Where Next for Microfinance Investors?
By Graham Orodje -
Until the reported crisis, investment in Microfinance in India was seen as very attractive by many equity providers. Massive investments went into some of the biggest Microfinance Banks in the country. Some of the investments achieved tremendous rates of return. This was particularly true of SKS Microfinance investors following its IPO. This lead to a rapid growth of the sector.
Investment in Microfinance in India is no longer seen as attractive by equity providers since the introduction of regulation. Many investors are reducing their holding in MFBs. The introduction of interest rate cap will make investing in MFBs even less attractive for those still seeking substantial returns on their investment. Many commentators have suggested that the high interest rates charged by MFBs was to satisfy the demand of investors for high rates of return rather than the cost of lending and loan repayments. JP Morgan recently reduced its stake in SKS.
With the events in India making investment in microfinance unattractive, where next for those that made very attractive returns from investing in Microfinance in India, Africa?