The financing of microfinance is especially appealing for international and investment banks, because they can use their status and deal-structuring creativity to bring microfinance institutions to new kinds of investors. The following will be discussed in this chapter: Service delivery vs. financing, in-house vs. partnerships, social responsibility positioning. | Summary of the Last Lecture New Technology Corporate Choices MODELS AND CORPORATE CHOICES Financiers The financing of microfinance is especially appealing for international and investment banks, because they can use their status and deal-structuring creativity to bring microfinance institutions to new kinds of investors. Financiers Standard Chartered Bank, for example, has used its presence throughout Africa and Asia to develop a portfolio of $170 million across 13 countries financing 41 MFIs. In many cases Standard Chartered places funds from international investors who need its assistance to convert dollar or euro loans into local currency. Financiers International investors have also been pouring money into microfinance; total international investment increased from $1 billion in 2004 to $ billion in 2008. At first, only socially responsible investors were interested in inclusive finance, and deals were far too small for institutional investors. Financiers As more mainstream . | Summary of the Last Lecture New Technology Corporate Choices MODELS AND CORPORATE CHOICES Financiers The financing of microfinance is especially appealing for international and investment banks, because they can use their status and deal-structuring creativity to bring microfinance institutions to new kinds of investors. Financiers Standard Chartered Bank, for example, has used its presence throughout Africa and Asia to develop a portfolio of $170 million across 13 countries financing 41 MFIs. In many cases Standard Chartered places funds from international investors who need its assistance to convert dollar or euro loans into local currency. Financiers International investors have also been pouring money into microfinance; total international investment increased from $1 billion in 2004 to $ billion in 2008. At first, only socially responsible investors were interested in inclusive finance, and deals were far too small for institutional investors. Financiers As more mainstream investors enter, however, they rely heavily on well-known investment banks for quality assurance. This means that investment banks and venture funds have a unique market-making role to play in bridging between worlds. Financiers The strong reputation and international connections of Credit Suisse were surely an important factor in the stunning success of the Compartamos Banco IPO in 2007. Financiers Shares of Compartamos Banco, a Mexican MFI previously little known to investors outside Latin America, was sold by Credit Suisse to American and European investors (among others) at the unprecedented share price for a microfinance institution of 13 times book value. Financiers Other high-profile deals included the Sequoia Capital India investment in SKS Microfinance and the Deutsche Bank’s Microcredit Development Fund. Financiers A decision to finance rather than deliver does not preclude later direct involvement. It may even pave the way. Annibale makes this point with respect to Citibank. .
