How Have Market Challenges Affected Microfinance Investment Funds?

 A new CGAP brief reports that total assets of the 10 largest microfinance investment vehicles MIVs grew by 7.2 percent in 2011, which is higher than the 4.1 percent growth rate in 2010, but still below pre-crisis levels. This increase in growth rates was mainly driven by the increased microfinance institution (MFI) demand for capital. Moving forward, investment managers expect a further increase in MFI demand in 2012 and improved growth compared to 2011. They also expect further expansion into underserved markets and more focus on equity investments.

Although support from investors remained relatively strong, some fund managers have noted that raising private investor capital has become more challenging, mostly due to negative publicity in several microfinance markets and economic weakness in several European economies.

Fund managers are increasing their focus on social performance and end-client issues to ensure more responsible placement of their capital. MIVs are also increasingly targeting underserved markets, mostly in sub-Saharan Africa (SSA), Asia, and rural markets.

Read the brief in its entirety on CGAP.org.