The Microfinance Collateralized Debt Obligation: A Modern Robin Hood?

Lund, Sweden, June, 18 2006 - The aim of this paper is to highlight a potentially very fruitful link between micro-entrepreneurs and the international capital markets.

We discuss the role structured finance and credit derivatives could play in extending finance to micro-entrepreneurs on a much larger scale than today’s mainly non-commercial microfinance industry. The mechanisms of so called collateralized debt obligations (CDOs) are described and extended to the microfinance world. Finally, a hypothetical, but realistic, example of such a microfinance CDO (MiCDO) is used to discuss the implications of securitization and tranching of microcredits.