MICROFINANCE PAPER WRAP-UP: Symbiotics 2011 MIV Survey Report: Market Data and Peer Group Analysis

Published by Symbiotics Research and Advisory; August 2011; 34 pages; available at http://www.microfinancegateway.org/p/site/m//template.rc/1.9.53112

Symbiotics Research and Advisory, a member of the Switzerland-based Symbiotics Group, has conducted a survey of microfinance investment vehicles (MIVs) on behalf of CGAP (Consultative Group to Assist the Poor), a US-based policy and research center, which draws on survey responses from 70 MIVs with a total of USD 5.9 billion in assets under management, representing approximately 87 percent of the global MIV market asset base. According to the survey, the microfinance institutions (MFIs) that are supported by these MIVs report an average loan size of USD 1,600 and an average outreach of 137,000 borrowers, with 60 percent of borrowers being female and 44 percent of borrowers living in rural areas.

The report identifies geographic concentration as a key trend over the last year, with the top five MIVs now accounting for 51 percent of all assets and 46 percent of microfinance portfolios, while the next five account for 14 percent and 16 percent, respectively. The authors note that MIVs tend to be highly consolidated in terms of their regional exposure as well as their five largest country investments. Growth rates also appear to be stabilizing, as MIVs reported 10 percent growth in assets, which is the lowest yearly increase ever recorded by this survey, which has been conducted annually since 2007. In the last year, MIVs have decreased their cash balances from 17 percent to 13 percent as they reevaluate opportunities to expand their microfinance portfolios.

For the purpose of the analysis, MIVs are separated into three categories based on their allocation of non-cash assets: fixed-income funds, equity funds and mixed funds. Fixed-income funds are the most common type and represent the lion’s share of MIVs, accounting for 64 percent of respondents and 83 percent of total assets. Mixed funds and equity funds account for a smaller share of MIVs (19 percent and 17 percent, respectively) and a lesser share of total assets as well (11 percent and 6 percent). Among MIVs that took part in the survey, 73 percent of the aggregate portfolio is invested in microfinance, 10 percent is in other interests including small and medium-sized enterprises (SMEs) and fair trade investments, and the balance is in cash and other assets. To a greater extent than funds in other categories, equity funds tend to focus on microfinance (92 percent) to the exclusion of other investments (3 percent).

In 2010, MIV growth was driven by a 58-percent increase in assets managed by equity funds, which is expected to continue increasing by 118 percent in 2011. Mixed funds are predicted to grow at a consistent rate of around 18 percent, while fixed-income funds are expected to almost to triple their rate of growth from 6 percent to 17 percent. Overall MIV growth is expected to rise from 10 percent to 21 percent during the next year.

On a regional basis, growth is highest in those areas that have historically attracted the smallest share of investment – South Asia and Sub-Saharan Africa – while relatively saturated markets like Eastern Europe, Central Asia, Latin America and the Caribbean are growing more modestly as they already have been targeted by fixed-income funds and mixed funds. Equity funds tend to concentrate their investment in just a few countries and a few currencies, while fixed-income funds and mixed funds are, on average, more diversified in their approach.

On the funding side, private institutional investors account for 45 percent of investments in MIVs. Retail investors and high net worth individuals represent 30 percent of investments, and public-sector funders make up the balance with 26 percent. Public-sector institutions invest more often in fixed-income funds, while mixed and equity funds are more heavily supported by private institutional investors.

Annual returns in 2010 have continued to decline steadily since the survey was first conducted in 2007. Reported US dollar returns were 2.4 percent and euro returns were 3.1 percent for the year. While equity funds forecast an improvement in financial performance in 2011, most fund managers expect relative stability going forward. In terms of costs, the survey points to an inverse relationship between total assets and the total expense ratio; fixed-income funds have an average of more than USD 100 million in total assets and report the lowest expense ratios, while equity funds are smaller and have higher expenses.

The final portion of the MIV survey considers environmental, social and governance (ESG) standards. 88 percent of MIVs report some form of ESG information to investors, and 71 percent of MIVs require anti-corruption policies. But most MIVs are not yet evaluating environmental performance – less than half of respondents indicated that they monitor MFIs’ environmental risks or offer compensation for carbon emissions. Performance has been strong in terms of the Smart Campaign’s Client Protection Principles, with 83 percent of MIVs endorsing this industry standard. Equity funds had the lowest performance in terms of ESG practices, while mixed funds were consistently above average. MIVs are good at reporting basic information like average loan sizes and rural-urban distributions, but are not yet consistently divulging information relating to specific microfinance products.

By Rohan Trivedi, Research Associate

About the Symbiotics Group:
Founded in 2005, Symbiotics provides for-profit investment intermediary services to the microfinance industry as well as business services to investors and practitioners of micro- and small enterprise (MSE) development. Overall, Symbiotics has been working with approximately twenty investment funds (MIVs) and a dozen institutional investors, facilitating the provision of USD 895 million in capital to about half a million micro-, small and medium-sized enterprises (MSMEs) through 150 financial institutions in approximately 35 emerging economies. The company also offers Syminvest, a microfinance investment intelligence platform designed to increase transparency and enhance investment capacity in the industry by monitoring markets, regions and specific institutions.

About CGAP (Consultative Group to Assist the Poor):
CGAP (Consultative Group to Assist the Poor) is a nonprofit policy and research center dedicated to providing financial access for poor people worldwide. CGAP was established in 1995 by approximately thirty development agencies and private foundations and is housed at the World Bank in Washington, DC, USA. Its mission is to provide “market intelligence, promote standards, develop innovative solutions and offer advisory services to governments, financial service providers, donors, and investors.”

Sources and Additional Resources:

MicroCapital.org story, November 1, 2010: “MICROCAPITAL PAPER WRAP-UP: Microfinance Investment Vehicle (MIV) Survey Market Data and Peer Group Analysis: The 2010 CGAP MIV Survey, by CGAP (Consultative Group to Assist the Poor)”, https://www.microcapital.org/microcapital-paper-wrap-up-microfinance-investment-vehicle-miv-survey-market-data-and-peer-group-analysis-the-2010-cgap-miv-survey-by-cgap-consultative-group-to-assist-the-poor/

MicroCapital Universe Profile: Symbiotics Group, https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Symbiotics+Group

MicroCapital Universe Profile: CGAP (Consultative Group to Assist the Poor), https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=CGAP+%28Consultative+Group+to+Assist+the+Poor%29

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