During current decades, the extension of microfinance services towards the poor families along with micro-entrepreneurs has developed to become a worldwide industry. Till lately, donations and subsidies formed the major source of financing for microfinance institutions (MFIs). Presently, however, the expansion of the industry and the demands by donors regarding financial sustainability has pressed MFIs to refer to international capital markets. Furthermore, most individuals regard international financing as essential to stimulate the expansion of the sector, indicating that solely international capital markets can hold the approximated US$200 billion required to attain the prospective requirement for microfinance services globally.
The author of the article states that the creation of special investment funds, known as microfinance investment vehicles or (MIVs), indicates the appearance of this fresh specialized capital market. Typically, MFIs possess financial and social and attract financing from actors with diverse extents of profit motivation, as from entirely development-grounded to maximum profit-grounded. Additionally the author finds that accessibility to commercial debt is associated to sturdy financial performance, an elevated professionalization level, and a low standard loan size showing outreach to deprived customers. He finds that MFIs getting subsidized international debt, mark female clients largely than other MFIs. I find the statement that MFIs accessibility to accessibility to international debt being associated to an excellent MFI performance as misleading since in many developing countries MFIs that have no access to international financing are performing extremely well. Furthermore, most of the MFIs are found in the developing countries. However I support the author on the issue that MFIs require to professionalize their activities to attract international financing.
The author indicates that since every MIV alleges to present social returns for investors, they occupy the field known as socially responsible investments or (SRIs). An SRI, which is an investment process, incorporates social, environmental and ethical deliberations into investment resolution making. In its contemporary understanding, corporate social responsibility or CSR not only involves the moral obligations of companies to their stakeholders, however also needs investing in projects which produce social and economic gains. In the microfinance setting, CSR therefore mean that MFIs ought to accomplish their social undertaking in an economically sustainable manner. The author thus finds that the occurrence of international funding towards an MFI is directly related with its social performance. This is a true issue since international investors tend to align with microfinance’s targeting social groups for instance women. I therefore throw a challenge to international investors to not solely focus on corporate social responsibility MFIs since there exist other numerous MFIs that invest in other more productive areas with higher returns and require international funding. There exist a huge risk in CSR MFIs since the extended loans to social groups might not be recovered leading to stakeholders losing their investments.
big challenge goes towards MFIs, they must professionalize their functions and guarantee
good financial records in order to draw international business funding. For
instance, possessing an internal auditor to report to the Board is among of the
few professional mechanisms that could enhance an MFI’s financial records. MFIs
with the greatly efficient operations are the ones with the most excellent prospective
to contact poor customers and are the same ones acquiring international
commercial funding. However MFIs require to cautiously extend the subsidized
loans to the underprivileged groups to prevent the MFIs’ collapse due to bad
Mersland, R., & Urgeghe, L. (2013). International Debt Financing and Performance of Microfinance Institutions. Strategic Change, 22(1/2), 17-29. doi:10.1002/jsc.1919
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