Financing the Microfinanciers
How Microfinance Institutions Are Sourcing Capital
Photos and event write-up by Sriram Puthucode
Maya Chorengel of Elevar Equityand Ann Miles of BlueOrchard Finance talked about sourcing capital in the forms of equity, debt, and savings. The SVMN Speaker Event was well-attended by a diverse mix of financial analysts, microfinance industry experts, and members from the nonprofit space. At the onset, Sean Foote, Partner at Labrador Ventures and the moderator for the evening, introduced the event as a “living room” discussion involving a lot of interaction from the audience. Indeed the conversation ended up being very informative, intelligent, and interactive.
Maya started off the discussion talking about mobilizing domestic capital in microfinance and the importance of deposits as an investment option for microfinance institutions (MFIs). She said that the microfinance sector is capital-constrained since the global financial crisis, as MFIs are finding it difficult to raise capital. She pointed out that by the time the microfinance pie grows, domestic capital is going to grow also.
Ann reviewed CGAP’s (Consultative Group to Assist the Poor) classification of microfinance investment vehicles (MIVs). She mentioned that the average top five MIVs manage 43% of the microfinance investment portfolio. She discussed the inability of most MFIs to operate as banks, citing as constraints the lack of trained professionals, lack of knowledge in managing deposits, and limitations in building capacity. Ann also talked about the slowing trend in the transformation of grant-based MFIs to for-profit MFIs, attributing as causes regulations, costs, time for transformation, complications, and ownership issues.
The discussion progressed with much participation of the attendees. Sean did a great job of moderating, including getting a clarification of the differences between equity-based and grant-based investments in microfinance. In closing, both Maya and Ann spoke about the challenges faced by microfinance institutions and cited a few examples such as supply of equity, a lack of clear exit strategies for MFI equity funds, commodity and food prices, and foreign exchange exposure.
The moderated discussion with microfinance experts was an engaging and informative event, and Silicon Valley Microfinance Network will certainly feature this format again in its future events.
Ann Miles’ presentation:
Maya Chorengel’s presentation: