The Evolution of Fixed Income Investment in Microfinance - Identify the Opportunity, Negotiate and Execute

Roland Dominicé, Senior Manager, Investment Services, Symbiotics

Investment strategies: Pioneer funds, development funds, social investment funds, blended value funds, global balanced funds, commercial funds, leveraged funds. There's a diversification of ways to look at the market and structure the strategy of the fund. There's more and more control of the risk into these funds, whereas the later funds have a strategy. The return of these funds has increased over time and is increasing. The efficiency, more importantly, has improved.

Investment instruments:
*From hard currency to local currency
*From short- to mid- to long-term debt
*From senior to subordinated debt
*Unsecured vs. secured lending
*From loans to transferable securities
*From straight to structured obligations
*From borrower to issuer

Is microfinance a buyer's or a seller's market?

Q&A Panel moderated by Howard J. Finkelstein, Shareholder, Akerman Senterfitt

*Eliza Erikson, Senior Investment Officer, Calvert Foundation
*Richard Greenberg, Senior Manager, Micro and SME Finance, Overseas Private Investment corporation
*Cyrille Parant, Chief Executive Officer, PlaNet Investment Services
*Jean-Pierre Klumpp, COO, BlueOrchard
*Roland Dominicé

Eliza Erikson, Calvert. We've been investing primarily in debt in microfinance since 1995. Our mission to end poverty through investment has not changed. We continue to see enormous potential. Our average investment size in our fund is just $15,000. We continue to see a fair amount of demand. ... We find ourselves in the retail space, which has very tight margins. We've evolved through partnerships with other MIVs to help us originate our loans. We use that model to grow and get down to tier 2 institutions that need a lot of monitoring and due diligence. Doing syndication products with other MIVs.

(Emily thinks doing a syndication with Calvert could be a good way for us to begin investing in Honduras. That way we wouldn't have to do it alone.)

Definitions:Tier 1: Top ~150 MFIs; ~1-2% of MFIs
Tier 2: Near profitability; 8% of MFIs
Tier 3: Majority NGOs, approaching profitability; ~20% MFIs
Tier 4: Start-up MFIs, mostly unprofitable; ~70% of MFIs

MFIs tend to lie on a continuum, with the Tier 4s tending to be member-based NGOs, moving toward formal institutions as they approach Tier 1.

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