Equity Investment Exit Strategies and the Future of a Secondary Market

Presenter: Alex Silva, President and Founder, OMTRIX Financial Consultants and former director, PROFUND

Emily says he (and PROFUND) are some of the coolest things she's seen in the field of microfinance in terms of what they've accomplished.

Vikam Akula, CEO, SKS

[http://web.archive.org/web/20070521020143/http://www.sksindia.com/|SKS] is the largest microfinance institution in India. Current portfolio is $320 million; portfolio at risk is less than 1 percent; 10% profit margin.

For all the success that microfinance has had, there's also a fundamental flaw. It has not been able to scale. It only reaches 15%-20% of the market. If that happened in telecom or some other industry, we'd write it off as underperforming. That's just the gap on credit alone; it doesn't include the gap in insurance and other products.

Why? Lack of capital; lack of capacity; and the high cost of microfinance. At the end of the day, it's still a bunch of tiny loans, and there are high transaction costs.

MFIs continue to rely on social investors, and there's just not enough capital to finance the industry.

A woman said to me, "Am I not poor too? Do I not deserve a chance to get my family out of poverty." I was so jarred by that question that I wanted to design microcredit in such a way that you never have to say no to a poor person who is just looking for an opportunity.

That led me to think that you needed to develop a profit model to get commercial capital. Learn from scalable processes from the business world that they have used to spread things like Starbucks. Use technology to automate/lower transaction costs.

Profit: Microfinance has to be not just profitable but extremely profitable. In today's market, following the sub-prime meltdown, if you want investors to put money into unsecured borrowers, you'd better be not just profitable but very profitable.

Chris Brookfield, Directory, Equity Fund Investor, Unitus

[http://www.unitus.com/|Unitus] launched in March 2006, the first 100% privately-funded equity fund in the microfinance industry. Investing in Brazil, India, Mexico.

"The poor constitute the largest untapped global market."

We engage this market by providing access to people: sources of credit, sources of financial products, sources of information that poor people wouldn't otherwise have. We operate the same way my former venter capital firm operated.

We greatly prefer to guide our companies to IPOs as a source of exit. The basic reason to create IPOs is that having entrepreneurial firms serve the poor will be better than having branches of banks.

Theme by Danetsoft and Danang Probo Sayekti inspired by Maksimer