Cross-Border Funding for Microfinance

South Asia

Results of the CGAP Cross-border Funding Surveys 2010

About the CGAP surveys

The CGAP surveys focus on cross-border funding for microfinance.

Over 150 institutions and funds have participated in CGAP’s 2010 surveys on microfinance funding, representing 85 to 95% of the total estimated cross-border funding to microfinance.

CGAP collects data from major funders (bilateral and multilateral agencies, development finance institutions, foundations) and from microfinance investment intermediaries (MIIs) such as Microfinance Investment Vehicles (MIVs) and holdings.

All data is as of December 2009.

For any questions or data requests please contact Barbara Gähwiler at bgahwiler@cgap.org.

At a Glance

29 Public Donors and Investors

(Multilaterals, Bilaterals, DFIs)

$3.4 billion

Private Donors and Investors

(Foundations, Institutional and Retail Investors)

$0.6 billion

Microfinance(Support for microfinance at all levels of the financial system: retail, market infrastructure, and policy)

37 Microfinance Investment

Intermediaries (MIIs)

Commitments to Microfinance for SA as of December 2009: $4 billion*

* CGAP surveys capture 85 to 95% of the total cross border funding to microfinance

$3.36 bln

Ap

exes

$0.4 bln $0.2 bln

$0.5bln

Ap

exes

$0.04 bln

Low growth in commitments in 2009

• Cross-border funders had $4,064 million committed to South Asia (SA) as of 2009, representing 19% of total cross-border funding to microfinance.

• Lowest growth in commitments, with a rate of 1% compared to 17% globally.

• 29 public funders (18 bilateral and multilateral agencies and 11 development finance institutions - DFIs), 14 foundations/NGOs and 37 Microfinance Investment Intermediaries (MIIs) are active in SA.

• The AsDB and the World Bank represent more than 50% of commitments to SA.

21,313 (100%)

1,546 (7%)

6,188 (29%)4,724 (22%)

787 (4%)

4,064 (19%)

2,544 (12%)1,461 (7%)

Total East Asia & the Pacific

(EAP)

Eastern Europe & Central Asia

(ECA)

Latin America & the Caribbean

(LAC)

Middle East& North Africa

(MENA)

South Asia (SA)

Sub-Saharan Africa (SSA)

Multi-Region

Committed Amount (million USD)+17%

+4%

+21%+22%

+19% +38%+22%

+1%

Number of respondents: 61 and CGAP estimates based on 90 MIVs

AnnualGrowth Rates for 2008 to 2009

Public funding dominant, but private funding growing faster

• Public funders provide 84% of total commitments to SA, compared to 69% globally. Private funders (foundations, institutional investors and individual investors) account for 16%.

• While public funding decreased by -7%, private funding increased by 129% in 2009 (compared to 33% globally). Of the 37 MIIs active in SA in 2009, only 24 were active there in 2008.

• Bilateral agencies decreased their commitments by -17%; multilateral agencies by -10%. DFIs increased their commitments by 18% on average.

69%63%

68%

54%

87% 84%75%

60%

31% 37% 32%46%

13% 16%25%

40%

Total EAP ECA LAC MENA SA SSA Multi-Region

Commitments by Type of Funder

Public Funders Private FundersNumber of respondents: 61 and CGAP estimates based on 90 MIVs

Focus on refinancing retail financial service providers

• 88% of commitments to SA are used to refinance retail financial service providers, directly or indirectly.

• At least $400 million are committed to capacity building in SA. 83% of these funds are used to strengthen retail service providers; 17% are used at the market infrastructure and policy levels. India represents close to 80% of these capacity building funds, due to one large project funded by AsDB, World Bank and KfW.

• Funding for on-lending increased by 33% in 2009, while funding for capacity building decreased by -18%.

88%83%

99%91%

84%88%

67%76%

12% 17%

1%9% 16% 12% 33% 24%

Total EAP ECA LAC MENA SA SSA Multi-Region

Commitments by Purpose

Onlending Capacity Building

Number of respondents: 58 and CGAP estimates based on 90 MIVs

Debt is by far the main instrument used by funders

• 60% of commitments to SA is provided by funders directly or channeled through local governments, 40% are channeled via intermediaries such as MIIs.

• Debt remains the main financial instrument used by funders.

• Funders committed $550 mln in grants. Grant represent 10% of direct investments, compared to 21% globally. Afghanistan and Bangladesh received 60% of total grants to SA.

• Debt and equity increased in 2009 while grants and guarantees decreased during the same year.

66%

5%

21%

4%4%

Direct Funding by Instrument (TOTAL)

Other

Guarantee

Grant

Equity

Debt

45%55%

Commitments by Type of Funding (TOTAL)

Direct Indirect

86%

2%10%1%1%

Direct Funding by Instrument (SA)

Other

Guarantee

Grant

Equity

Debt

60%40%

Commitments by Type of Funding (SA)

Direct Indirect

Number of respondents: 58 and CGAP estimates based on 90 MIVs

India receives 65% of total funding to SA

• Funders are active in 8 countries in SA.

• In 2008 and 2009, India represents at least 65% of total commitments to SA.

