Microfinance Funds: 10 Years of Research & Practice

This white paper, co-written by Symbiotics and CGAP, reflects back on 10 years of data and analysis on microfinance investment vehicles (MIVs), shedding light on their progress during the period 2006-2015. It not only allows for a greater understanding of the market’s evolution and the changes occurring in funds’ portfolios, investor markets and their social outreach but also contextualizes MIVs' future outlook in contributing to a greater degree of financial inclusion in the developing world.

High-level findings from this study are:

• Since December 2006, assets under management (AUM) of MIVs have grown more than five-fold, rising from USD 2 billion to USD 11 billion2 by the end of 2015; 
• The regions of Eastern Europe & Central Asia (EECA) as well as Latin America & the Caribbean (LAC), remained the primary MIV markets in 2015;
• Concentration indicators have been decreasing slightly for all funds, with the rate of exposure to the largest region decreasing by only 10 percentage points since 2006;
• By the end of 2015, institutional investors were worth a total of USD 5 billion, 47% of total funding, compared to USD 500 million back in 2006 – an increase which represents a Compounded Annual Growth Rate (CAGR) of 27%; 
• More than two-thirds of vehicles are domiciled in Western Europe (mainly Luxembourg and the Netherlands), which currently accounts for nearly 90% of the MIV universe in terms of total assets (TA);
• Switzerland and the Netherlands remain the primary locations for MIV managers, while Germany and the United States have switched places, with the latter moving up to third place;
• The majority of microfinance funds were launched during the 2005–2010 period;
• Yields in USD on MIVs’ direct microfinance portfolios declined slightly, before stabilizing at around 7% from 2011 onwards on a weighted average basis;
• The cost structure of MIVs has been relatively stable since 2007, the overall trend being led by the cost levels of Fixed-Income Funds, which account for a large share of total market size;
• Return spreads above Libor three-month USD and EUR have averaged 2% over the past 10 years;
• The total number of active borrowers financed by MIVs through their portfolio investees has gradually increased, from 520,000 in 2006 to nearly 24 million at the end of 2015.