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Library » Foreign Capital Investment in Microfinance: Balancing Social and Financial Returns

Foreign Capital Investment in Microfinance: Balancing Social and Financial Returns
Feb 2008, Reille, X. & Forster, S.
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Examining the investment boom in microfinance

This paper explores the investment boom that microfinance is experiencing currently. It states that:

Individual and institutional investors are looking for ways to channel capital into microfinance;
While the bulk of investments in microfinance have come from socially motivated investors, the entry of a few mainstream investors with no particular social focus raises concerns about whether microfinance will be able to uphold its social mission.

The paper:

Describes the new landscape of cross-border investments;
Presents data on the performance of microfinance investment vehicles (MIVs);
Analyzes issues confronting the microfinance equity and debt markets;
Explores how the influx of private sector investments might influence the social focus of microfinance development.

The paper concludes that:

With the fast-paced market changes brought in by international private investors, public investors need to redefine areas where they can add value;
Private investors are bringing in crucial governance capacity and professionalism into microfinance, but have mostly restricted themselves to top MFIs in Latin America, Eastern Europe and Central Asia;
The entry of double bottom line investors is welcome because they help MFIs remain focused on both social and financial objectives;
Such investors are more demanding about social and environmental performance and can be a major force in improving transparency and accountability.

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19 Mar 2009



United States

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Journal Volume/Pages:
24

Publisher(s):
CGAP