Minlam Microfinance Fund

Minlam Asset Management LLC is an alternative asset management firm founded in 2006. Minlam Asset Management serves as the investment manager for the Minlam Microfinance Fund, an emerging market debt fund that focuses on investments in financial institutions that serve low-income communities in certain markets. Minlam launched Minlam Microfinance Fund, its sole fund under management, in October, 2007. Funded by a sovereign fund of funds, a United States university endowment and several high net worth individuals, Minlam Microfinance Fund currently has assets of approximately $50 million.

The Minlam Microfinance Fund seeks to deliver attractive risk-adjusted returns to investors by providing local currency debt funding to microfinance institutions (MFIs). Our experienced team of investment professionals combines microfinance and emerging market debt financing expertise with currency risk management capabilities to deliver local currency funding to MFIs. Minlam’s local currency debt products are increasingly being sought by MFIs, which are willing to pay a premium for local currency loans, and provide the Fund with a competitive advantage to hard currency lenders. The Fund provides institutional and other private investors access to creditworthy microfinance institutions in growing and highly attractive frontier markets which offer significantly higher yields than currently available in developed markets.

Financial description

The investment objective of the Fund is to achieve attractive risk-adjusted returns by lending directly to microfinance institutions (MFIs) and purchasing debt securities of MFIs in select emerging markets. Minlam employs a systematic approach to investing by (1) using industry and local relationships for deal origination (2) selecting attractive emerging markets and eliminating countries with the highest default and/or foreign exchange depreciation risk; (3) conducting a comprehensive internal credit evaluation of prospective MFIs, including on-site due diligence and in-depth fundamental analysis; (4) structuring loan transactions, including covenants and terms, in a manner to protect investors; (5) closely monitoring portfolio holdings through direct from MFIs and frequent management contact; and (6) strategically hedging foreign exchange exposure, including the use of frontier market hedging through financial institutions exclusively serving the microfinance sector. We strive to generate compelling risk-adjusted returns for our investors by (i) loaning to MFIs at attractive local interest rates, and (ii) benefiting from local currency stability or appreciation relative to USD with respect to portfolio investments denominated in the local currencies.
In January 2010, Minlam received a $100 million portfolio guarantee facility from the USAID. 50% of the principal amount of MFI loans in 7 countries are guaranteed by the full faith and credit of US Treasury.