by Bharathi Ram - Key Players -

MICROCAPITAL STORY: Consultative Group to Assist the Poor (CGAP) 2008 Microfinance Investment Vehicles (MIV) Survey – Summary of Main Findings

The Consultative Group to Assist the Poor (CGAP) released the main findings of its 2008 survey on Microfinance Investment Vehicles (MIVs), analyzing evolving opportunities in microfinance for the investor community.

MIVs are private investment funds that play the role of a financial intermediary between foreign investors and microfinance institutions (MFIs). Most MIVs are very small in size with 86 percent of MIVs having less than USD 20 million under management. According to this CGAP brief, MIVs reach out to smaller MFIs with the average MIV investment size equal to USD 1 million. The full text of the main findings of the CGAP survey was released in September, 2008 and can be found here.

As of September 2008, CGAP identified 91 MIVs (p2) as currently active with total assets under management (AUM) amounting to USD 5.4 billion. 58 of these 91 MIVs were surveyed by CGAP with total assets of the surveyed MIVs accounting to USD 4.7 billion. The survey reveals an increase in the average total assets of MIVs from USD 66 million in 2006 to USD 81 million in 2007. Although the preferred instruments of MIVs is still debt which comprises 78 percent (p2) of total microfinance portfolio, equity investments increased by 95 percent (p2) in 2007 as compared to 2006.

CGAP categorizes the surveyed MIVs into 7 peer groups and the survey results are disclosed for each MIV group as a whole. The seven groups are:

  • Registered mutual funds: These are organizations that seek money market returns primarily from fixed income investments and are regulated by market authorities
  • Commercial fixed income investment funds: These are private investment companies seeking returns from fixed income investments but are not subject to market regulation
  • Structured finance vehicles passively managed: Organizations whose assets include only a static pool of fixed income investments and the fund managers make as few portfolio decisions as possible in order to minimize transaction costs.
  • Structured finance vehicles actively managed: Organizations which include mainly fixed income investments and which have their pool of assets actively managed with the goal of exceeding certain investment benchmarks.
  • Blended value funds: These are organizations generally managed by not-for-profit organizations. They provide debt and equity finance for MFIs offering below market returns to socially focused investors.
  • Private equity funds: These are funds which are driven by commercial organizations with a strong development agenda and provide mainly equity finance.
  • Holding companies: These are companies which provide mainly equity and technical assistance to start-up microfinance banks.

Please refer to page 14 of the survey for a detailed list of MIVs in each group.

In terms of average total assets, structured finance vehicles (actively managed) recorded the highest with approximately USD 150 million (p6) followed by registered mutual funds with approximately USD 103 million (p6) and blended value funds with USD 80 million (p6). From a growth perspective, commercial investment funds registered the highest growth in 2007 with 241.5 percent (p6) followed by registered mutual funds at 113.5 percent and private equity funds at 108.6 percent. While debt is still the preferred instrument for passively managed structured finance vehicles (comprising almost 100 percent (p7) of the microfinance portfolio), equity is the preferred instrument for private equity funds and holding companies (comprising nearly 85 percent of total microfinance portfolio). Please refer to page 7 of the survey for a more detailed analysis of the same.

By Bharathi Ram, Research Assistant

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