Investing in Microfinance and Basel III

This paper examines the current trend of increasing investment in microfinance. It also examines the potential impact of the Basel III framework on investment.

Investing in the microfinance industry has proved beneficial to MFIs, investors and potential borrowers. The paper states that:

• Investors and MFIs are now interested in investing in sustainable business opportunities;
• Microfinance organizations can be categorized into those providing financial services for enterprise development, income generating activities and food security;
• Different categories of organizations deserve different approaches and modalities of evaluation;
• Investor should look at the governance factor, exchange rate risk, strategic risk and the risk of regulatory impact when investing in the microfinance industry;
• Investors should also consider financial and operational risk.

Investing in the microfinance industry is the next frontier in the global financial market. The forthcoming Basel III framework regulations will improve transparency in the industry and create more investment opportunities. Ultimately, the individual MFI should be appealing from the investment point of view and should operate in a conducive legal environment.