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A is for Alpha ( Tricks and Trends)

A is for Alpha ( Tricks and Trends). Damian von Stauffenberg April 11th, 2007. What Shapes MFIs ?. What Shapes MFIs?. Growth. Portfolio Growth – 40 Latin American MFIs. 40 Latin American MFIs. Two Examples. 2000 2006 WWB Cali Portfolio ($mm) 12.8 146.2

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A is for Alpha ( Tricks and Trends)

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  1. A is for Alpha(Tricks and Trends) Damian von Stauffenberg April 11th, 2007

  2. What Shapes MFIs ?

  3. What Shapes MFIs? • Growth

  4. Portfolio Growth – 40 Latin American MFIs

  5. 40 Latin American MFIs

  6. Two Examples 20002006 WWB Cali Portfolio ($mm) 12.8 146.2 Clients 33,000 149,000 Crear Arequipa Portfolio ($mm) 2.3 29.0 Clients 2,400 26,100

  7. What Shapes MFIs ? (Cont’d) • Do the Clothes Still Fit? Where to look: • Consistent Methodology • Delegation • Controls • Governance • Organ. & Staff • Financial Structure

  8. How Do We Rate ? • Microfinance Operations • Portfolio Quality • Management & Organization • Governance & Strategic Positioning • Financial Position

  9. Main Trends (In addition to growth) • Increasing Competition • Dropping Rates • Greater Efficiency • More (and better) Products • Commercial Funds Have Replaced Donor Money • NGOs Convert into Financial Intermediaries

  10. Bumps on the Road (MFIs) • Over- Indebtedness of Borrowers • Some MFIs will Overreach • Populist Politics • Economic Cycles haven’t ended!

  11. Bumps on the Road (Funders) • Oversupply of Foreign Funding • Crowding Out • Too many MIVs chasing too few MFIs? • Lack of Transparency • Returns don’t match risks • No Benchmarks • No Independent Performance Evaluation

  12. Direct International Financial Institution Investments in Microfinance Institutions Source: CGAP Public Investor Microfinance Portfolio - 2005 Survey

  13. International Financial Institutions Lending to Latin American MFIs Rated by MicroRate 2005Growth Ratesby Rating Grade In 2005, IFI’s increased their investments in the strongest MFIs and decreased their investments in the weakest MFIs.

  14. 1,800 $1,533 1,600 1,400 $1066 1,200 $1,008 1,000 82% USD Millions 800 $554 600 400 200 0 MicroRate MIV Universe: 2004 MicroRate MIV Universe: 2005 Total Assets Microfinance Portfolio Growth of Microfinance Investment Vehicles (MIVs)2003-2005

  15. MIV Microfinance Portfolio Geographic Investment Analysis Round 2 MIVs 14 MIVs Asia 12% Eastern Europe Latin America 17% & Caribbean 56% Africa 8% Other Regions & World Wide 7% Africa Eastern Europe Asia Latin America and the Caribbean Other Regions/World Wide

  16. Thank You !

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