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> Posted by Danielle Piskadlo, Manager, Investing in Inclusive Finance, CFI

The Investing in Inclusive Finance program at the Center for Financial Inclusion at Accion explores the practices of investors in inclusive finance. Across areas including risk, governance, stakeholder alignment, and fund management, this blog series highlights what’s being done to help the industry better utilize private capital to develop financial institutions that incorporate social aims.

You may have noticed an uptick in headlines over the past few months announcing the selling of microfinance equity shares. Here are a few examples:  Accion sells 15 percent stake in Paraguay’s El Comercio to Incofin’s Rural Impulse Fund; Grupo ACP sells its 60.68 percent stake in Peru’s MiBanco to Edyficar; Triodos sells stake in Cambodia’s ACLEDA Bank to ORIX Corporation.

Expect to see more such headlines, as the number of exits from microfinance equity investments is anticipated to accelerate in the next couple of years as a result of a combination of different factors:

1. Equity funds are maturing. Many funds were created around the same time and while some have no official time horizon, even patient capital reaches a point when it is time to consider moving on.
2. Microfinance institutions (MFIs) are also maturing. Thanks to the patient capital and expertise of many initial microfinance investors, some MFIs are now so large and sophisticated that they need new investors with deeper pockets and different expertise to further their growth and development.
3. Social investors are moving into new frontiers. Some social investors are reevaluating where their equity funding and participation can have the biggest impact, for example by moving into more rural or poorer countries. In a number of countries, regulatory environments are becoming friendlier to foreign microfinance investors now that they have a more proven track record.

Given that many social investors are seeking to pass the baton, what does it mean to exit an investment responsibly?

The freshly released paper, The Art of the Responsible Exit in Microfinance Equity Sales, dissects exactly this question. The paper, a joint effort of the Center for Financial Inclusion at Accion (CFI) and the Consultative Group to Assist the Poor (CGAP), shares the thoughts and experiences of 50 investors and industry stakeholders on the topic of exiting an investment in a “responsible” manner.

What did we uncover?

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