Luxembourg Financial Sector: Advantages, Expertise & Opportunities in the Creation and Registration of Microfinance Investment Funds

This study examines the potential of Luxembourg as a domicile for Microfinance Investment Funds (MIV). MIVs play an increasing role in channeling supplementary financial resources to MFIs. Luxembourg offers an adequate legal, regulatory and fiscal framework for MIV incorporation. Factors like the registration tax and restrictions on MIV distribution are deterrents to Luxembourg's attractiveness as a financial center. In most cases, however, Luxembourg offers many advantages for setting up MIVs. These include:

• Luxembourg's overall reputation;
• Service providers' professionalism with regard to investment funds;
• Flexible legal vehicles, combined with a recognized regulatory framework and favorable tax environment;
• Current presence of MIVs that have already passed the regulators' test;
• Broad range of investment vehicles;
• Fiscal measures that promote sector visibility. 

There is need for the Luxembourg financial community to integrate its microfinance-related activities into its overall communication and diversification policy. Enabling initiatives, some by the public authorities and others by the financial community, would help Luxembourg enhance its role as a major center for the setting up of MIVs.