<em>WASHINGTON, D.C., March 31, 2023</em> – The Financial Inclusion Equity Council (FIEC), a member forum for fostering dialog among equity investors in inclusive finance, is forming a new partnership with two leaders in the responsible finance sector, a move aimed at strengthening the global implementation of responsible investment practices to help advance the lives of low-income people.

FIEC is transitioning its secretariat from the Center for Financial Inclusion to Cerise+SPTF. Under the new arrangement, FIEC will work closely with Cerise+SPTF’s Social Investor Working Group to further deepen collaboration and discussion among investors in identifying new opportunities for inclusive growth through financial services in a world of increasing disruption and uncertainty.

FIEC will retain its member-driven structure, continuing to operate as a members-only group of equity investors, while also contributing to and benefitting from the work of Cerise+SPTF’s Social Investor Working Group. Currently, there are 17 FIEC members, primarily fund managers with $4.7 billion under management invested in 64 countries. Deborah Drake will remain as FIEC’s director, and current Advisory Board members - Caspar Sprokel (Triodos), Jan Dewijngaert (Incofin), and Orsolya Farkas (Triple Jump) - will continue to support the transition.

The new secretariat is expected to be in place by the end of April. Since FIEC’s inception in 2003, Accion has hosted FIEC with CFI, Accion’s independent think tank, serving as secretariat since 2008.

“Transitioning the FIEC Secretariat to Cerise+SPTF will provide enhanced opportunities to convene and discuss a range of pressing topics with partners who serve the investment community and share our common purpose of fostering collaboration and dialogue to advance the social mission of investors in inclusive finance,” Drake said.

“It has been an honor to host FIEC,” Mayada El-Zoghbi, CFI’s managing director, said. “We see this move as a great opportunity for FIEC to further deepen the impact of its work by bringing together leading entities in equity investment that prioritize responsible investing in financial inclusion.”

Jurgen Hammer, Managing Director of SPTF’s European office in Luxembourg and head of the Social Investor Working Group, said: “Equity investors, through their participation in the governance and management boards, play a vital role in the implementation of socially and environmentally responsible practices of the investments funds and financial institutions they invest in. Sharing the almost 20 years of experience of Cerise+SPTF’s investors’ working group will strengthen the global implementation of responsible investment practices and lead to a more accountable and transparent industry.”

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<strong>Background</strong>

<a href="https://www.centerforfinancialinclusion.org/about/what-we-do/fiec"><strong>Financial Inclusion Equity Council</strong></a>, originally known as the Council of Microfinance Equity Funds, was founded in 2003 when research and data on the microfinance sector were scant, to provide members with a forum to discuss their role as responsible shareholders in microfinance institutions (MFI).  FIEC has pioneered efforts to strengthen governance, increase transparency, and ensure social impact is front and center in its members’ investment due diligence and decision-making. Its “<em>Practice of Corporation Governance in Shareholder-Owned MFIs</em>” has become a standard reference for the industry.  FIEC conducted the first study of MIV fund managers’ remuneration and collaborated with the Microfinance Network in an analysis of MFI pay practices for boards of directors. FIEC is also known for its flagship valuation database, available only to members.  FIEC’s current agenda includes increasing regulation and reporting requirements, widening the concept of financial inclusion to more players such as investing platforms, digitalization of MFIs, valuation of fintechs, and managing new risks such as currency risk, exit strategies, and climate change.

<a href="https://cerise-sptf.org/" target="_blank" rel="noopener noreferrer"><strong>Cerise+SPTF</strong></a> supports financial service providers, social businesses, impact investors, networks, professional associations, regulators, and donors—a wide cross-section of stakeholders from all over the world—with the standards and tools they need to achieve their social and environmental strategies. Cerise+SPTF pursue this mission through several strategies, including:
<ul>
 	<li>The Social Investor Working Group, which is open to all investors seeking to balance financial, social, and environmental performance. Currently, there are more than 600 investor members representing over 200 organizations in the group. The SIWG meets twice a year in person, typically once in February/March and once in June, and holds monthly webinars throughout the year.</li>
 	<li>Specific technical sub-groups (such as SFDR, Client Protection, Outcomes/SDGs) complement the regular activities. The group provides peer-to-peer learning and gives a platform to address global issues and develop practical and standard approaches with a collective voice.</li>
</ul>
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<a href="https://www.centerforfinancialinclusion.org/about/what-we-do/fiec"><strong>The Center for Financial Inclusion</strong></a> is an independent, global think tank housed at Accion that conducts rigorous research and advocates for evidence-based change to ensure that all people can make use of financial products and services to advance their lives and prosper.

