The large gap between the demand for and the supply of microfinance creates opportunities for growth for new and existing MFIs. Recent estimates indicate that 2.7bn people still do not have access to formal financial services while existing MFIs are estimated to reach approximately 200m borrowers.
High need for growth capital
Despite the fact that microfinance institutions often profitably serve an enormous untapped market, many mainstream investors fail to understand the attractive risk-return parameters of investing. Consequently, there is a strong need for growth capital in these institutions, so they can strengthen their capital base and attract local bank funding. Equity investors in microfinance are currently in a position to acquire significant shareholdings in emerging institutions at relatively attractive terms and conditions.
Scalable business model
Successful MFIs around the world, like ASA Bangladesh, have demonstrated that MFIs can grow rapidly within a short period of time with limited external resources, with highly standardized operations are and a relatively homogeneous clientele. With assistance from the ASA team, CMI’s partner institutions have the opportunity to expand rapidly by adopting best-practice business models and proven credit methodologies that have been widely implemented by ASA and many ASA replicas around the world.
Emerging MFIs now have the opportunity to expand rapidly by adopting best-practice business models and proven credit methodologies as widely implemented by ASA and many ASA replicas around the world.
Substantial operating leverage
Relatively small equity investments allow MFIs to attract additional funding in the form of institutional loans and client deposits growing their loan portfolio by a multiple of up to nine times and thereby substantially increase their aggregate profit margin.
CMI focuses on accelerating the growth of high-potential MFIs in developing countries thereby allowing clients to improve their incomes and ultimately their living conditions. Most development experts consider microfinance to be one of the most effective, proven tools to sustainably reduce poverty and increase social and economic stability.
This list is not inclusive. Investors that wish to learn more about investing in CMI are advised to contact CMI.