Burgess COMMENTARY

Peter Burgess

Peter Burgess
Funding Microfinancial Institutions
Brian1nyc@aol.com Sat, Apr 27, 2013 at 12:16 PM
To: brian1nyc@yahoo.com

Dear Microfinance Friends,

This past Thursday, April 25th, 2013, I had the pleasure of attending our club's (Microfinance Club of NY) event at Moody's, in downtown Manhattan, on Trends in Products and Structures for Funding Microfinancial Institutions.

Our panel moderator was:

Mary Rose Brusewitz, Transactional Attorney, Partner in Charge, NY Office; Co-head, International Practice, Strasberger & Price, LLP. She is also a board member for our club.

Our panelists were:

• Patrick Ball, Developing World Markets, VP, Microfinance Operation & Debt Investments
• Jacob Haar, GMG Investment Advisors; Managing Director, Minlam Asset Management
• Jody Rasch, Senior VP Social Performance Group, Moody's

Then Patrick, our first panelist to speak, explained about what his company, Developing World Markets, does to help fund MFIs (microfinance institutions). They work in Asia, Africa, and the Middle East. They use debt investments to help in developing world markets. They manage over $750 million, focus on the debt side of the business, but also in asset management, and structured finance. They did the first bond in Azerbaijan, for example. They focus on raining money from institutional investors. He spoke about two points:

1. 1) local currency financing
2. 2) social impact

They look at the yield curve and see where there might be opportunity for financing. An innovative idea is tying the interest rate being paid by the borrowing MFI inversely to the social performance of the MFI.

Here is more from Developing World Market's website:

We are at the forefront of a global effort to create investable solutions to meet the social and economic needs of the developing world. We structure transactions that provide inclusive financial institutions (IFINs) with access to international capital markets. We aim to achieve sustainable development through market-level financial returns for our investors and social returns in the developing world.

DWM has structured and advised on approximately USD 1 billion in creative inclusive finance transactions over the past 10 years. Our transactions have financed over 140 inclusive financial institutions (IFINs) in more than 40 emerging market countries. As of December 31, 2012, DWM managed approximately USD 765 million in impact investments.

The DWM team shares the passionate interest of our clients and investors in the social goals served by our transactions. We're serious about investing. We're serious about impact.

Minlan is also based in NY. Minlam Asset Management LLC is an alternative investment advisor that manages investment products focused on financial institutions that serve small businesses, microenterprises and low-income clients in emerging markets. It believes that investments in these financial institutions are characterized by attractive risk-adjusted returns, low correlation to traditional asset classes and less competition than other market opportunities. Minlam Asset Management LLC provides long-term local currency financing to microfinance institutions worldwide. They also deal with local currency.

Jacob explained that the first product he deals with is private debt and term loans. They are also involved with securitization of signature loans. There had been a decline and now a resurgence in this activity. There is a secondary market in MFI loans. There are also equity investments and quasi equity investments.

Our third panelist to speak was Jody, of Moody's (our host). He spoke about a different way of bond structuring, doing good and doing microfinance. He gave an example in a related area of the UK and prison systems. Social impact bonds. Tying rate to social performance. Deutsche Bank has done a bond on social performance. Moody's has been developing a rating system for social performance. Regulators are starting to look more and more at the social risk of microfinance, so this is important. India is an example of this.

After the panelists' presentations there was a lively question-and-answer and discussion session. It's obvious that things are changing in microfinance. There is more maturity and sophistication, more acceptance by the mainstream, more opportunities for financing. but less 'tree hugger' raw enthusiasm. Discipline and measuring performance is more important than ever. Microfinance is no longer the new kid on the block, and is now being held to higher standards.

Here are some photos from the evening:

Sign welcoming us, on the 20th Floor of Moody's

Part of our panel: Mary Rose Brusewitz, Patrick Ball, and Jacob Haar.

And here's Jody Rasch, our third panelist, and host.

Another view, all together.

The session went from 6:45 to 8 p.m.

It was well attended. Even more arrived later.

People had individual conversations with the panelists afterwards.

Here are club members Nicole and Peter (center and right).

Moody's is located at 7 World Trade Center, next to the new World Trade Center building that is already the tallest in NYC.

Their location affords a great view of the memorial 9/11 Reflecting Pools.

And that's it. It was a very, very informative evening.

Brian Gately

Brian Gately, CUDE
Brian Gately Credit Union Consulting Services
910 Park Place 6B
Brooklyn, NY 11216
Tel: 917 566 6357 (mobile), 718 778 9836 (office)