Helping microfinance investors responsibly select a buyer
Just published "Caveat Venditor: Towards a Conceptual Framework for Buyer Selection in Responsible Microfinance Exits" – new research commissioned by NpM, Platform for Inclusive Finance, in partnership with the e-MFP Investor Action Group and the Financial Inclusion Equity Council (FIEC). This new paper written by Sam Mendelson and Daniel Rozas goes beyond raising questions, and seeks to provide a template to help investors navigate the complex terrain of "responsible exits."
As microfinance equity sales grow, so does the importance of selecting a suitable buyer - the obligation on the seller to exit 'responsibly'. This research project involved consultation with various equity investors, to ascertain what is current industry practice on buyer selection processes, and the priority that investors give to different criteria in selecting a buyer. Sam and Daniel find a consensus around a process which first excludes clearly unqualified buyers but, beyond that, gives primacy to the financial offer. A minority view places more importance on protecting the social mission of the MFI, and ensuring the new buyer provides the necessary strategic value for the MFI to grow congruent with its social mission. Sam and Daniel have developed a conceptual framework for buyer selection that imports elements of both approaches, and can guide investors and their advisors in future exits.