Trends in Cross-Border Funding

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Cross-border funding for microfinance has increased over the past four years, reaching at least US$24 billion in commitments by December 2010. This estimate includes commitments from public and private funders supporting microfinance in developing countries. While total commitments, or the stock of funding, increased gradually, the growth rates have come down from an estimated 30% (2008) to an estimated 13% (2010).

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  • 1. Cross-Border Funding of MicrofinanceGlobal trends 2007-2010 December 2011

2. Outline What is cross-border funding? Global trends in cross-border funding Annexes About the data Funders surveyed in 20112 3. What is cross-border funding?Cross-border FundingLocal Funding PublicPrivateGovernmentLocalDonors and Donors and fundsDepositscommercial InvestorsInvestors (State banks, (Individual, sources(Foundations,Apexes, Institutional)(Commercial (Multilaterals,Independent Institutional and banksBilaterals, DFIs) programs) Retail Investors) Private investors) MicrofinanceInvestmentIntermediaries (MIIs)Microfinance(Support for microfinance at all levels of the financial system: retail, market infrastructure, and policy) 33 4. Commitments still growing, but at slower pace Cross-border commitments to microfinance - US$ millionCross-border commitments to microfinance (US$ billion)+13%25+17% +7% +12% +30%20 +22%15Total (estimate)20 funders in our sample10 Annual growth rates: 5+17% Total (estimate)+17% 20 funders 0Dec07Dec08Dec09 Dec10 Commitments increased continuously to reach at least $24 billion by Dec. 2010. Growth rates are diminishing, from around 30% in 2008 to 13% in 2010. Around $3 billion was disbursed in 2010.4 5. New commitments higher in 2010 than in previous years Commitments over 4 years - US$ million 20 funders in our sample-2,607 +3,613 -1,433 +1,006 14,689+2,924 +1,491 13,683 -518 +2,757 +2,239 12,192 9,952Total commitmentsNew commitmentsClosed projectsGrowth 20072008 2009 2010 The decline in the growth rate is due to a higher number of microfinance projects coming to anend in 2010 compared to previous years, rather than a slowdown in new commitments. The amount of new commitments was higher in 2010 than in the years 2007 to 2009.5 6. Public funders provide 70% of cross-bordercommitments Commitments by Type of Funder (%) Estimate - Dec. 2010Commitments by type of funder(%, estimate as of Dec. 2010)Privatefunders30% Publicfunders70% Total commitments: US$ 24 billion No significant difference in the growth of private and public funding from 2009 to 2010.From 2008 to 2009, private funding grew at a much higher rate (33%) than public funding(11%). CGAP estimates that public funders provide around 70% of total commitments tomicrofinance and private funders around 30%. 6 7. Largest 5 funders remained the same over last 3 yearsFunders commitments in % ofDec. 2010Typethe commitments of the 20 funders in our sample KfWDFI 18% World Bank Multilateral Agency 11% AsDB Multilateral Agency 11% IFCDFI9% EBRD DFI7% All 557% 7 8. Funders use diverse channels to support microfinanceFunding channels (% of commitments of 20 largest funders) 20 largest funders 38% 28%18%8% 8%Direct MIVs andLocal apexesUnspecified Governments indirect funding holdings and banks Microfinance(Support f or retail institutions, market inf rastructure and policy) In 2010, the 20 largest funders channeled 18% of their funding via MIVs and holdings (up from13% in 2008). Direct funding represented 38% of the 20 largest funders commitments in 2010. Overall, almost half of total cross-border funding is channeled via MIVs, holdings, localapexes, banks and other intermediaries. 8 9. Debt is most used instrument; equity and guarantees increasing Total commitments by instrument (data from 20 largest funders)+6% +1%68% Dec0864% Dec09 60%Dec10+20% Annual growth rates+57% +12%+12% +93% -9%+19% +20%+13%12% 13% 13% 13% 11% 9% 5%6% 10% 5%5% 6%DebtEquity GrantGuarantee Other Debt remains the main financial instrument, but its share is declining. Equity investments increased by 12%, compared to 57% in 2009. Guarantees increased by 93%,mostly driven by four large new programs. Grants commitments decreased for the first time in 2010(-9%), mostly due to projects coming to an end in 2010 and a relative slowdown in new commitments.9Around 14% of the direct debt is provided in local currency. 