Microfinance turns poor people, banks optimistic: Turner arm

Microfinance Monitor, August 10, 2010: The benefits of loans provided to the poor in emerging countries can be far-reaching, says the latest Sector Focus commentary by financial-services analysts at Turner Investment Partners.

Turner, an investment firm based in Berwyn, Pennsylvania, said in its monthly Sector Focus commentary as part of the continuing efforts of its five analyst teams to monitor the market sectors for its growth-stock portfolios.

The paper, entitled “Microfinance does well by doing good,” was written by Pablo Echavarria, security analyst; David Honold, portfolio manager/security analyst; Mark Turner, president and senior portfolio manager; and Rick Wetmore, portfolio manager/security analyst. The authors believe that microfinance is “one of the most encouraging global economic and social developments in decades:” it empowers borrowers to improve their lives, especially the largest group of microfinance borrowers — rural women.

The authors call the small, short-term loans a “win-win situation.” Lenders benefit from high net-interest margins and above-average repayment rates, while borrowers who have been denied credit in the past are able to fund business ventures that may provide a way out of poverty.

As examples of success in microfinance, the authors identify three foreign banks that are leading microfinance lenders: Bank Rakyat of Indonesia, Compartamos Banco of Mexico, and Credicorp of Peru. In the last three years, these microfinance banks have increased their net income by 20%. They are part of a $60-billion industry that Turner thinks is likely to prosper for years to come.

As of June 30, 2010, Turner held in client accounts 5.7 million shares of Bank Rakyat, 41,651 shares of Mexican microfinance bank Compartamos Banco, and 3,066 shares of Credicorp.