Managing Commercial Microfinance: The People and Institutions Behind the Asset Class

This paper explains how microfinance works by identifying the involved parties and the processes by which parts of the sector are managed. It specifically tracks the commercial microfinance market.

The paper states that microfinance has grown unsystematically. The people and the institutions that manage microfinance funds are still exploring management structures, processes, investment vehicles and best practices. Capital markets are still experimenting with the first tranches of securitized commercial microfinance offerings.

The paper examines the roles that investors, investment managers and microfinance institutions (MFIs) play. It concludes that commercial microfinance is still evolving. Oversight authorities and standardized guidelines are being established to improve disclosure and transparency. Most MFIs receiving commercial funding are required to go through formal, third-party audits and meet certain reporting and presenting guidelines. Competition will continue to drive the efficiencies, cost and performance of all parties involved with microfinance.