Capital Structuring and Equity Valuation - Toolkit

As the microfinance industry evolves, there are more options available for microfinance institutions (MFIs) to finance their business, including different forms of debt, equity, and hybrid forms for raising capital. In this scenario, it becomes important for MFIs to equip themselves with the knowledge and skills necessary to design their institution's capital structure.

The Capital Structuring and Equity Valuation Toolkit aims to educate key leaders and managers of MFIs on the capital structuring process and approaches to equity valuation relevant to the microfinance industry. At the same time, the toolkit provides bankers and investors with a better understanding of the needs of MFIs in terms of capital structuring and valuation. The toolkit provides the context and approaches to capital structuring and equity valuation, as well as other issues relevant for investors, such as issues of control, exit, country risk, etc.

The manual is divided into five different sections that independently address funding issues. The sections of this manual are the following:

1. Introduction - presents the reader with the topics discussed in the manual as well as their importance to MFIs.
2. Capital structuring - describes the range of financial instruments available to gain access to debt and capital financing, and discusses key topics that are aimed at identifying the optimal capital structure.
3. Valuing my MFI - provides different techniques commonly used to value a MFI in order to assess the most appropriate value of equity stakes offered to investors.
4. Reading the investor's mind - describes different aspects that MFIs should consider when approaching different types of investors, including topics such as control issues, exit strategies and return expectations that a MFI needs to be aware of.
5. Conclusion - brings all discussed topics together and summarises key take-aways.

A clear understanding of the capital structuring process and approaches to equity valuation relevant to the microfinance industry is essential for MFIs to understand and appropriately assess all funding options in order to make the right strategic funding decisions. The MicroSave Capital Structuring and Equity Valuation Toolkit allows the MFI's management to understand the different funding options available to the MFI, assess the advantages and disadvantages of different possible capital structures, evaluate the factors that influence the optimal capital structure, comprehend the methods available to value the MFI, apply valuation methods, learn what are the elements that the different types of investors consider when investing in the MFI and discover what variables are important for funders when deciding how much and where to invest.

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