Microfinance Donors & Investors
Who is Funding Microfinance?
Many developing and transition economies receive cross-border, or foreign, funding for microfinance. This funding has been provided by a broad range of donors and investors with diverse institutional characteristics, business models, instruments, return expectations, risk appetites, and conceptions about the ultimate goal of microfinance. Also, many new funders are vying to contribute to microfinance: there are over 100 microfinance investment vehicles that channel private investments to microfinance. Interest from foundations is also expanding, with over 350 foundations funding microfinance, including 40 that have chosen microfinance as a key program area. Development finance institutions (DFIs) such as KfW, EBRD, and IFC and public bilateral and multilateral agencies continue to provide significant funding to microfinance.
| Public Funders |
Private Funders and Funding Intermediaries |
Multilateral Development Banks and UN Agencies
Agencies owned by multiple governments of the industrialized and developing world [e.g., World Bank, the regional development banks], and UN agencies [e.g., the United Nations Capital Development Fund (UNCDF), International Fund for Agricultural Development (IFAD)] |
Foundations
Non-profit corporations or charitable trusts typically funded by a private individual, a family or a corporation, with a principal purpose of making grants to unrelated organizations [e.g., Bill & Melinda Gates Foundation, Ford Foundation] |
Bilateral Agencies
Aid agencies and ministries of governments in developed countries [e.g., Swedish International Development Agency (Sida), United States Agency for International Development (USAID)] |
International NGOs
Non-governmental organizations that can be either specialized in microfinance [e.g., ACCION, FINCA] or work in multiple sectors, including microfinance [e.g., CARE, Concern Worldwide] |
Development Finance Institutions (DFIs)
The private sector arms of government-owned bilateral and multilateral development agencies [e.g., KfW (Germany), International Finance Corporation (IFC)] |
Individual Investors
Socially motivated individual “retail” investors and high net worth individuals that act as venture philanthropists. Individual investors provide their capital through organizations like Oikocredit, a Dutch cooperative society, investment funds, and online, peer-to-peer platforms like Kiva.org. |
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Institutional Investors
International retail banks, investment banks, pension funds, and private equity funds that channel capital into microfinance, often with an expectation of return that is below market [e.g., Deutsche Bank, TIAA-CREF] |
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Microfinance Investment Vehicles (MIVs)
Investment entities that have microfinance as a core investment objective and mandate. MIVs receive money from investors through the issuance of shares, units, bonds, or other financial instruments. They provide debt, equity, or guarantees to MFIs and non-specialized financial intermediaries. [e.g., European Fund for South East Europe (EFSE), BlueOrchard] |
To improve transparency on funding flows CGAP conducts an annual survey with microfinance funders.
How much money is flowing into microfinance?
CGAP estimates that cross-border funders increased their global commitments to microfinance by around 13% in 2010 up to at least US$24 billion. This estimate includes funding from public funders (DFIs, multilaterals, bilaterals) and private funders (foundations, institutional and individual investors).
The five largest funders in terms of total commitments remained unchanged over the past three years: KfW, World Bank, AsDB, IFC and EBRD.
What is the money used for?
The bulk of cross-border funding (86%) is used for on-lending to retail clients. The share of commitments dedicated to capacity building remained at 14% over the last four years.
Where does the money go?
SA, ECA, and LAC are the regions receiving the highest amounts of cross-border funding. These three regions combined receive more than 60% of total commitments. Commitments to SSA represent 11% of global commitments and increased steadily over the last four years, albeit at slower growth rates than commitments globally. MENA and EAP remain the regions receiving the least funding for microfinance. Commitments to EAP represented 9% of global commitments as of December 2010. However, commitments to EAP increased by 49%, the highest growth reported in any region in 2010. Commitments to MENA represent around 4% of global commitments and increased by 5% in 2010.
How does the money flow?
Debt is the main instrument used by cross-border funders to fund microfinance. As of December 2010, debt represented 60% of total commitments, while equity represented 13%, grants 11% and guarantees 10%. The remaining 6% includes different structured finance products.
Equity investments increased by 12% in 2010, a much slower growth rate than in the previous year (57%). The amount committed through guarantees increased by 93%, mostly driven by four large new guarantee programs. Grant commitments decreased for the first time in 2010 by 9%, mostly due to projects coming to an end in 2010 and a relative slowdown in new commitments.
In 2010, around 40% of debt funding is loans from multilateral agencies to governments. Governments can use the funds to on-lend to MFIs or as grants to support capacity-building initiatives at the retail, market infrastructure, and policy levels.
Who receives the money?
The 10 DFIs surveyed in 2011 reported commitments to microfinance of US$ 9.1 billion as of December 2010. In 2010, as in the past three years, half of the commitments of these DFIs (US$4.4 billion) were concentrated on only 30 recipients, including 12 MFIs and 18 MIVs, holdings, local banks, and funds.
Among DFIs, there is a clear trend towards indirect funding, i.e. funding microfinance investment vehicles (MIVs) and holdings that channel funding to retail financial service providers. Over the last four years, the share of DFI funding via MIVs and holdings has increased from 22% in 2008 to 29% in 2010.
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