In a developing country of just 7 million people, with one of the lowest GDPs of the former Soviet Union, one would guess that a significant microfinance deal would be done by a European development bank, not by a commercial entity. This recent transaction, the fourth in a series worth a net total of $9.5 million, pales in comparison to the scale of transactions on the world financial markets. It also pales to the current total worldwide foreign direct investment (FDI) in microfinance, which is approximately $1.9 billion. Microfinance investment now represents .5% of worldwide annual FDI.
The fact that quasi-governmental development banks in a small and poor (even by regional standards) country like Tajikistan can place 4 simultaneous investments in the microfinance industry would have been unheard of not many years ago. Growth of foreign investment in microfinance has accelerated in recent years, signaling an emerging asset class, although 90% of this investment is from public sources like these Tajikistan deals.
Yet, despite growing foreign investment in microfinance, meager deal-flow plagues the industry. Only subsidized investment banks survive on such slim deals.
For this reason, we urge you to do business with the best microfinance funds that are pooling regional investments to provide market-rate returns. Only the growth of these funds will cultivate the deal-flow necessary for Wall Street to enjoy an asset class and the global poor to enjoy financial services.Additional Resources1) Analysis of recent growth trends of both domestic and foreign sources of MF investment funding
2) Excellent springboard for articles related to the market for foreign investment in microfinance 3) Time: "Why Micro Matters: Wall Street is Figuring Out How to Profitably Package Tiny Loans to Third World Entrepreneurs."
4) For more in-depth articles that discuss the commercialization of microfinance, visit the MicroCapital website(Tajikistan-specific sources) 5) UN-sponsored paper that discusses the investment climate in Tajikistan6) Findings of study that investigated various economic factors in Tajikistan7) Paper discusses current FDI climate in Tajikistan, as well as need for further investment for economic growth 8) European Bank for Reconstruction and Development’s (EBRD’s) involvement in Tajik microfinance institution9) TMSEF May 2005 Newsletter (EBRD-sponsored Tajik Micro and Small Enterprise Financial Facility)