Cross-Border Funding for Microfinance Results of the CGAP Cross-border Funder Survey 2011

Overview on cross-border funding

Public Donors and Investors

(Multilaterals, Bilaterals, DFIs)

Around $16.7 billion

Private Donors and Investors

(Foundations, Institutional and Retail Investors)

Around $7.4 billion

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

Total Commitments to Microfinance as of December 2010: $24 to 27 billion1)

1) Amounts based on data submitted by 20 funders and CGAP estimates based on 2009 dataset and 2011 Symbiotics MIV Survey2) MIIs’ outstanding microfinance portfolio (estimate based on 2011 Symbiotics MIV Survey)

102 Microfinance Investment

Intermediaries (MIIs)

$2.7 bln $7.3

bln

$2.5bln Apexes and other

Intermediaries

Governments

$4.2bln

$5bln2)

Commitments still growing, but at slower pace

• Commitments increased continuously to reach at least $24 billion by Dec. 2010.

• Growth rates are diminishing, from around 26% in 2008 to 13% in 2010.

• Around $3 billion was disbursed in 2010.

0

5

10

15

20

25

Dec07 Dec08 Dec09 Dec10

Cross-border commitments to microfinance - US$ million

Total (estimate)

20 funders in our sample

+17%

Annual growth rates:

+13%

+17% Total (estimate)

+17% 20 funders

+30%+12%

+22%

+7%

The regional allocation of funding did not change significantly over the last four years

• SA, ECA and LAC remain the regions receiving most funding.

• Commitments to ECA have decreased for the first time in four years.

• Commitments to SSA represent 11% and increased steadily albeit at slower growth rates than commitments globally. 5 funders surveyed anticipate an increased focus on SSA in 2011.

Dec07 Dec08 Dec09 Dec10

Commitments by Region (%)20 funders in our sample

Multi-Region

Sub-Saharan Africa (SSA)

South Asia (SA)

Middle East & North Africa (MENA)

Latin America & the Caribbean (LAC)

Eastern Europe & Central Asia (ECA)

East Asia & the Pacific (EAP)

15%

9%

21%

16%

4%

24%

11%

Equity and guarantees significantly increasing

• Debt and grant remain the main financial instruments used in SSA. SSA receives 34% of the total grants committed globally by the 20 funders in our sample.

• For the 20 funders in our sample, equity investments in SSA increased by 56%, with several new investments by DFIs in MIIs (Leapfrog, Rural Impulse II, FEFISOL, Regmifa, Goodwell, …) and greenfield MFIs.

• Guarantees also increased by 59%, mostly due to DCA USAID and AFD Proparco new investments.

• The 20 funders provide 28% of the direct debt to SSA in local currency, against only 14% globally.

39%

60%

17%

13%33%

11%

10%10%

2% 6%

SSA Global

Breakdown by Instrument (%)20 funders in our sample - Dec. 2010

Other

Guarantee

Grant

Equity

Debt

The share of commitments dedicated to capacity building remains stable over the last four years

• For the 20 funders in our sample, the bulk of cross-border funding is used for on-lending to retail clients (65%, compared to 86% globally).

• The share of commitments dedicated to capacity building (35%, compared to 14% globally) remained stable over the last four years.

Capacity building

35%On-lending

65%

The purpose of funding in Sub-Saharan Africa% of total commitments

20 funders in our sample - Dec. 2010

21%

8%

6%

Capacity building at the policy level

Capacity building at the market infrastructure level

Retail capacity building

On-lending

Issues that will have most impact on improving access to finance

in the next 5 years20 funders in our sample

Going forward

1. Mobile and branchless banking

2. Responsible finance and consumer protection

3. Rural finance

4. Savings

5. Regulation and supervision

Advancing financial access for the world’s poor

www.cgap.org

www.microfinancegateway.org

ANNEXES

Local FundingCross-border Funding

What is cross-border funding?

Public Donors and Investors(Multilaterals,

Bilaterals, DFIs)

Private Donors and Investors (Foundations,

Institutional and Retail Investors)

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

Microfinance Investment

Intermediaries (MIIs)

Government funds

(State banks, Apexes,

Independent programs)

Local commercial

sources(Commercial

banksPrivate investors)

Deposits (Individual,

Institutional)

About the CGAP 2011 Cross-border Funder Survey

• The survey is based on data reported by the major cross-border funders,

complemented with CGAP estimates where indicated.

• In 2011, CGAP surveyed a subset of 20 microfinance funders that together

represented 85 percent of total commitments reported in the previous survey

year and include the major funders in all regions. Estimates on global cross-

border funding are based on data from this subset complemented with data

from the 2011 Symbiotics MIV Survey.

• The sample of funders surveyed includes 10 Development Finance

Institutions (DFIs), 5 multilateral agencies, 3 bilateral agencies, 1 institutional

investor and 1 foundation.

• Survey participants: ABP, AECID, AFD Proparco, AfDB, AsDB, CIDA, DCA

USAID, DFID, EBRD, EC, EIB, FMO, Gates Foundation, GIZ, IFAD, IFC,

KfW, MIF IADB, OPIC, World Bank.

Method and Definitions

• Method: All findings are based on data from the 20 largest microfinance funders in terms of 2009 commitments, complemented with data on MIVs provided by Symbiotics. Total global commitments to microfinance are estimated based on four years of data from the 20 largest funders, three years of data from 61 funders and data from 90 MIIs. Growth rates are based on data from 20 funders except for the breakdowns by levels/purpose (subset of 17 respondents). If not specified otherwise, analysis is based on committed amounts. All direct funding is allocated by region. Indirect funding with a clear regional focus is also allocated by region (e.g., funding via MIVs with a clear regional focus). All other indirect funding is allocated to the category "multi-region". DFIs' commitments at market infrastructure and policy levels are not fully captured by this survey. For questions or further data requests please contact Barbara Gähwiler at bgahwiler@cgap.org.

***

• 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.