Using the Same Tape Measure: MicroRate To Launch Tool for Rating Microfinance Funds

by Bill Baue

"The rating tool, a project supported by Gray Ghost Microfinance Fund, Omidyar Network, and Gates Foundation, is yet another step toward establishing microfinance as a distinct asset class. SocialFunds.com -- Microfinance, which provides tiny loans to help people bootstrap out of poverty by running small (often one-person) businesses, took another step toward becoming a distinct asset class with the advent of a mechanism for objectively rating microfinance funds. MicroRate, an independent company that already rates microfinance institutions (MFIs), has been working to develop a microfinance fund-rating tool for several years. At a May 1 Silicon Valley Microfinance Network (SVMN) talk, Bob Patillo of the Gray Ghost Microfinance Fund (a $75 million microfinance "fund of funds") announced a project to support the MicroRate rating tool that is also backed by the Omidyar Network and the Gates Foundation."

http://www.socialfunds.com/news/article.cgi/2014.html

Morgan Stanley, BlueOrchard Bond Routes International Investments to Microfinance

By M. Sapp

Bond to Benefit Low-income Start-up Enterprises in Developing Countries

Originally published: June 13, 2006 Source: Women eNews, USA

"What was once the realm of donor dollars and tiny loans to extremely poor women in Bangladesh is developing into a multimillion dollar market for international investors.
In March, New York-based investment banking giant Morgan Stanley offered a $106 million bond on behalf of 65 microfinancing institutions, or MFIs, and the bond sold immediately. Banks, insurance companies and investment funds from the United States and Europe snapped it up. Dutch development bank, the Netherlands Development Finance Company (FMO), bought 30 percent.

The deal follows two other bonds worth a total of $57 million in 2004 that were offered only in a limited number of markets and currencies. Morgan Stanley's deal breaks new ground by turning international investors in the United States and Europe into microfinance creditors who see new opportunities to profit by helping individuals start up businesses in developing nations.
To read the complete article, please click here."

Summary taken from http://www.microfinancegateway.org/content/article/detail/33672

Wall Street Journal Features Article on New Profit-Based Microfinance Model

Microfinance has been a non-profit venture since its discovery in the 1970s. This may be a changing reality in the microfinance world. A new profit-based model is emerging in India. The man who is pioneering the movement toward for-profit/ large bank investing in microfinance is 37 year-old Mr. Akula of SKS Microfinance Pvt. Ltd.

Mr. Akula has applied a two step modification to the more traditional micro lending model in order to make the process as efficient as possible. The first step was streamlining. Mr. Akula placed rules upon borrowing and payment. Simple rules allow for loan officers to see more borrowers in the course of a day. Streamlining of payment in combination with the creation of simple loan management software allows for much more efficient accounting practices.

With the reputation of 100,000 borrowers and a default rate of only 2% large lending institutions have become willing investors in SKS’ for-profit style micro-lending. In 2004 Citigroup began lending to SKS and ABN Amro Holding NV and HSBC Holdings PLC were soon to follow.

http://microcapital.org/cblog/index.php?/archives/220-Remember-this-Day-For-Profit-Microfinace-Blazes-Front-Page-of-Wall-Street-Journal.html