Collaborative Report on Orderly Debt Restructurings Issued by Microfinance Industry

Collaborative Report on Orderly Debt Restructurings Issued by Microfinance Industry

03/11/2011

A report on the guidelines and best practices for handling debt defaults by microfinance institutions (MFIs) was issued today by the International Association of Microfinance Investors (IAMFI).

In the past, a number of factors, like increased capital flows, record growth by MFIs, as well as the global financial crisis, led to an increase in debt restructurings. It also brought about the need for tools and frameworks to handle restructurings as they happen.

The report enumerates the methods in which industry players can work together to ensure that microfinance remains a sound investment opportunity and simultaneously enhances the ability of MFIs to serve clients throughout any economic or market cycle.

The best practices enumerated in the report are based on the joint work of the IAMFI Microfinance Lenders Working Group. This industry group was convened by the IAMFI to develop standard best practices.

Members of the Working Group represents a broad range of global stakeholders, which include microfinance investment vehicles, limited partner investors, financial institutions, law firms active in microfinance and development financial institutions.

The research of the Working Group was supported by the International Transactions Clinic of the University of Michigan Law School, as well as the Microfinance Analytics.

The IAMFI Executive Director, Joan Trant, explained, “The IAMFI Microfinance Lenders Working Group embodies IAMFI’s efforts to strengthen the microfinance industry by developing universal standards and best practices.”

She also said, “Commercial capital can be a positive force in delivering financial services to the world’s unbanked poor, and the Working Group’s recommendations help investors and MFIs navigate restructurings in a financially responsible manner.”

WRITTEN BY:

blakeh@wellsdrew.com