Microfinance typically refers to various kind of small loans, savings, money transfers and other kind of financial services targeted to low-income clients. Now, as the market for microfinancing mature, there are new options also for foreign currency exchange which often been pointed out as a big risk factor.
Mini Foreign currency exchange
Recent studies show that currency risk is one of the biggest challenges for microfinancing. If the loans are taken in USD, which is very common, there is always a risk of foreign currency fluctaions.
But luckily, many forex brokers have recently expanded their services, in order to make it possible even for low income clients to trade forex.
For more info about online forex trading, check out Wikipedia and NFA, the American organisation for forex dealers.
Almost everywhere around the world the stockmarkets have been falling in the last time, due to things like banks loosing money in subprime loans.
But not everything are loosing value nowadays. The microfinance industry is developing and more traditional financial institutions are opening their eyes for microfinance because they starts to see the huge opportunities. Investing in microfinance and helping people start busiensses means profits for both the lender and borrower. It´s a stable and secure investment since the repayment rates of the loans are on a average close to 100%!
The Inter-American Development Bank(IDB) sponsors a new pilot rating program in Latin America set up by S&P to improve the infrastructure of microfinance institutions for national capital markets. S&P and IDB are cooperating in this project with the aim to gain acccess to the capital markets for the MFIs.
Standard&Poors involvement is a breakthrough in the microfinance industry, S&P talks the same “language” as investor and their benchmarking tools really opens up the capital markets for microfinance institutions.
The Microfinance Rating Methodology Working Group was put together in January 2007 consisting of analysts from S&P and experts in microfinance industry. They work together to find the information investors needs, how MFIs works and the state of the microfinance sector. The information from “The Microfinance Rating Methodology Working Group” are used by Standard&Poors when forming the outlines of the rating methodology and a tailored ranking system for MFIs
Earlier sufficient access to the mainstream capital markets wasn´t enough and made it hard for MFIs to find allocate fundings, because they where treated with mainstream metrics when being analyzed. The ongoing creation of new MFIs and adepting skills in handling funds will require far more easier access to the capital market.