Defined Liability and Institutional Funds
Defined liability and institutional funds include pension funds, insurance funds, trusts and other funds managed by or on behalf of a private institution. The pension fund assets of OECD countries exceed US 8 trillion. Insurance funds in the US control over US 3 trillion.10 These funds invest in a wide variety of instruments, though regulation and fiduciary practice tend to limit most investment to high-grade, tradable securities. Some very large funds buy higher risk assets, such as venture...
Private Investors Motivation for Maintaining Target Group Orientation
If equity is sold to a private investor, will mission drift occur, and if so, how can it be avoided Neusch tz 2004 recommends that development finance institutions sell their shares to the right investor, i. e. a strategic investor who will not abandon the original business purpose because there is a common set of values and objectives between private investor and public seller.11 If a buyer subsequently changes the character of the microfinance institution, he could be obliged to repay all or...
Corporate Governance
Corporate governance of MFIFs may be less important in controlling risk than it is in direct investments in MFIs. But participation in governance remains a focus of DFIs because it allows some control of investment policy and procedures. Some DFIs will be satisfied by board representation, while others, mostly those with large exposures, want to exercise additional control through membership in investment committees. Depending on the requirements of the investors and of the group of investors,...
Defining the Asset Class Where Does Microfinance Belong in the Investment
Strangely, key features of the microfinance investment universe have led some specialists to classify this asset class as money market plus. Key features that mis-leadingly suggest such a definition include little or nil volatility, like money market instruments predominately short term, with an average duration of 18 months, seldom exceeding the 36-month short term limit 4 the cash nature of the business with a high transaction turnover due to short duration and the low default record. For...
Appendix 1 Names Acronyms and Abbreviations
Other than Microfinance Investment Funds Consultative Group to Assist the Poor Cordaid CreSud DB MDF DID - Fonidi DID - Guarantee ACCION Gateway Fund AfriCap Microfinance Fund ACCION Investments in Microfinance Alterfin c.v.b.a. ASN-Novib Fonds AXA World Funds - Development Debt Fund Belgian Investment Company for Developing Countries BlueOrchard Microfinance Securities I, LLC Calvert Social Investment Foundation Community Deutsche Bank Microcredit Development Fund D veloppement International...
Bibliography
Chowdri, Siddhartha and Alex Silva, editor 2004 . Downscaling Institutions and Competitive Microfinance Markets Reflections and Case Studies from Latin America. Toronto Calmeadow. Christen, Robert Peck, Richard Rosenberg and Veena Jayadeva 2004 . Consultative Group to Assist the Poor CGAP Occasional Paper No. 8. Financial Institutions with a Double Bottom Line Implications for the Future of Microfinance. Washington, D.C. CGAP. Fernando, Nimal A. 2003 . Mibanco, Peru Profitable Microfinance...
Introduction to Part II
Chapter 6 consists of Mark de Sousa-Shields' exploration of the asset allocation strategies of local and international investors. He finds that their behaviour is broadly similar, which implies that a global market for microfinance investment could be possible. But microfinance is not yet sufficiently well described, and its risk and return characteristics are not yet well-enough understood to attract large numbers of investors. However, numerous sources of funding are likely to become...
References
CGAP Focus Note Nr 25 - Foreign Investment in Microfinance Debt and Equity from quasi-commercial investors - January 2004. Dexia Micro-Credit Fund - Annual Report as of 31st December 2003. Goodman, Patrick International Investment Funds Mobilising Investors towards Microfinance - ADA Luxembourg - November 2003. IPE Dutch pension funds fail IMF stress tests - www.IPE.com - 30th September 2004. MicroRate The Finance of Microfinance - September 2004 MicroRate amp IDB Technical Guide - Performance...