Trends in Cross-Border Funding

Cross-Border Funding of Microfinance Global trends 2007-2010 December 2011

Outline What is cross-border funding? Global trends in cross-border funding Annexes  About the data  Funders surveyed in 2011 2

What is cross-border funding? Cross-border Funding Local Funding Public Private Government LocalDonors and Donors and funds Deposits commercial Investors Investors (State banks, (Individual, sources (Foundations, Apexes, Institutional) (Commercial (Multilaterals, Independent Institutional and banksBilaterals, DFIs) programs) Retail Investors) Private investors) Microfinance Investment Intermediaries (MIIs) Microfinance (Support for microfinance at all levels of the financial system: retail, market infrastructure, and policy) 3 3

Commitments still growing, but at slower pace Cross-border commitments to microfinance - US$ million Cross-border commitments to microfinance (US$ billion) +13% 25 +17% +7% +12% +30% 20 +22% 15 Total (estimate) 20 funders in our sample 10 Annual growth rates: 5 +17% Total (estimate) +17% 20 funders 0 Dec07 Dec08 Dec09 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

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 9,952 Total commitments New commitments Closed projects Growth 2007 2008 2009 2010• The decline in the growth rate is due to a higher number of microfinance projects coming to an end 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

Public funders provide 70% of cross-border commitments Commitments by Type of Funder (%) Estimate - Dec. 2010 Commitments by type of funder (%, estimate as of Dec. 2010) Private funders 30% Public funders 70% 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 to microfinance and private funders around 30%. 6

Largest 5 funders remained the same over last 3 years Funders commitments in % of Dec. 2010 Type the commitments of the 20 funders in our sample KfW DFI 18% World Bank Multilateral Agency 11% AsDB Multilateral Agency 11% IFC DFI 9% EBRD DFI 7% All 5 57% 7

Funders use diverse channels to support microfinance Funding channels (% of commitments of 20 largest funders) 20 largest funders 38% 28% 18% 8% 8% Direct MIVs and Local apexes Unspecified 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 from 13% 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, local apexes, banks and other intermediaries. 8

Debt is most used instrument; equity and guarantees increasing Total commitments by instrument (data from 20 largest funders) +6% +1% 68% Dec08 64% 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% Debt Equity Grant Guarantee 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.• 9 Around 14% of the direct debt is provided in local currency. 9

Funding for capacity building remains stable The purpose of funding - % of total commitments 20 funders in our sample - Dec. 2010* 2% On-lending 2% Capacity On-lending building Capacity building at the policy level 86% 14% 10% Capacity building at the market infrastructure level Retail capacity building * Missing breakdown for AsDB• For the 20 funders in our sample, the bulk of cross-border funding (86%) is used for on-lending to retail clients.• The share of commitments dedicated to capacity building (14%) remained stable over the last four years. 10 10

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 sample 15% Multi-Region 11% 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 than commitments globally. 5 funders surveyed expect to offer more funding to SSA in 2011. 11 11

Regional Breakdown +15% -6% +31% 3.3 3.1 +65% +5% 2.9 2.2 2.3 2.2 +59% 1.3 .8 +49% +10% +10% 1.3Dec07 Dec08 Dec09 Dec10 -12% -3% +5% Dec07 Dec08 Dec09 Dec10 .6 .7 .8 .9 Multi-Region .6 .6 .6 Dec07 Dec08 Dec09 Dec10 Eastern Europe & Dec07 Dec08 Dec09 Dec10 Central Asia (ECA) Middle East & North Africa (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 1.4 Dec07 Dec08 Dec09 Dec10 Sub-Saharan Africa Dec07 Dec08 Dec09 Dec10 (SSA) Dec07 Dec08 Dec09 Dec10 Latin America & South Asia (SA) Caribbean (LAC) Data for the 20 funders in our sample Cross-border commitments to microfinance – US$ billion Annual growth rates 12

Looking ahead: Issues funders focus on in next five years Issues funders will focus on in the next 5 years Rural finance Responsible finance and consumer protection Mobile and branchless banking Regulation and supervision Savings MFI governance New business models Transparency on financial and social performance Microinsurance Reaching specific client groups G2P and social safety nets Payment services and remittances 0 1 2 3 4 5 6 7 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). 13 13

ANNEXES

About the data What data is used 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 the The 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 around are the data? 65% of total cross-border funding to microfinance. What are the Commitments: 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

Funders surveyed in 2011 Public funders AECID, AFD Proparco, DCA USAID,Development Finance Institutions EBRD, EIB, FMO, IFC, KfW, MIF IADB,(DFIs) OPICMultilateral and UN agencies AfDB , AsDB, EC, IFAD, World BankBilateral agencies CIDA, DFID, GIZ Private fundersFoundations Bill & Melinda Gates FoundationInstitutional Investors ABP 16

Further resources Additional data and analyses are available at www.cgap.org/funders For questions and feedback please contact Barbara Gähwiler (bgahwiler@worldbank.org). 17

Advancing financial access for the world’s poor www.cgap.org www.microfinancegateway.org

Trends in Cross-Border Funding

by CGAP on Mar 30, 2012

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