Microfinance Records Lowest Investment Growth in Six Years ? MicroRate
Friday, August 19, 2011
According to MicroRate’s ’The State of Microfinance Investment 2011’ report, the lingering effects of the economic crisis led to the lowest microfinance investment growth rate observed in the past 6 years, with total Microfinance Investment Vehicle (MIV) assets growing 12% in 2010.
Rating agency MicroRate has been doing annual survey and analysis of MIVs for the last six years and this year it received information from 80 MIVs covering 92% of global assets under management.
During 2010, MIV assets grew 12%2 -significantly lower than the 22% growth rate attained during 2009 and far below the annualized growth rate of 50% experienced from 2005 to 2009, the report says.
Reduced activity at the MFI level and expanding local sources of funding especially in Latin America, which are offering very competitive local currency loan rates are identified as the major factors contributing to the slowdown in MIV asset growth.
In Bolivia, local lenders are offering 3 and 4-year local currency loans at 6% – down significantly from 8% and 9% only a year ago. “Foreign lenders can’t touch those rates,” states Hugo Couderé of Alterfin.
The average MIV investment amount increased from $1.4 million in 2009 to $1.7 million in 2010, as the number of individual positions decreased during the same period.
MIV’s microfinance assets are predominantly debt instruments, as has been the case for the last six years. Of microfinance assets held by MIVs in 2010, debt investments represent 82%, followed by equity investments at 18%. Guarantees represent less than 0.5%.
Of the 80 MIVs analyzed, 47 reported having microfinance equity investments. The number of equity only fund has increased over the years. In 2010 there were 14 equity-only funds representing 64% of the total MIV equity investments by market value. The remaining 33 MIVs were larger hybrid funds. By contrast, in 2005, there were only 5 specialized equity funds representing 28% of MIV microfinance equity investments.
Latin America and the Caribbean (LAC) and Europe and Central Asia received the largest share of microfinance investments – a combined total of 73% of all microfinance investment in 2010. The largest portion of microfinance assets was invested in ECA (38%) followed by LAC at 35% – a reversal of their positions at the end of 2009.