Open AccessSecuritization: An Alternative Funding Mechanism for the Microfinance Institutions
Author(s) -
Shahadat Hossain,
Rubaiyet Hasan Khan
Publication year - 2018
Publication title -
journal of international business, economics and entrepreneurship
Language(s) - English
Resource type - Journals
ISSN - 2550-1429
DOI - 10.24191/jibe.v3i2.14427
Subject(s) - microfinance , securitization , business , portfolio , financial system , equity (law) , finance , financial services , debt , economics , economic growth , political science , law
Despite microfinance has been widely appreciated as an informal financial mechanism to provide financial services to the poor people in developing countries, this sector is still lacking behind in fulfilling the demand gap due to the dearth of adequate funds. Securitization opens a new horizon that overcomes the funding barriers of microfinance through which the top tier Microfinance Institutions (MFIs) can accumulate funds to enlarge their portfolio without issuing any debt or equity. This paper is a desk study that synthesizes how securitization can be used in the funding of the MFI portfolio and what are the benefits and risks associated with securitization of microfinance portfolio. As a case study, we use the two examples of cross-border securitizations in the microfinance industry to diagnose the role of securitization in microfinance.