Microfinance Gateway>Role Reversal: Are Public Development Institutions Crowding Out Private Investment in Microfinance (MFInsights)

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Library » Role Reversal: Are Public Development Institutions Crowding Out Private Investment in Microfinance (MFInsights)

Role Reversal: Are Public Development Institutions Crowding Out Private Investment in Microfinance (MFInsights)
Feb 2007, Abrams, J. & Stauffenberg, D.
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How are international financial institutions investing in microfinance?

This paper studies the funding pattern in microfinance and discusses direct retail lending to MFIs. It finds that:

The volume of international private lending has exploded: in 2005 alone, outstanding loans to MFIs doubled to nearly US$1 billion;
International Finance Institutions (IFIs) play an early catalytic role in attracting private funding to microfinance;
Top MFIs receive disproportionate amount of IFI funding.

The paper recommends:

Making IFI funding transparent;
Maximizing commercial participation in innovative capital markets transactions;
Seeding the next generation of MFIs;
Helping develop mechanisms to cover foreign exchange risk;
Promoting further private sector channels for microfinance and finance industry infrastructure.

The paper concludes that microfinance is a dynamic industry where the pace of change seems to be accelerating daily. In this environment, IFIs urgently need to refocus on complementing and attracting the private sector.

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19 Mar 2009



United States

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Journal Volume/Pages:
25

Publisher(s):
MicroRate Inc.