Lecture 27 - Microfinance for bankers and investors. The following will be discussed in this chapter: securitization of microfinance portfolios, equity investments, bonds, collateralized debt and collateralized loan obligations. | Microfinance for Bankers and Investors Summary of the Last Lecture Bonds Collateralized Debt and Collateralized Loan Obligations Securitization of Microfinance Portfolios Securitization of microloans has been viewed as a kind of holy grail for microfinance. A true securitization accompanied by a secondary market could, some hope, Securitization of Microfinance Portfolios make investing in microcredit a function of end-borrower creditworthiness while at the same time allowing a wider range of investors to participate by creating liquidity for the securities. Securitization of Microfinance Portfolios The quest remains, as quests often do, elusive. There have been a number of steps, but no full-fledged securitization involving all the requisite elements: Securitization of Microfinance Portfolios (a) packaging of loans from multiple originators, (b) securities offered on the basis of the creditworthiness of the underlying assets alone (that is, without credit enhancement) . | Microfinance for Bankers and Investors Summary of the Last Lecture Bonds Collateralized Debt and Collateralized Loan Obligations Securitization of Microfinance Portfolios Securitization of microloans has been viewed as a kind of holy grail for microfinance. A true securitization accompanied by a secondary market could, some hope, Securitization of Microfinance Portfolios make investing in microcredit a function of end-borrower creditworthiness while at the same time allowing a wider range of investors to participate by creating liquidity for the securities. Securitization of Microfinance Portfolios The quest remains, as quests often do, elusive. There have been a number of steps, but no full-fledged securitization involving all the requisite elements: Securitization of Microfinance Portfolios (a) packaging of loans from multiple originators, (b) securities offered on the basis of the creditworthiness of the underlying assets alone (that is, without credit enhancement) Securitization of Microfinance Portfolios , (c) actual transfer of ownership of the original loans to buyers, and (d) resale and trading among investors. Securitization of Microfinance Portfolios The closest deal to a full securitization is that of BRAC in Bangladesh, the world’s largest national NGO with over 6 million active borrowers and assets of $619 million as of 2007. Securitization of Microfinance Portfolios In 2006, MF Analytics, a financial boutique based in Massachusetts, and Citigroup structured a true-sale securitization for BRAC. This deal, as a first of its kind, required enhancements, despite BRAC’s 32-year history, strong balance sheet, and expanding market. Securitization of Microfinance Portfolios The issue was 150 percent collateralized. As a result, the paper received a AAA rating from the Moody’s affiliated Credit Rating Agency of Bangladesh. Securitization of Microfinance Portfolios BRAC raised $180 million of inexpensive and long-term financing, made available over a .
