Supporting Financial Sector Development in Growing Economies

At its core, micro and SME finance is focused on promoting economic development. In emerging markets, hundreds of millions of informal micro and small business owners constitute the lion’s share of the economy. These entrepreneurs require financial services like bank accounts, loans, savings products and insurance to grow their businesses sustainably.

Unfortunately, many emerging economies lack deep financial sectors, which inhibits access to capital for small borrowers with limited to no collateral. Basic financial tools are fundamental to the establishment of efficient, formal financial institutions and helping them grow sustainably is critical to uplifting the entire economy. While financial sector development in many countries has improved, there is still unmet demand for capital from creditworthy borrowers, which creates potential for even greater social impact going forward.

For MicroVest, financial sector development happens as a result of our investments which in turn provide productive loans, savings, payment, and insurance products to clients previously excluded from the financial system. To ensure that these investments have a positive impact on the economy as a whole, MicroVest invests in financial institutions which have strong governance, talented management, robust IT systems, commitment to financial sustainability, and dedication to serving clients. These characteristics help ensure that the institutions are well-equipped to support economic activity.

Improving financial ecosystems requires building and supporting efficient institutions that are able to tailor their services to specific customer segments and have well-designed credit

methodologies and effective governance structures. In the countries where MicroVest invests, the first financial intermediaries were often credit-only NGOs and finance companies.

Some organizations have since evolved into regulated, deposit-taking institutions that offer a wide range of related products, such as savings and insurance. By supporting the growth and development of these institutions, MicroVest aims to improve financial systems and increase access to responsible financial services.

Our portfolio of micro and SME financial institutions are beginning to provide the types of digital tools that have been absent from the market. Healthy competition is driving interest rate spreads down while services are being delivered more efficiently as evidenced by falling cost-to-income ratios. At the same time, MFIs are experimenting with innovative savings products, new payment mechanisms to reach rural and remote populations, and complementary life and credit insurance products.

In support of this mission, MicroVest’s due diligence and investment process is designed to identify and invest in financial institutions that have built a track record of success in these areas and have potential to scale their platforms to better serve unbanked and underbanked customers.

The information contained here has been written for MicroVest Capital Management LLC ("MicroVest") and no representation or warranty, expressed or implied is made by MicroVest as to the accuracy or completeness of the information contained herein. This article is for informational purposes only and is neither an offer to sell nor a solicitation of an offer to purchase an interest in any MicroVest product (the "Funds"), and nothing herein should be construed as such. Any such offer or solicitation will be made only by means of delivery of a definitive private offering memorandum which contains a description of the significant risks involved in such an investment. Prospective investors should request a copy of the relevant Memorandum and review all offering materials carefully prior to making an investment. Any investment in a MicroVest product is speculative, involves a high degree of risk and is illiquid. An investor could lose all, a significant portion or some amount of its investment. You should not construe the contents of the enclosed materials as legal, tax, investment or other advice. To invest with MicroVest, one must be a qualified purchaser and an accredited investor. The investments may be deemed to be highly speculative investments and are not intended as a complete investment program. They are designed only for sophisticated persons who can bear the economic risk of the loss of their entire investment in the Funds and who have a limited need for liquidity in their investment. There can be no assurance that the Funds will achieve their investment objectives.