MICROS: the rating of MFIs
TBLI Conference, Amsterdam – 12th November 2009
2www.ecpindices.com Bloomberg: ECPS <GO> Reuters: ECAPITAL
Assessment of MFIs is driven by market demand and coherent with ECPI’s sustainability-related mission
The market for microfinance has been significantly growing over the last few years, benefiting financial institutions and developing communities.
There is still interesting potential for market expansion.
ECPI developed a proprietary methodology to evaluate the sustainability of MFIs and the impact of their activity on local communities to help investors finance the best and least risky institutions.
3www.ecpindices.com Bloomberg: ECPS <GO> Reuters: ECAPITAL
ECPI has been a leading provider of sustainability research, rating and Indices since 1997.It is part of Mittel Group, a strong listed financial group, providing capital but also segregated freedom of action in its research activities.
ECPI is the market-leading provider of ESG (Environmental, Social and Governance) research, rating and Indices as a unique bundle of ESG products:
Research and RatingECPI proprietary screening methodologies have evolved after a decade of work, resulting in a flexible tool for its clients. The database of 4,000+ issuers is periodically updated to provide maximum flexibility and exposure to the latest company ESG-relevant news.
IndicesECPI has been working since 1997 on the creation of sustainable and thematic indices to integrate sustainability analysis in the investors’ investment process, by identifying fundamental performance-driving factors and making them investable.ECPI Indices are available across all asset classes and distributed through all major data vendors, providing optimal accessibility.
Bloomberg Page: ECPS<go>Reuters Page: ECAPITAL
Web: www.ecpindices.com
ECPI - Mittel Group is a leading provider of ESG rating and indices
4www.ecpindices.com Bloomberg: ECPS <GO> Reuters: ECAPITAL
The assessment of MFIs is coherent with ECPI’s mission
The market for Microfinance has been significantly growing over the last years, benefiting local communities in developing countries and financial institutions: microfinance is an emerging asset class.
However, it is estimated that one billion people still lack access to basic financial services: there is a significant demand untapped.
Microfinance is still far from reaching its potential. This is largely due to a lack of both funding resources and adequately structured investment vehicles.
MICROS
ECPI has developed a proprietary methodology to evaluate the sustainability of MFIs and the impact of their activity on local communities:
to increase transparency of investment products that imply exposure to Debt and/or Equity of those entities and consequently
to attract more investors to this market.
5www.ecpindices.com Bloomberg: ECPS <GO> Reuters: ECAPITAL
Actually only 9% of the market of microfinance demand is funded
As of Jan 2008, the microfinance sector has an estimated total loan volume of USD 25 bn.
Yet, it is unable to serve more than a fraction (approx. 100 m) of total sector demand of roughly 1 bn micro-borrowers.
This situation translates into an immense funding gap estimated at around USD 250 bn.
SOURCE: DB research, Meehan, CGAP, Dec 2007
SOURCE: The MIX based national poverty rates; ratio is based on borrower/poor, Dec 2007
6www.ecpindices.com Bloomberg: ECPS <GO> Reuters: ECAPITAL
Until 2015, is expected a 900% grow of private investments in microfinance
By 2015 institutional and individual investments in microfinance is expected to rise sharply to around USD 20 bn.
Microfinance is gradually evolving into an asset class that will attract retail investors and benefit from the general strong rise in SRI.
Microfinance will appeal to a wider range of commercial investors as it might even be conducive to investors’ portfolio diversification.
In order to reach this goals, a critical mass of MFIs must be capable of absorbing foreign funding.
7www.ecpindices.com Bloomberg: ECPS <GO> Reuters: ECAPITAL
MICROS is meant to identify the best structured MFIs
Third Party Assessment Transparen
cy Increase
Risk Reduction
# of products and investors increase
Funding Gap fill MICRO
S
8www.ecpindices.com Bloomberg: ECPS <GO> Reuters: ECAPITAL
Intangible Value Screening
Selection of the companies with high standards of corporate social and environmental responsibility in order to capture Corporate Intangible Value.
MICROS adopts an approach similar to that applied to company ESG screening
The analysis focuses on the MFI critical success factors:
the institution’s corporate and operational structure, and
the institution’s social impact.
ECPI applies its screening to analyze sustainability and business risks of each MFI in a portfolio.
The analysis is designed to anticipate potential risk through a systematic and rule-based ratings approach that investigates the institution’s ability to run its business in the best possible way vis-à-vis the investors.
The goal of the methodology is the selection of the best in class MFIs.
