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Symbiotics 2015 Microfinance Investment Vehicles (MIV) Survey Report: Market Data and Peer Group Analysis Published by the Symbiotics Group

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Published 2015, 45 pages, available at http://www.syminvest.com/ papers/ed4710d3-cd20-4366-ad75-095f2b3adffe

This ninth annual microfinance investment vehicles (MIVs) survey covers both financial performance, such as growth, risk, return, cost structure, efficiency and funding patterns, as well as social performance, such as commitment to environmental, social and governance (ESG) practices. The dataset includes responses from 84 funds holding aggregate total assets of USD 10 billion, representing 96 percent of the MIV market. The term “benchmark” is used to refer to this sample population. The survey indicates that MIVs’ total assets grew at a rate of 13 percent, and their microfinance portfolios grew by 16 percent during 2014. The authors describe the microfinance investment market as having remained “concentrated,” as the top five MIVs maintained the same market share of 45 percent as in the previous year.

MIVs tended to focus on “large” microfinance institutions, those that held total assets of USD 100 million or more, with 59 percent of their microfinance portfolios invested into such institutions compared with 6 percent invested into those with total assets lower USD 10 million. Direct debt remained the dominant form of investment, representing 83 percent of MIVs’ aggregate microfinance portfolio. The weighted average yield on direct debt portfolios was stable at 6.8 percent as compared with 6.9 in 2013. In line with previous years, Eastern Europe and Central Asia (EECA) remained the region attracting the greatest portion of investment, totaling 38 percent of aggregate direct microfinance portfolio. Cambodia received the most funding, at 8 percent of MIVs’ total direct commitment, while the top 10 countries accounted for a total of 52 percent.

The portion of MIVs’ portfolios invested in areas other than microfinance, such as small and medium-sized enterprises, education, healthcare, agriculture and housing, amounted to USD 7.9 million, representing 7 percent of MIVs’ total assets. The authors’ ESG analysis finds MIVs’ portfolio companies financed end-clients with an average loan size of USD 1,622, the lowest in 5 years; 58 percent of microfinance borrowers had voluntary savings; and the Client Protection Principles, a set of standards that govern the practices of microfinance businesses, were endorsed by 99 percent of MIVs in the benchmark and 1,600 microfinance investees. The rates of reporting of ESG practices to investors and the adoption of anti-corruption policies both increased slightly since 2013, from 83 to 84 percent of MIVs for the former and 84 to 89 percent for the latter.

Still, when disbursing a loan to an investee, only 43 percent of MIVs actually disclosed the total annual cost that the investee will incur as a single percentage figure. The second section of the survey presents a peer-group analysis dividing the MIVs into 49 fixed-income, 21 mixed/hybrid and 14 equity funds. Fixed-income funds grew in terms of both total assets (15 percent) and microfinance portfolio (18 percent). Mixed funds showed growth rates of 5 percent and 11 percent, respectively; while equity funds showed growth rates of 16 percent and 7 percent, respectively. As in previous years, Latin America and the Caribbean (LAC) and EECA were the prime regional targets of fixed-income and mixed/hybrid funds, while LAC and South Asia were targeted most by equity funds. Although the majority of funding was placed in EECA, the largest portion of microfinance investees was located in LAC (36 percent).

In terms of funding sources, more than 50 percent of MIVs’ aggregate capital was financed by private institutional investors. Public-sector investors increased their participation by 17 percent year-on-year, claiming 32 percent of total MIV funding as of 2014. The average management fee and total expense ratio were reported to be stable, showing no change in the former at 1.4 percent and, in the latter, a slight decrease from 2.4 percent in 2013 to 2.3 percent in 2014. In terms of financial performance, unleveraged fixed-income funds showed an increase in net return for USD share classes of 3.4 percent on a weighted average basis, compared with 2.4 percent in 2013. The return on equity for leveraged vehicles denominated in USD notes decreased from 2.6 percent in 2013 to 2.2 in 2014.

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