$2 to 50 mln

$51 to 100 mln

$101 to 300 mln

$301 to 500 mln

$501 to 1,000 mln

>$1 bln

Commitments as of December 2009

2008/2009 Growth in

CommitmentsIndia > $1billion ↑↑Bangladesh $300 to 500 mln ↓Pakistan $100 to 300 mln ↓↓Afghanistan $100 to 300 mln ↓↓Sri Lanka $50 to 100 mln ↓↓Bhutan $2 to 50 mln →Maldives $2 to 50 mln →Nepal $2 to 50 mln ↓↓

↑↑ increases, more than 20 mln

↑ increases, 5 to 20 mln

→ same or change less than 5 mln

↓ decreases, 5 to 20 mln

↓↓ decreases, more than 20 mln

Direct Commitments by Country as of Dec. 2009

Country breakdown is available only for direct funding

Active Funders in SA

AsDB 27%World Bank 25%

KfW 9%DFID 6%IFAD 5%

Top 5 Funders in SA% of Commitments to SA

Active Funders in SA

Multilateral & UN Agencies Bilateral AgenciesAsDB AusAIDEC CIDA Aavishkaar Goodwell respA GMFIFAD DFID ASN-Novib respA MFILO Finland MoFA Bellwether Rural ImpulseIsDB GTZ BOPEF ShoreCapUNCDF Italy MoFA Consorzio Etimos SIDIWorld Bank JICA DBMDF SNS

Netherlands MoFA Dignity SNS MF IINorad DMCF Symbiotics DRFSDC Elevar Equity II Triodos FSF

Foundations & NGOs USAID EMF Triodos MFCiti Foundation Finethic Triodos-DoenCordaid Development Finance GCMC Unitus EFDoen Foundation Institutions (DFIs) Hivos-Triodos Wallberg GMFFord Foundation AFD Proparco I&PGates foundation BIO ImpulseGrameen Foundation CDC IncofinHivos DCA USAID India FIFICCO EIB MicroVenturesMSDF Finnfund MicroVentures IndiaOmydiar Network FMO MicroVentures SICAROxfam Novib IFC MicroVest IRabobank Foundation KfW MicroVest IIStromme Foundation Norfund OikocreditWhole Planet Foundation OPIC OTI

Microfinance Investment Intermediaries (MIIs)

Method and Definitions

• Method: Figures are based on data reported by 61 funders and 90 microfinance investment intermediaries. CGAP used data provided by microfinance investment intermediaries to estimate funding from individual investors and institutional investors. All data is as of December 2009. Growth rates are based on a subset of respondents for which data is available for all years covered by the surveys. Country breakdowns are based on funding for which country allocation is available.

***

• Cross-border funding for microfinance: Like other development sectors, microfinance receives funding from public and private funders in developed countries. Depending on local capital markets and the regulatory environment, microfinance institutions in developing countries can also access local funding sources, such as client deposits or loans from local commercial banks. The CGAP surveys focus exclusively on foreign, or cross-border, funding for microfinance.

• Commitments: A common way to measure funding for microfinance is to look at funders’ commitments. Total commitments represent the total amount of all currently active investments and projects, whether the funds have been disbursed or are yet to be disbursed during the remaining lifetime of a project. As such, total commitments describe the stock of funds set aside for microfinance at a given time (i.e. December 2009 for the data above). To understand the actual flow of money to the microfinance sector, it is also necessary to look at annual disbursements.

• Microfinance Investment Intermediaries: Microfinance Investment Intermediaries (MIIs) are investment entities that have microfinance as one of their core investment objectives and mandates. MIIs can provide debt, equity or guarantees (directly or indirectly) to microfinance service providers. The main types of MIIs are Microfinance Investment Vehicles (MIVs), Holding Companies and others such as peer-to-peer lending platforms.

Survey Participants

Public funders

Multilateral and UN agencies

N=8 AfDB, AsDB, EC, IFAD, ILO, IsDB, UNCDF, World Bank

Bilateral agencies

N=15 AusAID, CIDA, DANIDA, DFID, Finland MoFA, GTZ, Italy MoFA, JICA, Lux Dev, MCC, Netherlands MoFA, NORAD, SDC, Sida, USAID

Development finance institutions (DFIs)

N=18 AECID, AFD Proparco, BIO, CAF, CDC, DCA USAID, EBRD, EIB, Finnfund, FMO, ICDF, IFC, IIC, KfW, MIF IADB, Norfund, OPIC, SIFEM

Private funders

Foundations and NGOs

N=16 Foundations: Citi, Doen, Ford, Gates, Grameen, Grameen Jameel, Mastercard, MSDF, Rabobank, Stromme, Whole Planet; NGOs: Cordaid, HIVOS, ICCO, Omidyar Network, Oxfam Novib

Individual Investors n/a CGAP estimates*

Institutional InvestorsN=4 + CGAP estimates*

ABP, ING, PGGM, TIAA Cref, and CGAP estimates*

*CGAP estimates are based on data from 90 MIIs. For more information on MIIs see http://www.cgap.org/p/site/c/template.rc/1.11.142715/

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