Paris Microfinance Network

SHARE MicroFin gets landmark $27m investment

Legatum and Aavishkaar Goodwell have announced an equity investment of US$27Mln in SHARE Microfin Limited, India's leading microfinance institution. Legatum, a private firm that invests in capital markets and in initiatives that support human and social development, has agreed to invest US$25Mln (INR 100 Crore) to acquire a majority interest in SHARE.

The investment represents the largest equity investment to date in the global microfinance sector, and will enable SHARE to reach an additional five million customers over the next five years. SHARE is one of the largest MFI’s in India with over one million clients and US$95 million in outstanding loans. SHARE operates in 5 Indian states, across more than 8000 villages with 2300-plus staff. Share was founded in 1989 as a non-profit organization to improve the quality of life of the poor by providing access to financial and support services. In 2000 SHARE converted into a for-profit Non Banking Finance Company (NBFC), and it has grown from 2000 members then into the leading MFI in India today. In the last three years it has achieved growth of 90% in customer numbers.

Udaia Kumar, Chairman and Managing Director of SHARE Microfin Ltd. said, that the transaction exemplifies the important role that experienced global investors will play in helping to develop the microfinance industry. According to Mr. Kumar, SHARE is now ready for the next stage in its growth.

Seattle RadioShow Hosts Microfinance Discussion

KUOW, a local radio station in Washington, US, hosted a Microfinance discussion yesterday with several local leaders in the industry & a local borrower. An interesting listen, as they discuss how their organizations originated & operate, how they came into their roles, the local approach & services of their MFI partners, what results they are most proud of, their perspectives on the growth potential & needs of various global regions...and other topics. The local borrower, Theresa Tulio, comments that the most valuable service contributing to her success was the 12-week business training provided by the US MFI she borrowed from.

Guests include:
Sam Harris - Founder & President of RESULTS, an international citizens' lobby focused on ending poverty.
Mike Murray - Former Microsoft executive & co-founder of Unitus
Rick Beckett - President & CEO of Global Partnerships, based in Seattle.
Theresa Tulio - Retail store owner in Kirkland called Paint Box. A former client of Washington Cash, a microcredit organization that provides its clients with training and development assistance.

Microfinance Loans Becoming More Mainstream

On May 4th, investment bank Morgan Stanley and BlueOrchard Finance announced the launch of the first microfinance structured deal rated by a major rating agency; Standard & Poor's(S&P). The Collateralized Loan Obligation (CLO) known as "BlueOrchard Loans for Development 2006-1", or BOLD, raised a total amount of $108 million-equivalent. The loans will be disbursed to 21 MFIs, in 13 different countries, using 5 different currencies. The MFIs recieving the loans are based in the following countries; Azerbaijan, Bosnia, Cambodia, Colombia, Georgia, Ghana, Kenya, Mongolia, Montenegro, Nicaragua, Peru, Russia and Serbia.

This deal offers promising funding news for the industry on several fronts:

BOLD represents the largest single commercial investment transaction in the history of microfinance and may lead the way to similar deals in the future.

Currency Exchange risk is a big issue for many MFIs accepting foreign investment. Approximately 20% of the BOLD portfolio was in local currency, Mexican peso, Colombian peso and Russian rouble (remainder in USD and EURO) with local rates fixed for a period of five years. BOLD uses currency swaps to hedge the risk for investors.

A Standard & Poor's rating of the deal increases the number of investors who are able to buy it, possibly boosting the amount of cash available for microfinance purposes.

The first involvement by a major investment bank, Morgan Stanley, bringing its know-how in structuring an investment product to the microfinance industry.

CLOs are a type of collateralized debt obligation that sell bonds backed by repayments on loans. Investors can buy bonds with different credit ratings depending on their exposure to any losses in the underlying portfolio.

Standard & Poor's has assigned preliminary ratings of AA and BBB to $58 million-equivalent of floating- and fixed-rate notes that will be issued by BOLD 2. BOLD 2 will also issue two tranches of unrated notes. The deal should close at the end of May. BOLD 2 will then issue the notes and lend the proceeds, in the form of unsecured loans, to the MFIs.