Thinking About Microfinance Through a Commercial Lens

This paper comprises the results of Grameen Foundation's Capital Markets Group survey of 116 finance and investment professionals in 2005. The paper states that:

• The execution of high profile microfinance transactions in the domestic and international capital markets in recent years has attracted investors' attention to the industry;
• The microfinance industry has appealing investment characteristics.

The document contains summary survey data from the respondents. Grameen Foundation conducted the survey to:

• Test the scenario whether microfinance institutions are able to carve out an allocation in portfolios across the range of commercial investors;
• Gain insight into the prerequisites;
• Lay the foundation for future industry discussions about the investment potential of microfinance;
• Inspire further research and education aimed at encouraging potential investors to participate in future microfinance investment opportunities.

Finally, it presents the summery of the survey as under:

• Majority of respondents were investment bankers/analysts;
• Their area of expertise lay in - emerging markets: 15%, equity: 14%;
• Their residence - North America: 78%, Asia: 9%, Latin America: 3%;
• Emphasis of 37% respondents' professional activities lay on socially responsible investment (SRI) offering a 'triple bottom line' at commercial rate of return, while only 3% laid complete emphasis on social value;
• 57% believed that microfinance can be identified today as its own asset class;
• Only 15% respondents felt that microfinance did not have the potential to be its own discrete asset class in the future;
• 40% believed that single most factor to be improved to make microfinance a more viable investment opportunity is return potential reflecting risks, while 16% had faith in benchmarks.