How Have Market Challenges Affected Microfinance Investment Funds? Highlights from the CGAP Market Scan

This report provides highlights from the CGAP market scan that examined the performance of microfinance investment vehicles (MIVs) in 2011. Findings indicate that total assets of the 10 largest MIVs grew in 2011, reaching USD four billion, despite the global economic recession. MIVs continued to face many challenges during the year, including increased credit risk in several markets and lower returns, but the overall investment market was more active than in 2010. This was attributed to renewed capital appetite from most microfinance services providers and more focus on underserved markets. Highlights include:

• Total assets of the 10 largest MIVs grew by 7.2% in 2011, above the 4.1% growth rate in 2010;
• Support from investors remained sound;
• MIVs are increasingly targeting underserved markets, mostly in sub-Saharan Africa, Asia, and rural markets;
• Microfinance fund returns exhibited significant returns but a steady average;
• Fund managers are increasing their focus on social performance and end-client issues, to ensure more responsible placement of their capital;
• Investment managers expect further increase of MFI demand in 2012 and improved growth compared to 2011;
• They also expect further expansion into underserved markets and more focus on equity investments.