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ADA Discussion Paper Series ADA Discussion Paper No.2

ADA Discussion Paper Series ADA Discussion Paper No.2 It looks at 7 top MIVs and their outstanding amounts to MFIs in the years 2007, 2008, 2009 It finds a concentration of funds in the larger, older and more mature MFIs

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ADA Discussion Paper Series ADA Discussion Paper No.2

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  1. ADA Discussion PaperSeries • ADA Discussion Paper No.2 • It looks at 7 top MIVs and their outstanding amounts to MFIs in the years 2007, 2008, 2009 • It finds a concentration of funds in the larger, older and more mature MFIs • It discusses the possible consequences of this concentration for the microfinance sector

  2. The average outstanding amount of the 7 top MIVs lay at 2.63 million USD in 2007, at 3.10 million USD in 2008 and at 2.78 million USD in 2009.

  3. In each year, about 86% of the total outstanding amounts went to the first 250 MFIs, 10% to the next 150 MFIs and only 4% to the remaining MFIs. 86.83% 85.35% 86.13% Total outstanding amounts (in thousand USD) 9.59% 9.78% 9.56% 4.87% 3.58% 4.31% Years

  4. Past performance and future potential of large and more mature MFIs is easier and cheaper to evaluate. • Funding of smaller and less mature MFIs seems,and often is, more risky. • Larger, more mature MFIs might grow even faster, but might also become less strict in their analysis and follow-up of projects (riskier loans, consumer loans, loans for other non-productive purposes > over-indebtedness). • There remain less opportunities for smaller, less mature MFIs to grow and to become more competitive.

  5. Approach of MFIs with different criteria • Establishment of more MIVs with a structure that allows for a better risk management (one class of shares guaranteeing another classes of shares) and which allows for the taking of more risks • Facilitation of the access to ratings for high potential newcomers, fostering of co-funding initiatives (investors paying for information contained in the ratings?) • Complementation of financial support, especially of the smaller, less mature MFIs, by technical support or capacity building measures

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