International For-Profit Investments in Microfinance Institutions Equity
Abstract: The purpose of this
document is to review the funding options for Microfinance Institutions (MFIs),
define the size of the holdings of international investors in MFI equity and in
particular the MFIs listed in stock exchanges, analyze the characteristics of
these subset of the financial world and study the stock exchange evolution of
some listed MFIs amid the financial crisis.
Design/methodology/approach: Since academic literature on listed MFI
equity is virtually inexistent, most of the information has been obtained from
the World Bank, annual accounts of the listed MFIs, stock exchanges and from
equity research documents.
Findings and Originality/value: Microfinance Institutions share several
common characteristics that make them a resilient business and the few MFIs
that are listed in stock exchanges seem to have performed better in the
financial crisis. Microfinance can be considered as one of the new frontiers of
the expansion of the global banking industry.
Practical implications: Presently, international for-profit investors
have very few ways of investing in microfinance equity. Most of the equity of
the MFI equity is funded locally or thanks to the local public sector. The
stock exchange listing of the MFIs should drive MFIs towards a more professional
management, more transparency and better governance.
Social implications: Microfinance Institutions provide credit to
microenterprises in poor countries that have no other alternative sources of
external capital to expand its activity. If global investors could easily
invest in the listed equity of the MFIs these institutions would expand its
lending books and would improve its governance, part of the population living
in poor areas or with lower income could ameliorate its standard of living.
Originality/value: The number of Microfinance Institutions that are
professionally run like commercial banks is still scarce and even more scarce
are the MFI listed in public stock exchanges. Therefore the published
literature on the characteristics and performance of the listed equity of the
Microfinance Institutions is extremely reduced. But microfinance assets are
rapidly growing and MFIs will need to list their equity in stock exchanges to
sustain this expansion.
Author: Carlos Rodriguez
Monroy, Ángel Huerga
Journal Code: jptindustrigg130027
