Cross-Border Funding for Microfinance

Eastern Europe and Central AsiaResults of the CGAP Cross-border Funding Surveys 2010

About the surveys

The CGAP surveys focus on cross-border funding for microfinance.

Over 150 institutions and funds have participated in CGAP’s 2010 surveys on microfinance funding, representing 85 to 95% of the total estimated cross-border funding to microfinance.

CGAP collects data from major funders (bilateral and multilateral agencies, development finance institutions, foundations) and from microfinance investment intermediaries (MIIs) such as Microfinance Investment Vehicles (MIVs) and holdings.

All data is as of December 2009.

For any questions or data requests please contact Barbara Gähwiler at bgahwiler@cgap.org.

At a Glance

28 Public Donors and Investors

(Multilaterals, Bilaterals, DFIs)

$4.2 billion

Private Donors and Investors

(Foundations, Institutional and Retail Investors)

$2 billion

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

53 Microfinance Investment

Intermediaries (MIIs)

Commitments to Microfinance for ECA as of December 2009: $6.2 billion*

* CGAP surveys capture 85 to 95% of the total cross border funding to microfinance

Ap

exes

$1.98 bln

$3.2bln

Ap

exes

$1.3 bln$2.9 bln $0.02 bln

Commitments growing faster than in other regions

• As in previous years, ECA receives the largest share of cross-border funding to microfinance, with $6,188 million committed as of 2009, representing 29% of total funding.

• Largest growth in commitments, together with SSA, with a rate of 22% compared to 17% globally.

• 28 public funders (bilateral and multilateral agencies and development finance institutions - DFIs), 11 foundations/NGOs and 53 Microfinance Investment Intermediaries (MIIs) are active in ECA.

21,313 (100%)

1,546 (7%)

6,188 (29%)4,724 (22%)

787 (4%)

4,064 (19%)

2,544 (12%)1,461 (7%)

Total East Asia & the Pacific

(EAP)

Eastern Europe & Central Asia

(ECA)

Latin America & the Caribbean

(LAC)

Middle East& North Africa

(MENA)

South Asia (SA)

Sub-Saharan Africa (SSA)

Multi-Region

Committed Amount (million USD)+17%

+4%

+21%+22%

+19% +38%+22%

+1%

Number of respondents: 61 and CGAP estimates based on 90 MIVs

AnnualGrowth Rates for 2008 to 2009

Public funding dominant and growing faster than private funding

• Public funders provide 68% of total commitments (compared to 69% globally). Private funders (foundations, institutional investors and individual investors) account for 32%.

• ECA is the only region were public funding grew faster than private funding in 2009. Public funding grew by 26% (against 12% globally), while private funding grew by 14% (33% globally). DFIs are driving this growth, with $900 million of net new funding in 2009; the 14 DFIs active in the region represent 64% of total commitments to ECA; KfW and EBRD alone represent 42%.

• ECA is the second region, after LAC, in terms of private funding and number of active MIIs. ECA receives 30% of total private funding.

69%63%

68%

54%

87% 84%

75%

60%

31% 37% 32%46%

13% 16%25%

40%

Total EAP ECA LAC MENA SA SSA Multi-Region

Commitments by Type of Funder

Public Funders Private FundersNumber of respondents: 61 and CGAP estimates based on 90 MIVs

Funding focused on refinancing retail financial service providers

• 99% of commitments to ECA are used to refinance retail financial service providers, directly or indirectly, compared to 88% globally. Russia and Bulgaria are two large recipients of public funding for on-lending, with each more than $350 million committed for this purpose.

• ECA ranks last in terms of funding for capacity building, with only $82 million committed. 38% of these funds are used at the market infrastructure and policy levels. 6 countries (Tajikistan, Moldova, Kyrgyz Republic, Azerbaijan, Turkey and Ukraine) represent ~70% of total capacity building funds to ECA - Tajikistan alone 25%.

• Funding for on-lending increased by 23% in 2009 while funding for capacity building decreased by ~7%.

88%83%

99%91%

84%88%

67%76%

12% 17%

1%9% 16% 12% 33% 24%

Total EAP ECA LAC MENA SA SSA Multi-Region

Commitments by Purpose

Onlending Capacity Building

Number of respondents: 58 and CGAP estimates based on 90 MIVs

• 55% of commitments to ECA are channeled via intermediaries such as MIIs; the remaining 45% are provided by funders directly or channeled through local governments.

• Debt is the main financial instrument used by funders. Structured finance is more widely used than in other regions: it represents 10% of direct commitments compared to less than 2% in other regions.

• ECA ranks first in terms of equity investments. DFIs invested $560 million in equity in ECA: 60% in MIIs, ~20% in network affiliates, ~20% in banks, and a small % in transforming NGOs.

More sophisticated instruments than in other regions

66%

5%

21%

4%4%

Direct Funding by Instrument (TOTAL)

Other

Guarantee

Grant

Equity

Debt

45%55%

Commitments by Type of Funding (TOTAL)

Direct Indirect

75%

8%3%4%

10%

Direct Funding by Instrument (ECA)

Other

Guarantee

Grant

Equity

Debt

45%55%

Commitments by Type of Funding (ECA)

Direct Indirect

Number of respondents: 58 and CGAP estimates based on 90 MIVs

• Funders are active in 22 countries in ECA. Commitments increased or remained stable in all countries except for Kazakhstan (due to the termination of one large deal).

