News Flash: Microfinance will never be an asset class

Folks, I feel like I have metaphorical egg on my face. Why? Because I just finished reading “Investment Innovations:Raising the Bar” ( and discovered that microfinance, like emerging markets, is an investment theme, not an asset class.

In hindsight, I suspect I should have figured this out in 2007 when the “Is Microfinance an Asset Class” question was first raised in microfinance investment circles. Given the need for a variety of debt and equity instruments (and even sub-themes such as mobile banking for microfinance, microinsurance etc), it seems obvious now that microfinance spans multiple asset classes and thus will never be a single asset class on its own. So why are we still debating this issue in 2011?

I can’t pretend to speak on behalf of the “microfinance industry”. I can tell you that personally, either because or despite the fact that I finished my MBA just as emerging markets became a theme and have worked in emerging markets ever since, I never heard the term “investment theme” until I read the Investment Innovations report. When presented with a clear framework for looking at financial sector innovation, however, I knew immediately how microfinance — and now social impact investment – should be categorized. They’re investment themes that span multiple asset classes. Case closed.

If “microfinance as an asset class” is taking up any of your thoughts, time and/or money today, join me in waking up and smelling the coffee. Let’s make the impact investment theme as much of a mainstream success story tomorrow as the emerging markets theme is today!


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