The Investing in Inclusive Finance program area explores the challenges and opportunities associated with the intersection of financial inclusion and commercial investment. As such, the Center for Financial Inclusion (CFI), through the Investing in Inclusive Finance team, serves as the secretariat for the Financial Inclusion Equity Council (previously known as the Council of Microfinance Equity Funds), and also led the Aligning Interests initiative in 2009- 2011 to address the problem of misaligned interests that can accompany MFIs transformations to a for-profit structure.

The Financial Inclusion Equity Council (FIEC), formerly known as the Council of Microfinance Equity Funds, is the first membership organization to bring together the leading private entities that make equity investments in microfinance institutions (MFIs) in the developing world. The Council’s members seek both social and financial returns from their investments in these institutions, all of which provide a range of financial services to poor households in developing countries.

As an industry association, FIEC convenes its members on a semi-annual basis for in-person meetings and networking. In addition, the Council, through its secretariat at the Center for Financial Inclusion, represents the voice of equity investors through a range of ongoing industry initiatives.

Equity investors in microfinance face tremendous opportunities and challenges, and at the same time they bear great responsibility for the health of the microfinance institutions they support.  Issues of concern to equity investors range from pipeline development to governance to valuation. By offering a forum for investors to share their experiences and challenges, FIEC helps investors collaborate to address shared difficulties and improve the practice of investing in microfinance.

About the Council

The Financial Inclusion Equity Council (FIEC) serves as a valued forum for leading financial inclusion equity investors who are pursuing double-bottom line goals. By helping Council members deepen their relationships with their investees, enhance the performance of their investments and develop best practices and standards, FIEC aims to ultimately strengthen the financial inclusion industry and advance the expansion of commercial microfinance. 

The Council’s purpose is:

1. To articulate and disseminate FIEC’s members’ knowledge and expertise about equity investing in financial inclusion, both amongst themselves and to other industry stakeholders, through forward-looking research and publications.
2. To lead and engage Council members in active dialogue about current challenges, trends and forecasts regarding microfinance and financial inclusion – through both in-person meetings and on-going working groups – in order to facilitate learning, sharing and exchange about the future path of the sector.
3. To act as the primary, “go-to” resource for fund managers and the industry for the development of best practices and industry initiatives regarding microfinance investment, by serving both as a portal to, and voice for, equity fund managers.

To learn more, visit the Council's website at www.fiecouncil.com.

Membership

Council members are active investors in financial inclusion and adjacent sectors. Members must have a primarily private ownership structure, at least two equity investments, a double bottom line commitment, and an active governance role in their investments. More information about FIEC membership requirements and benefits is available on the FIEC fact sheet.

Council membership focuses on:

1. Taking Stock: Identifying forward-looking trends and issues of relevance to members.
2. Broadening Views: Facilitating dialogue so members learn from each other, see issues through different lenses, and ultimately develop a broader and more balanced view of the industry.
3. Analyzing Investments: Researching investments already made and in the pipeline to provide members with information on current investment trends and flows. 

Council Initiatives

Member Projects

• Equity MIV Compensation Study: In 2009, the CMEF hired a consulting firm to conduct the first-ever comprehensive compensation study for equity MIVs. Data was collected, aggregated and analyzed from each Council member regarding base and incentive pay.
• Board Remuneration Survey: CMEF conducted a member survey regarding board remuneration practices at MFIs. This survey we conducted in collaboration with the Microfinance Network (MFN) to create more transparency for Council members on this issue. The results of this survey were discussed in this blog. 
• “Get Real” Valuation Project: In response to a member need for benchmarks to measure the performance of their funds, CMEF conducted a member survey in 2012 to confidentially collect information about fund returns.
• Mapping the Flow of Funds: In 2013, the Council created global maps of the global flow of equity funds. These maps captured both past (based on MicroCapital data) and future (based on information from the April 2013 meeting) equity investments.   
• FIEC by the Numbers: The Council collected data from its members to compare FIEC’s funds and assets under management with the greater financial inclusion industry. FIEC has approximately 81 funds and $5.5 billion in assets under management as of October 2013.
• Balancing Returns Framework: In 2013, the Councilcreated a practical framework to help members better communicate how they align different stakeholders’ interests, and more specifically, how they address the challenge of balancing financial returns with social and/or environmental impact, in order to promote transparency and accountability. The final framework can be found here. 

Council Publications

• Growth of Commercial Microfinance: CMEF’s signature series in 2004, 2006 and 2011, sought to illustrate the changes in growth, expansion and maturity of the commercial microfinance industry.
• Aligning Stakeholders: The Council’s 2011 report Aligning Stakeholder Interests in NGO Transformations: Emerging Good Practices  provides practical guidance for investors, MFI managers, staff, and other institutional stakeholders to use during the MFI transition process in order to more effectively align stakeholder interests.
• Governance Guidelines: First published in 2005 as "The Practice of Corporate Governance in Shareholder-Owned Microfinance Institutions," to provide practical guidance for stakeholders in strengthening the governance of their own MFIs. The Governance Guidelines have since been widely used and highly regarded as an excellent source for governance information within the microfinance industry. In 2012, the Council updated this reference document as "The Practice of Corporate Governance in Microfinance Institutions" to reflect new thinking and resources that emerged in the microfinance industry around governance since the original version was published.

Industry Voice

• Response to the Malegam Committee: In 2011, CMEF issued a collective Council response to the RBI regarding the Malegam Committee’s Report on Microfinance.
• Response to SPTF: In 2012, the Council issued a consensus statement on behalf of the Advisory Board in response to the SPTF’s request for comments on the Universal Standards for Social Performance Management. 

Industry Collaboration and Support

• Over-indebtedness and Microfinance: CMEF collaborated with responsAbility, Triodos, and the Center for Microfinance at the University of Zurich in 2010 to publish “Over-indebtedness and Microfinance: Constructing an Early Warning Index.”  
• Microfinance Banana Skins: The Council collaborated with Citi, CGAP and Centre for the Study of Financial Innovation (CSFI) on the Microfinance Banana Skins survey in 2008, 2009, 2011 and 2012. The survey explores the risks facing the microfinance industry in the context of challenges such as growth, changing economic environments and an expanding product range.
• Global Microfinance Valuation Survey: The Council supported the CGAP and J.P. Morgan Global Microfinance Valuation Survey in 2009, 2010, 2011, and 2012. These reports combine CGAP and CMEF knowledge of microfinance with J.P. Morgan’s equity research skills in emerging markets, with the objective of providing benchmarks for valuation of microfinance equity.
• Governance Roundtable Webinar: In 2012,this joint CMEF-PIIF webinar presented the updated version of the Governance Guidelines, highlighting the sections that were added and revised since the first edition was published in 2005. The roundtable focused specifically on two sections of particular relevance in the microfinance industry today: responsible exits and social performance.
• Role Reversal Revisited: In 2012, CMEF sponsoredMicroRate’s study Role Reversal Revisited: Are public development institutions still crowding out private funders?