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Resilience of Microfinance to National Macroeconomic Events: A look at MFI asset quality

Resilience of Microfinance to National Macroeconomic Events: A look at MFI asset quality

Date: 
May 2007
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Recent developments in the financing of microfinance have focused on the underlying microfinance portfolio. In the case of the BRAC securitization described in detail in this issue of the MicroBanking Bulletin, this can mean the packaging and selling of securities based on the microloan portfolio and its repayment performance. In other instances, service company models delink the MFI from the portfolio by having the MFI manage funds on behalf of another financial institution, like Ameen in Lebanon or Sogesol in Haiti. Banks entering microfinance, like ICICI Bank in India, have used portfolio buy-outs to gain market share, while leaving the microfinance institution to manage collection and recovery. All these transactions rely on managing the risk implicit in the microcredit portfolio, while explicitly attempting to eliminate or reduce institutional credit risk. Investors and analysts are left to judge portfolio risk, including its resilience to crises, economic downturns and other shocks that might read more...