Microfinance: an alternative asset class
Investments in microfinance represent a different type of asset class that generates both financial and social returns. For capital markets they represent an opportunity with an interesting risk/return profile. BlueOrchard is dedicated to contributing to bridge the gap between microfinance and the capital markets.
Financial return: the microfinance investment risk-return profile is attractive
Competitive return: microfinance debt offers a better return than monetary instruments (an estimated additional 150 to 200 basis points) with a slightly higher level of risk: it is an excellent alternative to fiduciary deposits or certificates of deposits. Furthermore, microfinance equity represents an attractive longer term opportunity.
Systemic features: Low volatility - Microfinance offers a lower volatility than traditional equities or bonds from emerging markets. It is materialized by instruments which are not yet quoted on stock exchanges and its value is not influenced by hard to predict interest rates and credit spread movements. Partial correlation - Microfinance is only partially correlated with political, economic or even climatic events. The informal sector is by its very nature a thriving place of permanent business creation, less directly linked to the fate of the formal economy.
Specific features: High solvency - The leading microfinance institutions are solvent institutions with medium risk profiles. Their main assets are loan portfolios which usually perform much better than traditional commercial banks. Strong diversification - Microfinance institutions have very well diversified portfolios. Their own credit risk is spread over thousands of micro-borrowers.
Social return: microfinance adds a new dimension to your money
By investing in microfinance, you contribute to the economic inclusion and growth of micro-entrepreneurs through specialized financial intermediaries delivering financial services of all kinds (credit, savings, insurance). You extend the frontiers of international finance and you contribute to virtuous development cycles of capital accumulation, investment and job creation. Better housing, nutrition, health as well as better education for children are among the most immediate social spill-over of microfinance operations on the welfare of the micro-entrepreneurs' families.
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