Socialenterpriseblog.com

Increased foreign direct investment into developing economies could become a very effective poverty intervention strategy. Microfinance institutions (MFIs) would be the logical place to locate these investments. This is because presently, the resources available from multilateral and private donor agencies will never be sufficient to satisfy the demand for Microfinance capacity development.

Agents of social change and other stakeholders in the field of microfinance have debated for years on how to increase the financial liquidity of MFIs thereby increasing their capacity to lend to the poor. What factors would need to be present in order to facilitate the wholesale buying and selling of microfinance securitized loan portfolios in the world capital markets? What role should a global peer-based professional organization play in bringing about this possibility?

A peer-based professional association could help set new financial statement transparency standards for MFIs by encouraging the use of “cost-accessible” financial reporting for MFI practitioners using XBRL.

This author advocates a peer-based professional organization promoting the development of XBRL taxonomies (eXtensible Business Reporting Language). XBRL is an internet-based financial reporting protocol that could ultimately serve to boost the financial liquidity of MFIs. By boosting the financial transparency of MFIs with XBRL reporting, it would thus would in turn enhance the possibility of a secondary trading market place for MFI securitized loan portfolios.

A secondary market trading market for Microfinance securitized loan portfolios assumes that outside investors are able to easily evaluate the financial strength of MFIs and track their performance through standardized reporting protocols. The development of XBRL taxonomies for Microfinance institutions can play a major role bringing about this possibility. Advances cannot occur without a single unified voice advocating MFI financial transparency.