Press Coverage
Rating opens door to altruistic microfinancing
MARKETS AND INVESTING Morgan Stanley and Blue-Orchard are adding to attempts to make the international capital markets do good work for the less fortunate, with a new package of bonds backed by tiny loans to the poor. The deal, to be sold at the end of this month, is the first time that a securitisation of so-called microfinance has achieved a credit rating, which opens up the debt to a far broader range of investors. Microfinance, the business of making tiny loans to individuals in developing countries, is a growing industry that has mostly been funded by development banks and multilateral institutions. The Dollars 108m fundraising by BlueOrchard - a company specialising in the management of microfinance investment products - and Morgan Stanley follows a similar but unrated Dollars 106m deal that the pair sold in April last year. It also follows an innovative Dollars 1bn bond aimed at financing child immunisation in some of the world's poorest countries, which was issued by the International Finance Facility for Immunisation, a scheme championed by Gordon Brown, UK chancellor, and structured and sold by Goldman Sachs. Ellen Brunsberg, head of securitised products in Europe at Morgan Stanley, said that banks were trying to get more out of themarkets for the less advantaged but they were not simply giving their services away. "We recognise that the capital markets can be instrumental for poverty mitigation", she said. "Ithas to be a commercial venture but it helps that we can feel we are doing good as well." Private banks and wealthy individuals, such as Microsoft founder Bill Gates, have increasingly been developing funds to invest in microfinance in recent years. So far, individual microfinance bond sales have amounted to just a few tens of millions and have mostly been privately placed with experienced microfinance investors. However, there is a growing realisation of the gap between how much funding is needed and what private individuals and donations are capable of delivering. "If you look at microfinance as a sector, it is going to grow from about Dollars 15bn now to Dollars 250bn over thenext decade, according to CGAP estimates," said Ian Callaghan, at Morgan Stanley. "Donations are obviously important but they are never going to reach that figure." The deal was rated by Standard & Poor's. Ms Brundsford said: "Getting a rating means this is not an esoteric asset class. The first BlueOrchard deal we took out saw a lot of interest but many investors were restricted from buying it because it was unrated. This time we expect demand to be huge."
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Press Coverage 
