A lot of discussion has circulated recently as to whether microfinance should be done in the traditional donor-driven, non-profit model -or- through the investor-driven, for-profit model. If our goal is to extend credit and banking services to the poor around the world by giving them a hand-up rather than a hand-out, who would do it best?
Since Nobel Laureate Muhammed Yunus made that first loan to poor women in a village in Bangladesh in the mid-1970’s (which was the incubus for the now famous Grameen Bank or “Community” Bank), the donor driven model has ruled. Roughly USD $50BB of credit is now circulating throughout the developing world through about 10,000 Microfinance Institutions (MFI’s) that serve 100 million clients. These clients use this capital to start and expand their businesses and they pay their loans back.. on time.. with interest. This model not only helps the poor by extending working capital to them but gives them something far more valuable… dignity.
However, current demand for microfinance is roughly ten times supply. With a default rate in microfinance over the last 30+ years of LESS THAN 2%, the microfinance sector is getting the attention of some of the largest financial institutions and governments in the world. This includes investments from Deutsche Bank, TIAA-CREF, European pension plans and other institutions that see investing in microfinance as the “new philanthropy” and very good for their corporate bottom-line. Investment returns in the sector astonish even the most hardened Wall Street and Silicon Valley veterans. Debt investments averaging near 7-10% returns coupled with Equity investments targeting and making 20%+ annually make this astonishment a reality. Betting on the poor is most assuredly a good bet.
One year after starting Global Microfinance Partners, I am more convinced than ever that helping the poor help themselves through small loans is the most intelligent and effective way to eliminate global poverty. Grassroots capitalism is taking hold and MFI’s worldwide are switching to for-profit models very quickly. Unhappy to simply sustain themselves through donations, MFI’s now wish to grow larger and serve more and more clients around the world who would otherwise have no access to financial services and business capital. Microfinance investing (or Microfinance 2.0) is the next evolution in an industry that changes lives and give hope to hundreds of millions of the working poor living around the world.
Microfinance Investment Vehicles (MIVs) have been in existence for over 10 years and offer debt vehicles to MFIs as well as making equity investments into the MFIs themselves. While the assets in MIVs range somewhere in the USD $10 billion range, this number is expected to rise exponentially as high net worth individuals, institutions, foundations and endowments see this new asset class as a true “Impact Investment.” Receiving a financial return on money that is ACTIVELY helping the poor through this sector is becoming more and more appealing to investors in this jaded time in the financial markets.
What if your investment portfolio could do good in the world? Not just the dividend and yield they make that you give to charity? These are questions that now have an exciting answers!
Mark Robeson
President
Global Microfinance Partners
Tel +1 704 332-9390
skype | mark.robeson
www.globalmicrofinancepartners.com
mark@globalmicrofinancepartners.com
“Connecting Capital Markets with Village Markets”
Wednesday, January 12, 2011
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