Investing in Microfinance. Why and How ? The case of Tunisia

After the Tunisian revolution people were hit by the bitter reality of the Tunisian miracle of Ben Ali's regime with an unemployment rate of 20 % and a poverty rate reaching the 25%. With no access to loans, low income people find themselves in a vicious circle of poverty that will lend them either to beg or criminality. Many of the poor people have a heavy life baggage and their personal life could have been ripped from the pages of Les Miserables . Such reality pushed the government toward draconian changes which lead to more liberalization of the microfinance sector to alleviate poverty and enhance social inclusion. Among the new allowed player is a private equity firm InvestCo. The decision has caught the industry by surprise as microfinance sector in Tunisia was always under the scope of nonprofit associations, and far from private equity firms reach. Hence the following inquiries : why a private equity firm would invest in this sector ? Why now ? Is the sector profitable ? Is it competitive ? What will be its strategy ? To answer these questions we followed the whole process that a private equity fund undertakes, i.e. studying the sector competitiveness, analyzing the investment opportunity and finally defining the strategy. We present in this business case the major steps of the approach.