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Microfinance institutions, which offer banking services to micro-entrepreneurs in poor and developing countries, are increasingly turning to the capital markets to raise money to increase their reach into the poor urban and rural areas which they serve. Microfinance investment vehicles (MIV) have been created to meet this demand for capital, at the same time producing some return for socially aware investors.

Over 20 MIVs have been set up in the Grand Duchy. Sponsors make use of a variety of regulated and unregulated structures to meet their needs. MIV have been set up under Part II of the law of 20 December 2002, replaced by Part II of the law of 17 December 2010, as SICARs, as SIFs and there is also a trend towards securitisation vehicles and structured products.

Luxembourg also promotes the raising of private capital for microfinance through the creation of the Luxembourg Fund Labelling Agency asbl (LuxFLAG). Launched in 2006 by a group of founding partners, the purpose of this non-profit making association is to award a specific label to microfinance investment vehicles based on defined and publicly available criteria. The criteria are designed to ensure that the fund is really invested in microfinance.