Arete Financial Partners

    Due Diligence of MFI Company for a Private Equity Fund

    Our client, a private equity player was exploring investment in Micro Finance. The client required a due diligence with focus on MFI credit and collections.  This was a follow on due diligence with the initial due diligence already conducted.

    The client wanted Arete to provide a credit performance sustainability view as well as an independent risk assessment. The PE also wanted recommendations to improve processes of the MFI

    Evaluation Approach

    Quantitative & Qualitative Inputs

    Data Analysis

    Feedback

    Meetings & interviews

    Minutes & Presentation

    Audit reports

    Approach & Key Challenges

    Challenges

    • Being an MFI the credit profile of customers as well as instruments of collections were different that traditional banks. Methods such a AEPS had to be verified.
    • MFI used a shared BA network

    Approach

    • Arete executed a comprehensive DD including

    • Portfolio Performance
    • Credit Initiation Process
    • Control & Monitoring Processes
    • Internal Audit Review
    • End Use Monitoring