Caveat Venditor: Towards a Conceptual Framework for Buyer Selection in Responsible Microfinance Exits

9 May, 2018

Original source: Microfinance Gateway

A concrete, industry-recognized framework to guide investors and their advisors

With the growing maturity of the microfinance industry, a question that has come into sharper focus is how social investors committed to advancing responsible finance practices should “exit responsibly” from the microfinance institutions (MFIs) – and, increasingly, the broader category of financial service providers (FSPs) and other companies working in financial inclusion – in which they have invested.

Leveraging an industry consultation process, this research provides a consolidated investors’ own emerging principles and procedures in assessing potential buyers, and uses the findings to produce a Conceptual Framework for Buyer Selection in financial inclusion equity exits. The framework serves as a resource for investors embarking on an equity sale, providing them with a concrete, industry-recognized framework to evaluate an exit. Additionally, it can:

  • Guide investor discussions with external organizations that assist them in exit trajectories (investment banks, advisory firms, etc.);
  • Assist new categories of impact investors that have little experience in exits;
  • Serve as a guide to potential buyers to help understand selection criteria and prevent interested (but unsuitable) buyers from spending time on a futile due diligence process.

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