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Can MIVs help increase Access to Finance?

Mar 14, 2011
Sub-Saharan Africa is one of the poorest regions of the world, with almost half of its population living in extreme poverty.

Financial exclusion is one of the multiple facets of this poverty. It translates into a total or partial lack of access to mainstream financial services, preventing people and small enterprises from seizing opportunities that would help them break out of the vicious cycle of poverty.



Formal microfinance, channelled through microfinance institutions (MFIs), is considered an effective means of combating financial exclusion and fostering economic development. However, the viability and effectiveness of microfinance is often threatened by the uncertainties around its long-term sustainability. Commercial funds are believed to be a solution to this concern. They, however, raise further concerns about the ability of microfinance to continue serving the poorest, on the one hand, while
providing substantial returns to investors, on the other hand.

Commercial funds (provided by, among others, investment funds and banks), do have a positive impact on MFIs by responding to their funding needs, fostering responsible behaviour and good management practices. Thus, getting private investors involved in microfinance is seen as a solution to filling the funding gaps faced by MFIs.


Microfinance Investment Vehicles (MIV) are funds that exclusively invest in microfinance assets. The number of these Microfinance Investment Vehicles is growing fast and the amounts involved are “booming” through much of the world -- in spite of the recent financial crisis -- underscoring the growing interest of investors in the new area.

Yet Africa still lags behind. Only 6.2% of the 4.8 billion USD assets under MIV management in 2009 were dedicated to Sub-Saharan Africa. This ‘neglect’ is generally attributed to Africa’s poor business environment.

The general business environment on the continent is said to discourage entrepreneurs, particularly foreign investors, from involvement in microfinance. Indeed, from the MIVs' standpoint, Sub-Saharan Africa is dominated by a large number of small, unprofitable MFIs, constrained by high operating costs and poor regulation. The returns of African MFIs' are also lower than those in other regions.

To develop Microfinance Investment Funds in Africa, microfinance stakeholders, governments, and donors must work together to build a more conducive environment and positive reputation that in which Africa is seen as ‘ready for business’ and not as a continent ridden with ‘financial aid and corruption’. Improved financial performance, good governance and transparency are
essential if the micro-finance industry is to attract the necessary investment, grow and thrive in Sub-Saharan Africa.

With regard to funding, donors should cede more space to private investors by focusing their action on MFIs that work with the poorest and are less able to mobilise private capital. Their role in risk mitigation, here, can also be valuable.

As for fund promoters, they have to strengthen their knowledge of the continent and their technical expertise at all levels of management in order to encourage private investors to invest in African microfinance.
In conclusion, it seems the main challenge faced by the African microfinance industry in Africa is largely twofold. The first is proving the value of microfinance as a profitable investment and diversification instrument, and the second is building an enabling environment that will convince private investors that the Sub-Saharan Africa region can offer worthwhile investment opportunities in the sector.


Aissatou Eugenie Sow Camara is a Financial Analyst with 10 years of experience in life insurance, banking and financial markets, including investment and risk management in Europe and Africa. She holds a Master of Science degree in Statistics and Decision Methods from the University Paris 1–Panthéon-Sorbonne (France) and a MSc. Degree in Development Finance from the University of Reading (United Kingdom). Her main interests include development issues related to financial sectors in Africa.

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