Capital Markets Guide for Microfinance Institutions (MFIs)

This guide provides an overview of the capital markets and includes basic insights into the key capital markets players, instruments, private versus public issues and the rating process. It also contains a checklist for screening investment bank or financial advisers, advice on packaging the institution’s success for raters and investors and numerous appendices which expand upon these core concepts and instruments.

Understanding the capital markets—how they work, the main players, the instruments available, how to screen financial advisers and investment banks, and how to prepare and access these markets—is critical for MFIs that are interested in expanding and diversifying their client product offerings. As MFIs increasingly expand their access to various capital markets instruments Women’s World Banking identified the need to develop a basic guide to assist MFI managers in understanding and distinguishing between these market offerings. The guide was developed in partnership with Lehman Brothers in order to help MFIs develop a solid grounding in these concepts and seek opportunities to tap their capital markets locally, or internationally.

As the capital markets in emerging economies deepen, MFIs are increasingly able to access them. This access enables MFIs to diversify funding sources, reduce financial exchange risk (via sources of local, rather than foreign, capital), and support growth and loan product diversification (such as housing loans) through longer-term funding. In addition, capital market access increases public awareness of microfinance and MFIs, and results in capacity building of MFIs as they adapt to satisfy the demands of the capital markets for greater transparency.