MicroRate, a for-profit microfinance rating agency based in the U.S., has recently released its eighth annual survey of international microfinance investment vehicles (MIVs). The report includes information from 92 MIVs, which hold total assets of USD 8.1 billion as of 2012, an estimated 95 percent of the global share. USD 438 million in MIV investments were redeemed that same year, a decrease from USD 467 million during 2011.
According to the report, MIVs have grown between 11 percent and 17 percent per year between 2009 and 2013 with growth and liquidity rates becoming increasingly stable. The liquidity rate in 2012 was 8.2 percent, down from 14.6 percent in 2009.
In 2012, Latin America and East Asia/Pacific had the highest growth (24 and 23 percent, respectively). In India, MIVs have resumed growth after a decline in recent years. Peru holds an MIV market share of 10 percent with opportunities for growth through investments in smaller rural MFIs. Despite growth in Africa, that continent’s market share decreased from 8 percent to 7 percent in 2012. On a per-country basis, investments grew fastest in Georgia, Azerbajan, Bosnia and Mongolia with 78, 45, 43 and 38 percent respective growth rates.
Industry trends include increases in the following: local-currency lending, diversification of funds into subsectors such as agricultural finance and fair trade, sizes of microfinance funds and investor demand for specialties like impact investing. In 2012, the median MIV size was USD 35 million, a 600 percent increase from 2006. Although the largest MIVs still provide the most loans, market share for the five largest MIVs decreased to 42 percent, from 46 percent in 2006.
The authors conclude the survey with thoughts about the future. Does the slower growth rate imply sustainable, responsible investing practices? They argue that investors should be careful, remaining aware of potential risks.
By Megan McGowan, Research Associate
About MicroRate:
MicroRate is a for-profit microfinance rating agency formally approved by CGAP (Consultative Group to Assist the Poor); the Inter-American Development Bank; and Peru’s Superintendency of Banking, Insurance and Pension Fund Managers (SBS). It was founded in the US in 1997 with the intent of objectively evaluating microfinance institutions (MFIs), thereby increasing transparency and driving additional funding into microfinance. MicroRate has completed approximately 600 ratings of approximately 200 MFIs worldwide as of 2012 and claims to perform its evaluations not through “rigid rating formulas,” but through the “evaluation of critical risk.” A private company, MicroRate is based in Washington, DC, with offices in Peru and Morocco.
Sources and Additional Information
[1] MicroRate: The State of Microfinance Investment 2013, http://www.microrate.com/media/downloads/2013/11/MicroRate-The-State-of-Microfinance-Investment-2013.pdf
MicroCapital.org: “MICROFINANCE PUBLICATION ROUND-UP: Microfinance Institution Tiers, Microfinance in East Africa, Weather Risk Management,” April 19, 2013, https://www.microcapital.org/microfinance-publication-round-up-microfinance-institution-tiers-microfinance-in-east-africa-weather-risk-management/
MicroCapital.org: “MICROFINANCE PUBLICATION ROUND-UP: Property Microinsurance in Columbia, Portfolio Reviews for Microfinance Funders, Microfinance Rating Comparability,” February 4, 2013, https://www.microcapital.org/microfinance-publication-round-up-property-microinsurance-in-columbia-portfolio-reviews-for-microfinance-funders-microfinance-rating-comparability/
MicroCapital.org: “SPECIAL REPORT: Panel: Seeking Diversification, Microfinance Investors Often Reap Annual Returns of 4%,” November 19, 2012, https://www.microcapital.org/special-report-panel-seeking-diversification-microfinance-investors-often-reap-annual-returns-of-4/ – more-21122
MicroCapital Universe Profile: MicroRate, https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=MicroRate
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