• Russia and Bulgaria remain the two most funded countries. More than 90% of funding to Bulgaria is actually participation in ProCredit Bulgaria’s securitization; to the opposite, funding to Russia comprises of debt and equity investment in a wide range of downscaling banks and MFIs.

Funders active in 22 countries

↑↑ increases, more than 20 mln

↑ increases, 5 to 20 mln

→ same or change less than 5 mln

↓ decreases, 5 to 20 mln

↓↓ decreases, more than 20 mln

Commitments by Country as of Dec. 2009, and 2008/2009 TrendCountry allocation is available for 46% of ECA commitments

$2 to 50 mln

$51 to 100 mln

$101 to 300 mln

$301 to 500 mln

<$2mln

2009 Commitments

2008/2009 Growth

2009 Commitments

2008/2009 Growth

Albania $50 to 100 mln → Moldova $50 to 100 mln ↑Armenia $100 to 300 mln ↑ Montenegro $2 to 50 mln ↑Azerbaijan $100 to 300 mln ↑↑ Poland $2 to 50 mln ↑↑Belarus $50 to 100 mln → Romania $100 to 300 mln →BiH $100 to 300 mln ↑↑ Russia $300 to 500 mln ↑↑Bulgaria $300 to 500 mln → Serbia $100 to 300 mln ↑Georgia $100 to 300 mln ↑↑ Tajikistan $100 to 300 mln ↑Kazakhstan $50 to 100 mln ↓↓ Turkey $100 to 300 mln ↑↑Kosovo $50 to 100 mln ↑↑ Turkmenistan <$2 mln →Kyrgyz Republic $50 to 100 mln ↑↑ Ukraine $100 to 300 mln ↑↑Macedonia $2 to 50 mln → Uzbekistan $50 to 100 mln ↑↑

Country breakdown is available only for direct funding

Active Funders in ECA

Active Funders in ECA

Multilateral & UN Agencies Bilateral Agencies

AsDB CIDA Access Holding MF Enhancement Facility St Honore

EC DANIDA ASN-Novib MFLO-LC Symbiotics DRF

IFAD Finland MoFA BFSEF MFLO-Opportunity Triodos FSF

ILO GTZ BOLD I MFLO-SubDebt Triodos MF

IsDB MCC BOLD II MicroAccess2007 Triodos-Doen

World Bank Norad BOMS I MicroCredit Wallberg GMF

SDC Consorzio Etimos MicroVest I XXEBDevelopment Finance USAID DBMDF MicroVest IIInstitutions (DFIs) DBMF-1 Minlam

AECID Dignity Oikocredit

AFD Proparco DMCF Opportunity LGF

BIO Foundations & NGOs DWM MF OTI

CDC Citi Foundation EFSE OXUS

DCA USAID Cordaid EMF Planet MicroFund

EBRD DOEN Foundation FINCA MF Procredit Holding

EIB ICCO Finethic respA GMFFinnfund Gates Foundation GCMC respA MFFMO Grameen Foundation Grameen CAMF respA MLFICDF Mastercard Foundation Hivos-Triodos Rural ImpulseIFC Omydiar Network I&P ShoreCapKfW Oxfam Novib Impulse SIDIOPIC Rabobank Foundation Incofin SNSSIFEM Whole Planet Foundation KCD Global SNS MF II

Microfinance Investment Intermediaries (MIIs)

KfW 21%EBRD 20%

IFC 9%EIB 4%

FMO 3%

Top 5 Funders in ECA% of Commitments to ECA

Method and Definitions

• Method: Figures are based on data reported by 61 funders and 90 microfinance investment intermediaries. CGAP used data provided by microfinance investment intermediaries to estimate funding from individual investors and institutional investors. All data is as of December 2009. Growth rates are based on a subset of respondents for which data is available for all years covered by the surveys. Country breakdowns are based on funding for which country allocation is available.

***

• 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.

Survey Participants

Public funders

Multilateral and UN agencies

N=8 AfDB, AsDB, EC, IFAD, ILO, IsDB, UNCDF, World Bank

Bilateral agencies

N=15 AusAID, CIDA, DANIDA, DFID, Finland MoFA, GTZ, Italy MoFA, JICA, Lux Dev, MCC, Netherlands MoFA, NORAD, SDC, Sida, USAID

Development finance institutions (DFIs)

N=18 AECID, AFD Proparco, BIO, CAF, CDC, DCA USAID, EBRD, EIB, Finnfund, FMO, ICDF, IFC, IIC, KfW, MIF IADB, Norfund, OPIC, SIFEM

Private funders

Foundations and NGOs

N=16 Foundations: Citi, Doen, Ford, Gates, Grameen, Grameen Jameel, Mastercard, MSDF, Rabobank, Stromme, Whole Planet; NGOs: Cordaid, HIVOS, ICCO, Omidyar Network, Oxfam Novib

Individual Investors n/a CGAP estimates*

Institutional InvestorsN=4 + CGAP estimates*

ABP, ING, PGGM, TIAA Cref, and CGAP estimates*

*CGAP estimates are based on data from 90 MIIs. For more information on MIIs see http://www.cgap.org/p/site/c/template.rc/1.11.142715/

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