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Library » All Eyes on Asset Quality: Microfinance Global Valuation Survey 2010

All Eyes on Asset Quality: Microfinance Global Valuation Survey 2010
Mar 2010, Reille, X., Kneiding, C., Rozas, D., O’Donohoe, N. & Rozeira de Mariz, F.

Understanding equity valuation trends in microfinance

This report provides benchmarks for the valuation of publicly and privately listed microfinance equity. It draws on a sample of 200 private equity transactions between 2005 and 2009 as well as data on eight publicly traded low-income financial institutions.

The past year was challenging for microfinance, with deterioration in portfolio delinquency levels and profitability. Most MFIs, have, however, proved to be up to the challenge. The study reveals that:

Delinquency has been moderate since June 2009, and profitability levels have stabilized;
Most MFIs continue to maintain solid reserve and capitalization levels;
Microfinance equity valuations have continued to rise;
MFI sector has continued to attract private and public investors;
India, in particular, has shown unusually high valuations.

While the effects of high delinquency will continue to be felt in 2010, most MFIs will continue to expand client reach, but at a slower rate and with improved risk management. Equity valuation will continue to attract the interest of public and commercial investors, while local banks are likely to step up MFI acquisition. Despite current market uncertainties, the medium-term outlook for equity investments in microfinance will remain positive.

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Publisher(s):
CGAP