Partnering with a microfinance asset manager BlueOrchard, Morgan Stanley will raise $108 million, through the sale of collateralized loan obligations (CLOs), to make it then available to micro lenders.
The global securities firm is the first one to receive credit ratings for CLOs composed of microfinance loans:
"Getting a rating was the key thing," said Ian Callaghan, head of microfinance for Morgan Stanley's securitized products group in London. "Investors reacted very positively to the deal last year, but because it wasn't rated a lot of doors were closed. This time they will be open, and we can market the bonds to a much wider audience of investors."
The underlying loans are to 21 microfinance institutions in Azerbaijan, Bosnia, Cambodia, Colombia, Georgia, Ghana, Kenya, Mongolia, Montenegro, Nicaragua, Peru, Russia and Serbia. Most of the loans are made in local currency, and the institutions pay interest averaging about 8.5 percent.
Three more microfinance CLOs are expected this year. In the next few years the market is expected to grow close to $4 billion
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