9 10. Funding for capacity building remains stableThe purpose of funding - % of total commitments20 funders in our sample - Dec. 2010*2%On-lending2% Capacity On-lendingbuilding Capacity building at the policy level86%14% 10%Capacity building at the marketinfrastructure levelRetail capacity building* Missing breakdown for AsDB For the 20 funders in our sample, the bulk of cross-border funding (86%) is used for on-lendingto retail clients. The share of commitments dedicated to capacity building (14%) remained stable over the lastfour years.1010 11. No change in regional allocation of funding over the last four years Commitments by Region (%)Commitments by region (%, data from 20 largest funders) 20 funders in our sample15%Multi-Region11%Sub-Saharan Africa (SSA)24% South Asia (SA)4%Middle East & North Africa (MENA)16%Latin America & the Caribbean (LAC)21% Eastern Europe & Central Asia (ECA) 9% East Asia & the Pacific (EAP)Dec07 Dec08 Dec09 Dec10 SA, ECA and LAC remain the regions receiving most funding. Commitments to ECA have decreased for the first time in four years in US$ terms. Commitments to SSA represent 11% and increased steadily albeit at slower growth rates thancommitments globally. 5 funders surveyed expect to offer more funding to SSA in 2011.1111 12. Regional Breakdown+15%-6%+31% 3.33.1 +65% +5% 2.92.2 2.32.2+59% 1.3 .8+49% +10% +10% 1.3Dec07 Dec08Dec09 Dec10 -12%-3%+5% Dec07 Dec08Dec09 Dec10 .6 .7.8 .9Multi-Region.6.6 .6Dec07 Dec08Dec09 Dec10Eastern Europe & Dec07 Dec08Dec09 Dec10Central Asia (ECA)Middle East & NorthAfrica (MENA)East Asia & the +12% +17% Pacific (EAP)+14% +2% -6% 3.5 +10% 3.3 +12%1.7 1.7 3.1+8% 1.5 2.8 +34%2.3 1.3 2.0 1.9 1.4Dec07 Dec08 Dec09 Dec10 Sub-Saharan AfricaDec07 Dec08 Dec09 Dec10(SSA) Dec07 Dec08Dec09 Dec10 Latin America & South Asia (SA) Caribbean (LAC) Data for the 20 funders in our sampleCross-border commitments to microfinance US$ billionAnnual growth rates12 13. Looking ahead: Issues funders focus on in next five yearsIssues funders will focus on in the next 5 years Rural finance Responsible finance and consumer protection Mobile and branchless banking Regulation and supervision SavingsMFI governance New business modelsTransparency on financial and social performance MicroinsuranceReaching specific client groupsG2P and social safety netsPayment services and remittances0 1 23 4 567 8 9 10 Number of responses Responsible finance is key focus area for funders. Funders go beyond credit-only model and support outreach to still underserved markets (e.g.rural areas).1313 14. ANNEXES 15. About the data What data isused in this This presentation is based on four years of data from the CGAP presentation? microfinance funder survey, complemented with data from Symbiotics MIV survey.What is theThe CGAP funder survey collects data from the major cross- CGAP funder border funders of microfinance. The full version of the CGAP survey? survey, conducted every two years, captures data from over 60 funders. In 2011, CGAP surveyed a subset of 20 microfinance funders. How The 20 funders surveyed in 2011 represented 85% of representative commitments reported in the previous survey year and aroundare the data? 65% of total cross-border funding to microfinance. What are theCommitments: All funds set aside for microfinance, whether or notmain indicators? disbursed stock of funding at a given moment (December 2010). Disbursements: All funds disbursed in the survey year flow of funds in 2010. 15 16. Funders surveyed in 2011 Public fundersAECID, AFD Proparco, DCA USAID,Development Finance InstitutionsEBRD, EIB, FMO, IFC, KfW, MIF IADB,(DFIs)OPICMultilateral and UN agenciesAfDB , AsDB, EC, IFAD, World BankBilateral agenciesCIDA, DFID, GIZ Private fundersFoundations Bill & Melinda Gates FoundationInstitutional Investors ABP16 17. Further resourcesAdditional data and analyses are available atwww.cgap.org/fundersFor questions and feedback please contactBarbara Ghwiler (bgahwiler@worldbank.org).17 18. Advancing financial access for the worlds poor www.cgap.org www.microfinancegateway.org