A structured finance approach to microfinance

Author: Kshama Fernandes, IFMR Capital
Publication: Euromoney Yearbooks

Abstract: The lending model of making small-sized loans to groups of borrowers who mutually guarantee repayment, was brought to the forefront when Mohammad Yunus and the Grameen Bank were awarded the Nobel Prize in 2006. Variants of the Grameen Model and other forms of microcredit have been implemented by microfinance institutions (MFIs) across the world, predominantly in Latin America, Africa, Asia and Eastern Europe. The need for continuous and reliable sources of capital is critical for growth and sustenance in this sector. The structured finance approach has given MFIs access to a new class of debt investors, thereby reducing over-dependence on traditional sources of funds and enabling risk transfer over a larger gamut of financial institutions.

Click here to read more.