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| Best Practices |
Pooling Resources
Elizabeth Wine
04/01/2005
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Traditional financial instruments, such as normal bonds issued by the MFIs, will remain more useful than securitizations for some time, according to Maria Otero, president and CEO of Accion International, a Boston-based microfinance organization that started in 1961 and coined the term “microenterprise.” MFIs have succeeded in floating small bond offerings in the $10 million to $20 million range in local currencies. The Accion network ended 2004 with approximately $700 million in a portfolio of loans from roughly 20 countries, funded by a combination of bonds and savings from borrowers.
Otero expects that securitization will become a useful tool, but not one likely to be widely employed for at least another five years. Even by then, she believes it will reach only the countries with more developed bond markets, such as India, Brazil and Mexico.
“From my perspective,” Otero says, “it is far more important to make these institutions strong financially and enable them to access capital from their local domestic markets than it is to bring complicated financial engineering for which microfinance and the financial markets are not ready.”
Elizabeth Wine is a Brooklyn-based freelance writer who has written extensively about investing and philanthropy. elizabethwine1@yahoo.com
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