Investors are increasingly able to put their money to work creating social as well as financial returns, thanks in part to the expanding role of investment banks in globalizing the funding of microfinance institutions (MFIs). On March 1 Swiss microfinance specialists BlueOrchard announced the launch of a collateralized loan obligation led by Morgan Stanley called BlueOrchard Loans for Development (Bold) that it describes as a landmark transaction: the securitization of loans to a diverse portfolio of microfinance institutions in 13 countries.
The cash raised in the issue will ultimately be loaned in amounts as small as $50 to micro entrepreneurs in such countries as Azerbaijan, where access to financial services for the poor is severely limited. Investment banks are able to offer secure credit and extensive advertising but their real worth is in providing the mechanisms that convert investors’ euros and dollars into the local currencies that MFIs need to deliver. Jack Lowe, CEO of BlueOrchard, says: “We have already done a securitization in the US but this transaction is groundbreaking in that we have structured it to access mainstream capital markets investors and have included local currency loans.”
| Annibale, Citigroup: hopes to reduce costs |
Bob Annibale, head of microfinance at Citigroup, says that the biggest challenge for global banks working with local MFIs is in helping them to reduce their substantial operating costs.