Equity in Microfinance: Some Reference Text

Financing Microfinance Institutions: The Context for Transitions to Private Capital, de Sousa-Shields, M., Miamidian, E., Steeren, J., King, B. & Frankiewicz, C., Dec 2004, USAID - U.S. Agency for International Development

This paper states that the microfinance sector is at crossroads between financing dominated by non-commercial sources and one that is increasingly and necessarily responding to private sector financing needs and interests. The authors observe that if the sector has to meet its goal of serving a large portion of the world’s poor with permanent financial services, it must continue to prove the viability of its core low income market and must develop significantly deeper access to domestic commercial capital.

Tapping the Financial Markets for Microfinance: Grameen Foundation USAs Promotion of this Emerging Trend, Meehan, J. Oct 2004, Grameen Foundation

This paper attempts to define the role of the financial markets in the microfinance sector. Stating that the global unmet demand for microfinance is pegged at around US $ 296 billion, the paper makes a case for long term role of the financial markets in biding the huge unmet demand. The author has made the following suggestions for greater integration of the microfinance sector with the financial markets:

· Hiring of an Experienced Chief Financial Officer;

· Hiring of an Advisor to communicate with potential investors;

· Preparation of a Business Plan;

· Training in Corporate Finance.

Raising Capital Through Equity Investments in MFIs: Lessons From ACLEDA, Cambodia, Kooi, P. Jun 2001, UNCDF

This paper presents issues in equity investment in microfinance institutions (MFIs).The paper also presents the fundamentals of the investment criteria that public and private investors would apply before investing:

· Development phase of the microfinance industry;

· Leadership status of the MFI;

· A clear vision and commitment to become a profitable MFI;

· A realistic business plan;

· Appropriate ownership and governance structures;

· Adequate management information systems;

· A sound exit strategy.

Raising Capital for Microfinance: Sources of Funding and Opportunities for Equity Financing, Fehr, D., Hishigsuren G, School of Community Economic Development, Southern New Hampshire University, Working Paper No. 2004-01

This paper reviews financing sources commonly used in microfinance, and suggests an outline financial analysis that MFIs might use in approaching potential equity investors. The authors state that these proposed financial procedures, while quite common corporate techniques in well-developed countries, have not been widely applied in microfinance. While this may partially be attributed to the lack of comprehensive financial and operating data in MFIs, most providers of donor and grant funding have been satisfied to concentrate on the social benefits of their investments. The authors argue that, if mainstream investors are to become investors in microfinance projects, they will likely require financial analyses similar to those used for their for-profit investing activities.