“Symbiotics 2015 Microfinance Investment Vehicles (MIV) Survey Report: Market Data and Peer Group Analysis;” published by the Symbiotics Group; 2015; 45 pages; available at http://www.syminvest.com/papers/ed4710d3-cd20-4366-ad75-095f2b3adffe
Symbiotics, a Switzerland-based investment company that is “specialized in emerging, sustainable and inclusive finance,” recently published its ninth annual microfinance investment vehicles (MIVs) survey based on indicators reported by MIVs for 2014. The report 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 the responses of 84 funds holding aggregate total assets of USD 10 billion as of December 31, 2014, 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 13.0 percent and their microfinance portfolios grew by 15.8 percent during 2014. The authors describe the microfinance investment market as having remained “concentrated,” as the top 5 MIVs maintained their market share of 45 percent from the previous year. MIVs tend 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 below 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 portfolio 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 52 percent. The portion of MIVs’ portfolios invested in areas other than microfinance, such as small and medium-sized enterprises (SMEs), 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 finance end-clients with an average loan size of USD 1,622, the lowest in 5 years; 58 percent of microfinance borrowers having voluntary savings; and the Client Protection Principles (CPPs), a set of standards that govern the practices of microfinance businesses, are endorsed by 98.9 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 have 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 disclose 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. As in previous years, EECA and Latin America and the Caribbean (LAC) 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 reported to be directed toward EECA, most of the microfinance investees from MIVs’ portfolios were 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 (TER) 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 the USD share classes of 3.43 percent on a weighted average basis compared with 2.43 percent in 2013. The return on equity for leveraged vehicles denominated in USD notes showed a decrease from 2.60 percent in 2013 to 2.17 in 2014.
By Hye In Arielle Oh, Research Associate
About Symbiotics Group
Founded in 2004, Switzerland-based Symbiotics provides for-profit investment intermediary and business services to investors and practitioners of micro-, small and medium-sized enterprise (MSME) development. Its work is divided its Financial Institutions, Asset Management and Investor Relations teams. As of 2015, its Financial Institutions team had facilitated the provision of USD 2.4 billion in MSME investments via 2,000 deals through its work with 28 funds and other investors and 250 financial institutions in 50 emerging economies; its Asset Management team managed seven microfinance and SME impact funds with USD 450 million in assets; and its Investor Relations team coordinated a dozen impact investing funds and strategies and raised assets of USD 350 million. The company also offers Syminvest, a microfinance investment information platform designed to increase transparency and enhance investment capacity in the industry by monitoring regional markets as well as individual institutions.
Sources and Additional Resources
Do you know that MicroCapital publishes the MicroCapital Monitor newspaper each month? Find out more at http://www.microcapital.org/products-page/
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