2. Discussion Points
• IAMFI: Commercial Investors’ Perspective
• Microfinance Investment Landscape
• Due Diligence Framework and Tools
3. Presenter’s Perspective: About IAMFI
IAMFI is a global membership organization dedicated to helping
commercially oriented microfinance investors, particularly Limited
Partner institutional investors that invest through microfinance
investment intermediaries (MIIs), to deploy their capital more
effectively. IAMFI’s services include:
• Providing credible, comprehensive and timely information on
the microfinance industry from an independent perspective
• Conducting research on investment-related topics
• Hosting virtual and in-person educational and networking
events
• Facilitating dialogue and action among all sector participants
to improve the investing environment
4. IAMFI’s Members
Founding Members
DOEN Foundation TIAA-CREF
Omidyar Network Plainfield Asset Management
Gray Ghost Ventures Rockefeller Foundation
Gray Matters Capital Triodos Management
Prudential
Charter Members
BlueOrchard Finance USA, G. Casagrande (SPBD, MicroDreams),
Calvert Foundation, Co-operative Financial Services, Developing World Markets, Elevar
Equity, Global Microfinance Partners, HSBC, J.P. Morgan, MicroCredit Enterprises,
MicroFinanza Rating, MicroVest, Minlam Asset Management, Morgan Stanley, Norwegian
Microfinance Initiative, Planet Rating, Prudential, Omidyar-Tufts Microfinance Fund,
Orrick Herrington & Sutcliffe, Ronoc, Triple Jump, individuals
5. Microfinance Funding Demand
• Total population living under US$2/day: 2.7 billion
• Total current microfinance customers: 130 million
• Total estimated potential customers: 1.5 billion
• Total estimated microfinance loans outstanding: US$65 billion
• Estimated funding gap: US$235 billion
6. Microfinance Investors: Limited Partners
Institutional investors
• Government-owned Development Financial Institutions
(DFIs)
• Corporations (domestic and int’l banks, insurance cos.)
• Pension funds
• Endowments
• Private equity and hedge funds
• Foundations
• Family Offices
Individual Investors
• High net worth
• Retail
7. Microfinance Investments
US$13.27 billion invested at 12/09 by primarily cross border funders
• 122 MIIs
• Investor breakdown: DFIs: 21%; Individuals: 30%; Private sector
institutional investors: 49%
Fixed Income
• 72% of current investment
• 2009 average net yield: 7.9% (range: 3.1-15.2%)
Equity
• 28% of current investment, and growing
• Median Book Value Sept. 08 - Dec. 09: 1.3 - 5.0x (42 transactions)
• Sale of Latin American MFI shares Aug. 2009: 2.6x book
• SKS IPO, July 28, 2010: 4.2x book
• Investors targeting ROE of 9-25% and IRR of 15-20%
Sources: J.P. Morgan - CGAP Equity Surveys 2009-2010, IAMFI
8. Modern Portfolio Theory and Microfinance
Portfolio Theory: Key Concepts
• Diversification
• Low correlation
• Bias toward equity
• Illiquidity acceptable due to long-term horizon
Affinities with Microfinance
• MIVs offer diversification across countries, currencies
• Evidence of low correlation with OECD and emerging market
assets
• Increasing equity focus
• Long-term investment strategy – with compensation for
illiquidity
9. Key Due Diligence Themes – with financial and social
implications
• Management and ownership structure
• Investment strategy, philosophy and process
• Risk management process and controls
• Operations
• Investment returns
• Structural issues
10. Tools for Social Due Diligence
• Smart Campaign (client protections)
• Social Performance Task Force (11 indicators, process addresses
from intent to impact)
• GIIN Impact Reporting and Investment Standards (metrics on:
organization, product, financial, operational and product impact)
• Principles for Investors in Inclusive Finance (fair treatment and
protection of clients)
• Charting the Course (due diligence recommendations and tools)
• Social ratings of microfinance institutions and microfinance
investment vehicles
11. Appendix: About IAMFI
IAMFI is a global membership organization dedicated to helping
commercially oriented microfinance investors, particularly Limited
Partner institutional investors that invest through MIVs, to leverage
their capital more effectively. IAMFI’s services include:
• Providing credible, comprehensive and timely information on
the microfinance industry from an independent perspective
• Conducting research on investment-related topics
• Hosting virtual and in-person educational and networking events
• Facilitating dialogue and action among all sector participants to
improve the investing environment
12. IAMFI’s Members
Limited Partners (LPs): Active and potential investors who invest in an
investment vehicle rather than investing directly in microfinance
institutions.
General Partners (GPs): Public and private entities that manage a fund or
investment vehicle in which there are many investors.
Service Providers (SPs): Entities that help advise, structure, consult or
broker investments in the microfinance industry.
13. IAMFI’s Services
Information Portal
• Robust web site with third-party information and data about
microfinance and microfinance investing
• Reviewed for relevance and accuracy so that investors may
evaluate information more efficiently
• Password-protected “Members Only” section
Research
• White papers, position papers
• First industry assessment of commercial debt performance
• Global survey on private equity investment
• GP and LP due diligence checklists
• Social Performance measurement survey
• Others
14. IAMFI’s Services, cont.
Education, Conferences and Events
• Hosted and co-hosted international conferences on
microfinance investing
• Issue-specific events and seminars for special interest groups
within the Association’s membership
Community
• Forum for members to discuss interests, goals and concerns
• Vehicle for dialogue, consensus-building and action among all
sector actors
16. The International Association of Microfinance Investors (IAMFI) is a global
membership organization dedicated to serving current and potential
market-driven microfinance investors.
IAMFI helps investors achieve their goals by offering credible, objective
industry information, conducting research, organizing educational
and networking activities, and working to improve the global environment
for microfinance.
IAMFI seeks to promote the virtuous circle of capital flows between private
sector sources, investment vehicles and microfinance institutions, enabling
greater access to financial services for the world’s working poor.
For more details contact Joan Trant, jtrant@iamfi.com, +1.212.297.2137.
