Integrating Microfinance into the Global Financial System

Integrating Microfinance into the Global Financial System

3rd Annual Global Microfinance Investment CongressNew York – May 25th, 2010

Integrating Microfinance into the Global Financial System

Slide 2

MIVs | Volumes

Year MIV (Nb)

TA (USD bln)

2004 45 1.10

2005 63 1.50

2006 75 3.05

2007 91 5.43

2008 103 6.6

2009E 119 7.9Source: CGAP MIV Survey 2009, Estimates: Symbiotics

USD constant

Slide 3

MIVs | Lower Performance

Year 2004 2005 2006 2007 2008 2009 2010/03SMX USD 2,61% 4,30% 5,09% 6,33% 5,95% 3,08% 0.95%SMX EUR 4,06% 3,10% 2,63% 4,15% 5,55% 2,06% 0.98%SMX CHF 1,48% 1,68% 1,89% 3,61% 4,63% 1,06% 0.34%

SMX USD SMX USD Underlying Funds

Slide 4

MIVs | Lending Rates

Average lending rates, in USD, investment grade MFIs

0

0.02

0.04

0.06

0.08

0.1

0.12

2006

-06

2006

-08

2006

-10

2006

-12

2007

-02

2007

-04

2007

-06

2007

-08

2007

-10

2007

-12

2008

-02

2008

-04

2008

-06

2008

-08

2008

-10

2008

-12

2009

-02

2009

-04

2009

-06

2009

-08

2009

-10

2009

-12

2010

-02

Coupon Ref. Rate Spread Linear (Coupon)

Slide 5

MIVs | Growing Critics toward Microfinance

Main critics• Consumer lending• Over-indebtedness• High interest rates• High profits

The Ugly Side of Microlending How big Mexican banks profit as many poor borrowers get trapped in a maze of debt.

Easy MoneyMicrocredit is booming in India, but the loans don't often pull people out of poverty.

Banquier des pauvres« Les IMF sont-elles vraiment fidèles à leur vocation sociale, ou ont-elles trouvé parmi les démunis, de plus en plus nombreux, un marché à conquérir ?"

Yunus Blasts CompartamosThe Nobel Prize-winning microfinance pioneer refuses to mention the words "Compartamos" and "microfinance" in the same breath .

Développement : quand la « bulle » de la microfinance éclateraLa microfinance n'est ni « bonne » ni « mauvaise » : tout dépend de la manière dont elle est mise en oeuvre.

Slide 6

MIVs | Summary

• Over liquidity• Differentiation in fund strategies• First defaults and loan rescheduling, provisions were booked• Impact of FX fluctuations• Higher competition amongst lenders, lower portfolio yields• Lower absolute and risk adjusted returns to investors• Growing critics and questions toward microfinance• Lower demand for funding• Address critics (social performance measurement)• Local currency

Slide 7

MFIs | Deterioration of Fundamentals

Slide 8

MFIs | Deterioration of Fundamentals

Slide 9

MFIs | Summary

• Overheating markets (Nicaragua, Bosnia, Cambodia, Morocco, ..)• Deteriorating fundamentals• First defaults and loan rescheduling• Slower growths• Lower cost of funding• FX exposure, needs for local currency funding

Slide 10

Q & A

Thank you !