A wrap of the recent spate of announcements in the microfinance space shows some interesting trends:
Investments are coming from across the world and are of significantly larger scale.
Dubai-based privately-owned finance firm Legatum Capital, run by one of New Zealand’s richest men – Christopher Chandler committed a $25 million investment in a leading Indian micro financier Share Microfin. VC heavyweight Sequoia Capital led a consortium that invested $11.5 million in India’s SKS Microfinance
Increasingly, the fine print with these investments includes an exit option.
According to Sequoia’s terms of investment, SKS must offer its shares publicly in an IPO within three years or face a sale/merger of the company.
Compartamos, the Mexican microfinance bank, went public on April 20, raising $407 mm in a much tracked secondary share sale.
Even while the debate rages on whether VCs with defined investment time horizons do good to MFIs, exit options are clearly key to justifying sustainable investments.
New and seemingly unlikely partnerships are being developed for quicker penetration and shared risk.
Western Union entered into a strategic alliance with micro financier Spandana to provide money transfer services.
SKS Microfinance and Citibank announced a USD 44 Million financing program involving Citibank India purchasing loans that are originated by SKS.
The benefits from these large investments will emerge over time.