• Meet the Team

WWB works with network members who are navigating the local and international capital markets on funding strategy, capital structure analysis, and evaluating the merits and feasibility of proposed capital markets deals. Throughout this work, we emphasize the value of the capital markets as a source of large amounts of long-term capital on competitive terms and as a means of developing a new investor base.

In 2001, WWB’s Microfinance and the Capital Markets Conference was the first industry forum catering both to MFIs seeking capital and knowledge of financial markets, and to international investors seeking industry insights and ways of investing in microfinance. In addition to this annual conference in New York, WWB also holds smaller, regional capital markets workshops. In May 2007, WWB delivered a three-day capital markets workshop in Karachi, Pakistan at the request of the Pakistan Microfinance Network. The conference included staff from leading MFIs in Pakistan and Afghanistan, as well as other microfinance professionals from both countries.

Loan Guarantee Program

WWB’s original mission was to “eliminate one of the most pervasive forms of discrimination against women in the developed and developing world: the denial of equal access to credit markets.” one of the primary means of delivering on this mission was WWB’s loan guarantee program, begun in 1980. The first loan guarantee was to FWWB Colombia.

The loan guarantee program continues to be an effective way of supporting women’s economic empowerment. The current program helps to make local capital available to microfinance institutions (MFIs) through a guarantee mechanism wherein WWB issues a standby letter of credit backed by a US investment grade bank to a commercial bank in the MFI’s local market. The local bank, in turn, provides at least twice the amount of the guarantee to the MFI in the form of a local currency loan. The program thus enables WWB network members to obtain substantially larger lines of credit in local currency at minimal cost. WWB’s loan guarantee program is also an effective way to collaborate with other microfinance industry players; a “syndicated” loan guarantee from several investors, including WWB, can make an even larger amount of credit available to MFIs.

In 2007, the WWB Board approved modifications to the loan guarantee program, more than doubling the maximum loan guarantee size to us$ 500,000 and extending the maximum tenor of the guarantee from one to two years. WWB’s loan guarantee program is competitively priced relative to other loan guarantees and is an effective tool for helping our member institutions diversify their funding and build credit records in their local markets.

Financial Risk Management

By their nature, banks and MFIs must take risks. Well-run financial institutions understand, monitor, and mitigate these risks. WWB works with network members to quantify and manage the financial risks faced by MFIs, including liquidity, interest rate and foreign exchange risks, to ensure that MFIs remain sustainable and profitable institutions into the future, serving their clients’ borrowing and savings needs.

Approximately 70 percent of all external capital currently lent to MFIs is denominated in hard currency, which—if left unhedged—will burden MFIs with significant foreign exchange risk. When an MFI borrows in a hard currency (such as the US dollar or the euro) but lends to its clients in local currency, the resulting currency mismatch means that the institution’s earnings are subject to the risk of exchange rate movements.

In 2004, Women’s World Banking published one of the first papers calling attention to the inherent risks of hard currency borrowing by MFIs. The paper recommends a number of foreign exchange risk mitigation strategies and provides an overview of foreign exchange volatility, an explanation of the mechanics of this risk, and descriptions of certain hedging strategies. Our subsequent paper in October 2007, From Dollar to Dinar: the Rise of Local Currency Lending and Hedging in Microfinance, highlights innovations both by international investors in creating mechanisms for lending in local currency to MFIs, and by MFIs who increasingly are using hedges to mitigate risk exposure.

Recognizing that few MFIs have formal risk management policies, WWB developed a workshop and electronic course for understanding financial risk management. The workshop teaches MFI managers to focus on asset and liability management, and to think holistically about product development.

• Related publications
  • Foreign Exchange Risk Management in Microfinance
  • From Dollar to Dinar: the Rise of Local Currency Lending and Hedging in Microfinance

Brokering and Advisory

WWB offers a loan guarantee program to improve MFIs’ access to local commercial bank loans. In 2007, WWB expanded this program to accommodate larger guarantee amounts and longer tenors and renewed guarantees on improved terms for two network members. Also in 2007, WWB helped mobilize loans for six network members of approximately US$ 7 million in local currency funding. WWB also formed a strategic collaboration with Morgan Stanley, which—despite turbulent markets—succeeded in arranging US$ 15 million in local currency funding for two WWB network members. This new funding was significant not only because of the large loan sizes and local currency denomination, but also because the process signaled new investor interest in microfinance from a Morgan Stanley Investment Management-managed Emerging Markets Debt Fund.