MIV investments in 2008 grew by 31%: CGAP survey

By Matthew Fuchs
Microfinance Focus, Oct. 22, 2009: Microfinance Investment Vehicles (MIVs) recorded a 31% growth in their total assets in 2008 amounting to $6.6 billion, said the CGAP MIV Benchmark Survey released recently. Though the estimates show that MIVs grew a further 16% in annualized figures in the first half of 2009, managers of many MIVs are not expecting more than 29% growth by this year end.

The growth is slightly lower than the exuberant 72% recorded in 2007 but the sector defied the trend of sell-offs in emerging market funds due to the challenging economic climate, said a survey release.

Performance also remained firm in 2008 but slightly weaker than the previous year. Registered mutual funds, the largest class of MIV with over $1.8 million in assets, returned 5.9%. But this indicates a steady performance over the last three years, returning 6.3% in 2007 and 5.8% in 2006. However, returns are expected to fall below 3.5% in 2009 due to weaker demand for loans from microfinance institutions (MFIs), and increased hedging costs due to volatility in currency markets.

Otherwise, Environmental, Social and Governance (ESG) indicators were covered for the first time this year. Over 60% of participating MIVs stated that they report regularly to investors on ESG matters, and 65% had staff who had received ESG training. In addition, 63% had committed to the Client Protection Principles developed by CGAP and the Accion Center for Financial Inclusion.
Other key findings included:

• 11 new MIVs entered the market in 2008, bringing the total number to 103, with a greater emphasis on equity investments and products like microinsurance.

• Equity investments grew by 47%, out-pacing fixed income growth of 32% for the second year in a row. Major factors included growth in private equity funds with 13 funds totaling $253 million in assets in 2008 and in the number and size of holding companies.

• Region wise, Eastern Europe and Central Asia attracted 47% of investment, followed by Latin America and the Caribbean at 29.1%, Sub-Saharan Africa 6.2%, East Asia and Pacific 6.1%, South Asia 4.7%, and Middle East and North Africa 1%.

• MIV investments remained highly concentrated, with top five countries with an exposure of 57.5% and top five investment exposure at 40.6%.

The 2009 MIV Benchmark Survey is the third annual survey conducted by the Consultation Group to Assist the Poor (CGAP), an independent policy and research center to promote financial inclusion. The survey defines MIVs as independent entities open to public or private investors which provide funds to MFIs. To qualify as an MIV for the survey these entities must have at least 50% of their assets invested in MFIs in emerging countries. 80 MIVs participated in this year’s survey, representing 93% of all MIV assets.

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