MicroCapital: On Microfinance and Microcredit Investment

Ricardo Bebczuk and Francisco Haimovich, published by CEDLAS, Universidad Nacional de la Plata, March 2007, 43 pages, available on the Microfinance Gateway at http://www.microfinancegateway.org/content/article/detail/39791

The results of the paper, by Ricardo Bebczuk and Francisco Haimovich, indicate that less than 10% of poor households surveyed in Latin America have access to credit. Nonetheless, the authors� exploratory statistics prove credit is indeed positively correlated to both an increase in income and an increase in household education. Furthermore, the increase in probability of completing secondary school is on average higher than the increase for primary school. However, it is important to note the results varied across countries. No gender effects were apparent in the analysis to support the Millennium Development Goal to promote gender equality and empower women.

This paper seeks to answer two questions: 1) how do MFIs make decisions about capital in the face of expanding financing options? 2) how can MFIs make better decisions to optimize capital structure and increase profitability?

In order to better understand MFI capital structure decision making processes in the face of new financing options, CGAP and the Grameen Foundation surveyed a broad set of MFI managers. The researchers found that most MFI managers are ill-equipped and inexperienced when it comes to navigating these complex issues of capital structure. Thus, they tend to weigh true cost incorrectly and make uninformed comparisons of funding options--mistakes which lead to poor decisions and, ultimately, to unnecessary loss of profit. Unfortunately, when MFIs lose profit, this loss translates into loss of viability and, therefore, loss of the ability to serve their clients.

By Adrian Gonzalez. Published by the Microfinance Information Exchange, Inc. (MIX) as part of the MIX Discussion Paper Series. July 2007. Available at http://www.microfinancegateway.org/content/article/detail/41949

This paper focuses on understanding the impact of macroeconomic shocks and other variables on the quality of microfinance loan portfolios. While studying this question has important practical implications for investors� confidence in the resilience of microfinance portfolios, there have only been a few isolated case studies in the literature demonstrating the resilience of microfinance portfolios. Mr. Gonzalez� work is important because it is the first global study analyzing these dynamics with panel data among large numbers of MFIs and countries. Their sample includes 639 MFIs in 88 countries and the data was collected over a period of nearly a decade- 1996 to 2005.

The Microfinance Capital Markets Newsletter of the Consultative Group to Assist the Poor (CGAP) and the MIX, the microfinance information clearinghouse, reported responsAbility Global Microfinance Fund, a Luxembourg-based fund, has booked a series of loans totaling over USD 2.1 million to three microfinance institutions (MFIs). Fondo de Desarrollo Regional (Fondesurco) and Fundaci�n ESPOIR, two Latin American MFIs, borrowed USD 200,000 each. LOKMicro, a MFI based in Eastern Europe, received a loan of approximately USD 1.7 million. The three separate transactions occurred in August of this year.