The term “microfinance institutions” (MFI) refers primarily to organisations which were created specifically to provide credit and other financial services to low income clients. Most have evolved from non-government organisations (NGO) working in poor communities with a strong social service orientation. Credit was often used by these NGOs as a tool to support the income-generating activities of their clients and for some, it became their main method of intervention. “Nowadays there is a bewildering variety of types and combinations of clients, delivery systems and institutional structures that shelter uneasily together under the big tent known as microfinance. It may be helpful to characterize the diversity of microfinance practitioners as lying along a continuum from traditional business (a purely financial bottom line) at one end to traditional social service (a purely social bottom line) at the other end. In the middle is the emerging phenomenon of the ‘social enterprise’ which manages to have a double bottom line, seeking to achieve a productive balance between business objectives and social objectives.” (C.Dunford, 2000)
According to a new CGAP Focus Note microfinance is experiencing an unprecedented investment boom. The past five years have seen remarkable increases in the volume of global microfinance investments. Between 2004 and 2006, foreign investment in microfinance institutions more than tripled to reach a total of US$4billion, says Foreign Capital Investment in Microfinance: Balancing Social and Financial Returns, written by Xavier Reille and Sarah Forster.
This Focus Note:
describes the new landscape of cross-border investments and presents an overview of who is investing and why.
presents the first ever published data on the performance of microfinance investment vehicles
(MIVs).
provides an analysis of the latest developments and issues confronting both the microfinance debt and equity markets.
explores how the influx of private-sector investment might influence the social focus of microfinance development.