included “withdrawals, money transfers and account maintenance fees,” ranged from KSH 3,629 (USD 35) and KSH 13,460 (USD 130). The charge to close an account ranged from KSH 495 (USD 4.79) to KSH 1,815 (USD 18), with an average of KSH 1,002 (USD 10).

In collecting these figures, the authors found bank staff exhibited “a great deal of confusion over the actual cost of different banking products and services,” making the process of comparing costs “surprisingly difficult.” The authors also note that “bank staff are often incentivised to push certain accounts rather than help meet customer needs.”

To combat these issues, the authors propose the following solutions: (1) standardizing disclosure templates; (2) updating government-required pricing disclosures; (3) prioritizing consumer protection; (4) increasing the use of behavioral research to help customers improve decision-making; and (5) conducting more studies that cover “other services (e.g. fixed deposits, payments, etc.) and different industry segments (insurance, SACCO [savings and credit cooperatives], mobile, etc.)”

By Matthew O’Neill, Research Associate

Sources and Additional Resources:

Marginalized Returns:

Valuing Microfinance Institutions: Where Are We Now:

The Price of Being Banked: A Study on Transparency and Cost of Leading Banking Services Sold in Kenya:

About CFI:

About FSD Kenya:

About SSIR:

GIIN Report:

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