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<strong>Contacts:  </strong>

<strong>CFI</strong> – Stella Dawson, interim Communications Lead, CFI. <a href="mailto:sdawson_ext@accion.org">sdawson_ext@accion.org</a>

<strong>FIEC</strong> – Deborah Drake, Director, FIEC. <a href="mailto:deborahodrake@gmail.com">deborahodrake@gmail.com</a>

<strong>SPTF</strong> – Laura Foose, Executive Director, SPTF.  (<a href="mailto:laurafoose@sptfnetwork.org">laurafoose@sptfnetwork.org</a>) Inc

<strong>SPTF</strong> – Jurgen Hammer, Managing Director, SPTF Europe.  (<a href="mailto:jurgenhammer@sptfnetwork.org">jurgenhammer@sptfnetwork.org</a>)

<strong>CERISE</strong> – Cecile Lapenu, Executive Director, CERISE.  (<a href="mailto:c.lapenu@cerise-spm.org">c.lapenu@cerise-spm.org</a>)

Financial Inclusion Equity Council Transitions its Secretariat to Cerise+SPTF

The <a href="https://www.centerforfinancialinclusion.org/about/what-we-do/fiec">Financial Inclusion Equity Council (FIEC)</a> has, for over a decade, brought together leading managers of equity investments in microfinance and financial inclusion in developing countries.  Our members have made equity investments of over $5 billion in institutions focused on under-served or un-served clients with the goal of improving livelihoods and opportunity.

Microfinance institutions (MFIs) and the clients they serve are currently facing severe economic challenges as a result of COVID-19. Many clients face uncertain incomes in the best of times and perhaps now more than ever, will need to rely on the vital role MFIs play in providing reliable access to savings, emergency loans and grants, health information and loans to restart businesses as lockdowns are lifted.

To ensure they can continue meeting their clients’ needs, MFIs will need the full support of the investor community and FIEC members stand ready to continue their support of this critical industry. Debt investors have begun to come together to <a href="https://www.covid-finclusion.org/investors">coordinate their responses</a> to COVID-19, particularly focused on near-term issues of liquidity and repayments. FIEC members support these timely efforts to address the immediate challenges. Meanwhile, FIEC members are <a href="https://www.covid-finclusion.org/post/preparing-for-insolvency-and-recapitalization-everybody-in-the-pool">preparing for the recapitalization</a> of MFIs that may face significant erosion of equity as they preserve their capacity to support their clients.

FIEC members commit to working with the entire investor community to achieve maximum cooperation among stakeholders and conserve resources. We will engage with the community to draw on previous experience to anticipate and resolve hurdles before they can impede a timely resolution. Further, FIEC members are committed to making financial instruments and structures available to help optimize financial outcomes while accommodating the diverse circumstances of creditors, shareholders, and other funders. Most importantly, we pledge to preserve our focus on social impact and commitment to patient capital.

The COVID-19 crisis presents an unprecedented challenge to the financial inclusion sector and the clients it serves. FIEC members resolve to work constructively and collaboratively with all members of the inclusive finance ecosystem to ensure the future viability and vitality of this critically important industry.

Financial Inclusion Equity Council (FIEC) Responds to COVID-19

While the valuation of microfinance institutions (MFIs) may be more of an art than a science, the practice within the equity investment community remains opaque, inconsistent and overly complex. This paper summarizes the challenges impact investors face when valuing MFIs--from which methodologies to use and what assumptions to make, to how to factor in the social mission and fintechs. There is an urgent need for more shared, comparable and reliable data to effectively benchmark impact investments.
<h2>Why This Matters</h2>
With MFI valuations, the stakes are high<span style="font-size: 11pt; font-family: 'Calibri','sans-serif';">—</span>a high valuation may signal an overheating market while a low valuation can represent a missed opportunity. As <span class="wf_file_text">MFIs</span> and other institutions evolve and mature, and as social investors look beyond the known pool of investors for exit options, reliable valuation data and practices will only gain in importance.

