Group Addresses MFI Restructurings

March 10, 2011

The International Association of Microfinance Investors (IAMFI) has developed a set of best practices and guidelines for handling debt defaults involving microfinance institutions.

Data analyzed by IAMFI puts the face value of MFI debt restructurings at $407 million at present. To put this number into perspective, consider that investors allocated $1 billion in new capital to microfinance investments in 2009, despite continuing economic uncertainty in world markets.

A new IAMFI report - Charting the Course: Best Practices and Tools for Voluntary Debt Restructurings in Microfinance - lays out ways industry members can collaborate to ensure that microfinance remains a sound investment opportunity and to improve the ability of MFIs to serve clients regardless of economic climate.

The project was sponsored by Morgan Stanley and developed by a group of experts representing all facets of the microfinance sector, including microfinance investment vehicles, financial institutions, limited partnership investors, community development banks, academics and law firms.

Charting the Course includes 10 recommendations for orderly debt restructurings, as well as assorted tools for investors and creditors, alike. Tools such as agreement templates, a menu of restructuring options and a loan covenant review that take into consideration social, financial and legal considerations that are unique to microfinance.

"Commercial capital can be a positive force in delivering financial services to the world's unbanked poor," explained Joan Trant, IAMFI's executive director, adding that the recommendations offered are intended to support financially responsible restructurings.

IAMFI is a global membership organization Copies of Charting the Course are available for downloading at the IAMFI Web site.

7,000-plus microfinance institutions dot the globe today

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