BLUEORCHARD  certainly attracted an audience. It was oversubscribed, and it sold out in an hour.

McKinley notes that these securitizations must perform well as investments if they are to succeed. “I’m adamant that we make the connection between the best microlenders and the capital markets so they will grow,” she says. The former chairman of American Funds’ Income Fund of America, one of the country’s largest mutual funds, and a portfolio manager of six of American Funds’ portfolios, McKinley advised BlueOrchard on the structure of its deal, but did not take a fee.

McKinley argues that MFI loan securitizations have several properties that should make them attractive to investors. They are not correlated with other asset classes, so they increase the diversification and lower the volatility of investors’ portfolios. Also, the fact that the collateral loans are denominated in foreign currencies provides something of a hedge against the U.S. dollar.

The BlueOrchard deal is a seven-year investment backed by a wide range of loans with tenors of less than one year. Because the average MFI loan term is four to six months in Latin America and approximately one year in Asia, the mismatch in tenor between the bond and the collateral allows the MFIs to circulate the money to borrowers several times before they must return it to investors. The securitization also provides MFIs with access to capital at a much lower rate than they would be able to secure from local banks.