New Partners, New Solutions, Greater Impact
Global Perspectives | Fall 2009

Members of this communal bank in Guatemala would benefit from their MFI being able to borrow capital in local currency.

In recent months, Global Partnerships has made exceptional progress on two fronts. First, we have established new partnerships with microfinance institutions in Latin America. Second, we have helped solve the industry’s currency exchange problem. Both of these efforts will expand opportunity and improve lives of thousands living in poverty.

New South American Partners Reach Those Most In Need
A key piece of Global Partnerships’ strategy is to pick the right partners: best-in-class microfinance institutions (MFIs) with sustainable business models who deliver exceptional levels of social impact. Our Latin American team spends a lot of time on an exhaustive due diligence process to gauge how well an MFI matches our mission before advising investment.

With that in mind, we’re proud to announce two new partnerships with MFIs that are making a real difference in their communities: D-MIRO in Ecuador and PRISMA in Peru.

D-MIRO, which became a partner in February, got its start by serving residents of the low-income neighborhoods of Guayaquil, Ecuador’s largest city. The microfinance institution has since expanded to two other branches in the coastal region, and another in Ecuador’s west-central region, where the percentage of people living in poverty is more than 85 percent. D-MIRO also recently launched a product called “Life,” targeted at borrowers with HIV who are unable to obtain loans from other financial institutions.

PRISMA, our newest partner, received its first loan from Global Partnerships in April, part of the second set of disbursements from our 2008 Microfinance Fund. PRISMA integrates its credit and savings programs with training in health, business skills and personal development—and also has a serious commitment to leaving no one behind, working in areas of Peru with a high incidence of malnutrition. The majority of PRISMA’s borrowers are women (72 percent) and take out their loans through a village bank structure.

Solution to Foreign Currency Challenge
A longstanding challenge for Global Partnerships’ microfinance partners has been currency risk: Microfinance institutions make loans in local currency but often borrow capital in hard currencies like US dollars. When local currency drops in value—which it often does in developing countries— paying back foreign loans becomes more expensive and MFIs often pass on the costs to their borrowers in the form of higher interest rates. Call it a lose-lose situation.

Enter a new strategy: In early July, Global Partnerships and other microfinance industry leaders launched MFX Solutions (www.mfxsolutions.com). MFX will address the currency-risk challenge by making modern hedging instruments accessible to microfinance lenders in developing markets where they need it most, along with free, web-based risk management tools tailored to the microfinance business model. (See also the Global Perspectives Fall 2008 article, “Foreign Exchange.”)

MFX is the product of a three-year collaboration between Global Partnerships and other industry leaders. Global Partnerships Chief Investment Officer, Gary Mulhair, who co-chaired the initial planning committee, recalls that the microfinance industry, which has long wrestled with the foreign exchange risk challenge, finally decided to work together. The launch couldn’t be more timely; as Gary Mulhair said, “Recent changes in the global economy further underscore the need for an independent organization like MFX to help reduce currency risk and increase the overall security of the sector.” With our next fund, we expect to use MFX to help our microfinance partners borrow in local currency. This will support their growth and stability—and their ability to reach and support more borrowers. Call it a win-win.

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