Microfinance Investors Adjust Strategy in Tougher Market Conditions

01 October 2010

Microfinance Investment Vehicles (MIVs) in 2010 are confronting the most challenging investment environment since the 1990s. Over the past two years, microfinance investors witnessed a handful of debt defaults and a major slowdown in demand for capital from microfinance institutions (MFIs)—a sharp contrast after the heady market growth experienced in previous years. However, MIVs continue to grow and earn positive returns.

MIVs’ total assets under management grew by 25 percent, with 11 new funds established in 2009. The returns of fixed-income funds remain positive at 3.9 percent, although they declined compared to 2008. Support from investors to the sector remains strong. Private institutional investors are the main source of MIV funding (46 percent of total MIV funding sources), followed by retail investors and high net worth individuals (33 percent), and public investors (21 percent).

This Brief presents the major trends within the MIV sector to emerge from this year’s CGAP MIV survey, powered by Symbiotics. It also highlights the growing commitment among MIVs to sound environment, social, and governance (ESG) practices. The last section discusses MIV challenges and prospects.