Barring more transparent, consistent and precise valuation data and more robust valuation methodologies, microfinance will remain a less mature asset class and social investors will be limited to a relatively small pool of known actors with whom to transact.
<h2>Looking Forward</h2>
Impact investors need more reliable valuation data and standard valuation methods to make sound investment decisions and to pursue their financial inclusion objectives. The <a href="programs-a-projects/investing-in-inclusive-finance/financial-inclusion-equity-council">Financial Inclusion Equity Council</a> (FIEC) is working to address this need by developing a valuation database for its members to share valuation data confidentially and anonymously.
<h4><a class="wf_file" href="storage/documents/Valuing_MFIs_Brief_Final__Arabic.pdf"><span class="wf_file_text">Download the Report (Arabic) &gt;&gt;</span></a></h4>
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Valuing Microfinance Institutions

The words “offshore” and “tax-haven” are often taboo rhetoric within the investment space. In this paper, the Financial Inclusion Equity Council (FIEC), with support from CFI, explores why and how equity impact investors use offshore vehicles. Our findings reveal that offshore vehicles offer key operational, legal, tax and reputational advantages and are a key part of the impact investment landscape.

Through interviews with Financial Inclusion Equity Council (FIEC) members, we sought to better understand the scope of offshore usage in financial inclusion and the factors at play when impact investors select a fund domicile. Convenience, transparency and reputational advantages are among the strongest drivers for choosing to offshore. However, divergent views exist among FIEC members regarding the tax implications of offshore vehicles.
<h3>Major Findings</h3>
<ul>
 	<li>Impact investors have legitimate reasons for using offshore financial centers (OFCs)—and tax status is not the driving factor. The main factors for choosing OFCs include:
<ul>
 	<li>Administrative Efficiency: OFCs have the legal, financial and administrative infrastructure in place to facilitate investment.</li>
 	<li>Human Capital: Accordingly, OFCs have specialized staff on hand to manage investments, such as lawyers, accountants and auditors.</li>
 	<li>Reputation: OFCs are reputable vehicles in international investing, which helps to validate their use for financial inclusion.</li>
 	<li>Convenience: OFCs may serve as a neutral base for multiple investors. Favorable time zones, shared language and currency also add to their accessibility.</li>
</ul>
</li>
 	<li>Two divergent perspectives exist between North American and European investors regarding the tax implications of OFCs. The North American perspective prioritizes tax minimization for shareholders/investors, while the European perspective prioritizes paying their fair share of taxes to the offshore country.</li>
</ul>
Challenge your assumptions about offshore funds and learn more about how these financial instruments contribute to financial inclusion.<span class="wf_file_text">
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Offshore Financial Centers for Financial Inclusion

Initial public offerings (IPOs) are widely viewed as markers of commercial success. However, in the financial inclusion industry, IPOs are sometimes viewed with suspicion, if not alarm. This paper examines the 2016 IPOs of two Indian microlenders – Equitas Holdings and Ujjivan Financial Services – and how “hardwiring” their missions into their operations and corporate culture helped drive their success. The experience of these two companies suggests how a responsible financial services company can position itself to go public while maintaining its social mission.
<h2>Featured Companies</h2>
<strong>Equitas Holdings</strong>
Founded in 2007 to provide the underserved and disenfranchised people in the Indian State of Tamil Nadu with reasonably and transparently priced microcredit, Equitas diversified after the microfinance crisis in 2010 into affordable housing, small and medium enterprise (SME) and vehicle loans. At the time of its April 2016 IPO, traditional microlending made up slightly more than half of the total portfolio, with over half of assets under management in Tamil Nadu.

In September 2015, Equitas was one of ten companies to receive in-principle approval from the Reserve Bank of India (RBI) for the Small Finance Bank (SFB) license. In order to become an SFB, regulations require that Equitas bring foreign ownership, which comprised 93 per cent of equity before the IPO, below 49 per cent. This requirement was one of the key factors behind the IPO. Once Equitas transitions to a SFB, it will be able to accept deposits, starting with its client base of approximately 3 million.

<strong>Ujjivan Financial Services</strong>
Founded in 2005, Ujjivan Financial Services’ vision was to make financial services available to the urban working poor in India. At the time, most Indian microfinance was focused on the rural population. Started as a four-person team in a Bangalore garage, at the time of its IPO in April 2016, the company had 8,000 employees, three million borrowers, disbursed loans worth Rs.15,600 crore (approx. USD 2.6 billion), and had operations in every Indian state. Like Equitas, Ujjivan received approval to become a SFB and therefore also needed to reduce foreign shareholding. As of September 2016, Ujjivan was on its way to becoming a SFB with diversified product lines.
<h2>Authors</h2>
Grassroots Capital Management PBC and The Financial Inclusion Equity Council (FIEC), with support from the Center for Financial Inclusion at Accion.

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How to IPO Successfully and Responsibly: Lessons From Indian Financial Inclusion Institutions

Danielle Piskadlo

Sam Mendelson

Daniel Rozas

India

South Asia

Impact Investing

Equity Investing

Press Release

Announcement

Report