ROLE OF CAPITAL MARKETS

  • Microfinance is becoming an attractive emerging markets asset class:

  • Microfinance offers the potential of strong profitability and low default rates

  • Relatively low correlation with global capital markets, offering differentiation opportunity

  • MFIs undervalued as compared to emerging market banks

  • Attractive exit strategies, including sales to strategic and financial buyers and IPOs

  • The microfinance industry is experiencing increased foreign
    investment,capital markets access,and integration into the banking sector:

  • Foreign investment in microfinance has been growing rapidly ($6.5 BN as of 2007)

  • There has been over $1.6 BN in microfinance capital transactions over the past three years, including bonds issuance, CDOs, promissory notes from specialized vehicles, and IPOs

  • Several successful IPOs have been issued including Banco Compartamos (Mexico - $467 MM) and Bank Rakyat (Indonesia - $489mm)

  • Commercial banks have downscaled into sector and investment banks have set up microfinance divisions