Lecture 26 - Microfinance for bankers and investors. The following will be discussed in this chapter: Bonds, collateralized debt and collateralized loan obligations. | Microfinance for Bankers and Investors Summary What Has Changed? Debt Deals Bank Loans Bank Loans As a measure of how far bank lending to MFIs has come, in 2007, Mibanco, a Peruvian bank specializing in microfinance (and onetime Bridge Fund guarantee recipient), Bank Loans raised money through an oversubscribed syndicated loan organized by Wachovia Bank and the International Finance Corporation (IFC), in which 10 major international banks provided $40 million in medium-term funding. Bank Loans While IFC presence helped give the syndication greater stature, there was no guarantee. Bonds In countries with active capital markets, the most appropriate providers of debt for microfinance are local investors. The domestic markets are ideal because they provide local currency, and the investors are familiar with local markets. Bonds In many countries, MFI bonds represent an attractive opportunity for local investors who have few options. Bonds Nevertheless, local capital markets were very | Microfinance for Bankers and Investors Summary What Has Changed? Debt Deals Bank Loans Bank Loans As a measure of how far bank lending to MFIs has come, in 2007, Mibanco, a Peruvian bank specializing in microfinance (and onetime Bridge Fund guarantee recipient), Bank Loans raised money through an oversubscribed syndicated loan organized by Wachovia Bank and the International Finance Corporation (IFC), in which 10 major international banks provided $40 million in medium-term funding. Bank Loans While IFC presence helped give the syndication greater stature, there was no guarantee. Bonds In countries with active capital markets, the most appropriate providers of debt for microfinance are local investors. The domestic markets are ideal because they provide local currency, and the investors are familiar with local markets. Bonds In many countries, MFI bonds represent an attractive opportunity for local investors who have few options. Bonds Nevertheless, local capital markets were very wary of MFI bond issues at first, and so they required credit enhancements like guarantees or overcollateralization. Bonds Prior to its international loan syndication, in 2002, Mibanco issued $ million in two-year bonds backed by a 50 percent guarantee from USAID10 and then a second bond with a similar guarantee from the Andean Development Corporation (CAF). Bonds Even with the enhancements, the first bond issues were small and carried a high interest rate. What may be surprising is how quickly the markets accepted the new institution after initial trials. Bonds Building on these experiences, in 2007, Mibanco offered a five-year bond for $10 million with an A rating on the Peruvian scale—and without a guarantee. Bonds Despite the lack of a guarantee, the interest rate on this issue fell from the 12 percent Mibanco paid on the first bonds to just over 6 percent. Bonds Financiera Compartamos, the precursor to Compartamos Banco, issued five bonds from 2002 to 2005, placing a total of .
