Microfinance institutions, which offer banking services to micro-entrepreneurs in poor and developing countries, are increasingly turning to the capital markets to raise money to increase their reach into the poor urban and rural areas that they serve. Microfinance investment vehicles (MIV) have been created to meet this demand for capital, at the same time producing some return for socially aware investors.
Today, Luxembourg is the principle European domicile for MIV. Promoters can choose from a range of regulated and unregulated structures. Hence, MIVs have been created as: undertakings for collective investment (UCIs) regulated by Part II of the Law of 20 December 2002 (replaced by Part II of the Law of 17 December 2010) as investment companies in risk capital (SICAR) or as Specialised investment funds (SIFs). Other popular structures are the securitisation vehicle and structured products.
A Grand Ducal Regulation of 14 July 2010 provides that UCIs and SIFs invested in microfinance and which meet certain conditions are exempt from the annual subscription fee, or taxe d’abonnement.
The Luxembourg Fund Labelling Agency asbl (LuxFLAG) promotes the raising of private capital for microfinance. Founded in July 2006 by a group of institutional partners, the purpose of this non-profit making association is to award a recognisable label to microfinance investment vehicles based on defined and publicly available criteria. The criteria are designed to ensure that the fund is really invested in microfinance.