Equity

Bellwether is essentially an Equity Fund and its primary financial instrument is risk capital. Any investment made by the Fund, even if structured as debt or quasi-equity would have the overarching objective of an equity stake in the MFI. Given that few MFIs are currently structured to accommodate equity, some proportion of this risk capital will take the form of subordinated debt, guarantees or other equity-like instruments.

The Fund will make strategic equity investments (common or preference) in select MFIs and seek a competitive return on equity while preserving the core principle of poverty alleviation. As a strategic investor and given the extensive microfinance experience of its fund management team, the Fund will play an active governance role and will assist the MFIs in building up their financial and management systems.

Debt

As a rule, plain debt is generally offered by the Fund to an MFI with whom an equity relationship already exists.

In exceptional cases, Debt may be considered if the Fund has the option to invest in the MFI’s equity in the future or recognizes a strong possibility of such an investment, or in the event the Investment Committee views the investment as furthering the overall investment strategy of the Fund. Cases where an MFI requires debt assistance to grow and is unable to raise this from other sources (banks and other financial institutions) will also be considered on a case-by-case basis.

Value added services

Playing the role of a bridge between the microfinance and the mainstream finance worlds, Bellwether offers value added services to MFIs. These services include credit enhancements to enable MFIs to access credit from commercial banks and loan syndications, together with national and international financial institutions. These services are especially offered to integrate promising young MFIs with the mainstream financial sector.

Keeping with its role of the ‘bridge’, Bellwether also undertakes capacity building of its partner MFIs in crucial areas like governance, legal transformation and adoption of suitable systems.