Recommended
Candidates
ECPI Company Screening Methodology
Global Investment Universe
Forward-Looking Approach
In case of relevant news, factors such as reiteration, company
reaction, malice, guilt and industry custom are taken into
account
The analysis has predictive goal
ESG ScreeningSelection of businesses with high standards of
corporate governance, social and environmental policies
MICROS
9www.ecpindices.com Bloomberg: ECPS <GO> Reuters: ECAPITAL
Corporate governance
Transparency
CORPORATE SUSTAINABILITY (intent, strategies and systems)
Performance
Risk management
Human capital
Litigations
Lending procedures
Regulations
MICROS analyzes the main operating areas of the MFI
OPERATIONAL SUSTAINABILITY (policy and compliance)
PortfolioManagement team
Employees Outreach
SOCIAL SUSTAINABILITY (achievement of social goals)
10www.ecpindices.com Bloomberg: ECPS <GO> Reuters: ECAPITAL
CASE STUDY: MicroVentures, a success story
MicroVentures is an initiative started in 2006 to invest in the most promising Microfinance Institutions (MFIs) in developing countries.
Among MicroVentures’ key investors and promoters: Italian leader entrepreneurs; private and banking foundations; family office and Italian financial institutions.
In less than 2 years, MicroVentures Spa (the first investment initiative) has build-up an active portfolio of 20 investments (equity and debt) into Indian and Latin American MFIs, actually serving more then one million clients, mainly women micro-entrepreneurs.
MicroVentures is now launching a Luxembourg Sicar to deliver consistent capital appreciation in the value of the assets by direct or indirect investments into the equity and quasi-equity instruments issued by MFI (Microfinance Institutions) mainly operating in Asia and Latin America.
The preliminary screening of the investable MFIs will include a governance due-diligence and a sustainability analysis.
11www.ecpindices.com Bloomberg: ECPS <GO> Reuters: ECAPITAL
Research Dept.
Milan
Piazza Diaz, 7
20123 Milan, Italy
Tel +39 02 7214 11
Fax +39 02 72141616
www.ecpindices.com
Bloomberg: ECPS <GO>
Reuters: ECAPITAL
Index Dept.
Luxembourg
5, Rue Goëthe
L-1637 Luxembourg
Tel +352 26 845633
Fax +352 26 845634
Disclaimer
This document has been prepared by Mittel Corporate Finance S.p.A. and/or any of its subsidiaries and affiliates, being noted that Mittel Corporate Finance S.p.A. is entirely owned by Mittel S.p.A., a company organized and existing under the laws of Italy, with registered office at Piazza Armando Diaz, n.7 I-20123 Milan, Italy (the “ECP Group Companies”) as part of their internal research activity. The information provided herein and, in particular, the data contained in this document are taken from information available to the public. All information contained herein is obtained from sources believed by it to be accurate and reliable. While the opinions and information contained in this document are based on public sources believed to be reliable and in good faith, ECP Group Companies have not independently verified the accuracy of such public sources. Because of the possibility of human, technical or whatsoever kind of similar error, however, such information is provided “as is” without warranty of any kind and ECP Group Companies, in particular, make no representation or warranty, whether express or implicit, as to the fairness, accuracy, timeliness, completeness, merchantability and/or fitness of any such information and opinions contained in this document. Accordingly, neither ECP Group Companies nor any of their respective directors, managers, officers or employees shall be held liable for whatever reason (including, without limitation, liability in negligence) for any loss (including consequential loss), expense, consequential, special, incidental, direct or indirect or similar damage, whether or not advised of the possibility of such damage, in connection with the fairness, accuracy, timeliness, completeness, merchantability and/or fitness of the information and opinions contained in this document and/or arising from any use or performance of this document or its contents or otherwise arising in connection with this document.Any opinions, forecasts or estimates contained herein constitute a high-level information statement only valid as at the date of its release. There can be no assurance that the evolution of the information contained herein and/or any future events will be consistent with such opinions, forecasts or estimates. Any information herein is at any time subject to change, update or amendment subsequently to the date of this document, with no undertaking by ECP Group Companies to notify such change, update or amendment.This document is not, nor may it be construed as to constitute a recommendation to make any kind of investment decision or an offer for sale or subscription of or a solicitation of any offer to buy or subscribe for any financial instrument. Accordingly, this document may not be used as a solicitation or an offer for sale or subscription, and any solicitation or offer shall be made only in accordance with all applicable laws and regulation, including, whenever applicable, the filing of a prospectus with the relevant authorities. ECP Group Companies are not financial advisors subject to special authorization and thus do not provide formal financial advice in the area of investment nor perform any asset management activity. ECP Group Companies recommend to potential investors wishing to be provided with formal financial advice in the area of investment to contact a financial advisor duly authorized by the competent regulatory authority of its country.ECP Group Companies publish researches on a regular basis. This publication has been prepared on behalf of ECP Group Companies solely for information purposes. All the information contained herein is copyrighted in the name of ECP Group Companies, and none of such information may be copied or otherwise reproduced, except for personal use only, further transmitted, transferred, published, disseminated, redistributed or resold, in whole or in part, in any form or manner or by any means whatsoever, by any person without ECP Group Companies’ prior written consent.
Top Related