BlueOrchard develops initiative to support emerging and frontier MSMEs and combat challenges posed to the UN SDGs by Covid-19
Zurich, 7 May 2020 – BlueOrchard is working with bilateral donors, development finance institutions, and foundations to develop a support initiative to provide funding for micro, small and medium-sized enterprises (MSMEs) in emerging and frontier markets that have been affected by the Covid-19 pandemic.
Emerging and frontier markets could be particularly vulnerable to both the public health threat and socio-economic impact of the pandemic. The combination of the initial disruption of the virus, the impact of response measures and uncertainty over the duration or extent of the crisis, means that some financial institutions in specific regions require additional funding in order to remain operational. While significant funding has been mobilised by governments and central banks in OECD economies, this is not necessarily the case for a number of developing markets. As a result, urgent action and tailored solutions are required in order to support MSMEs in staying in business and maintaining jobs.
The pandemic also poses a significant challenge to the possibility of achieving the UN Sustainable Development Goal (SDG) of ending poverty by 2030. There is a very real possibility that Covid-19 will increase the relative and absolute number of individuals in poverty around the world. As the first recorded increase since 1990, this could represent a reversal of approximately a decade of progress in reducing poverty.
BlueOrchard is collaborating with a number of potential investors, including Schroders, to develop a new fund, which would support financial institutions and their portfolio companies by providing flexible financing schemes and helping to limit disruption to businesses, maintain jobs and re-establish a path to growth.
The initiative will take a two-phased approach; firstly, the ‘stabilisation’ phase will provide much-needed liquidity to micro and small businesses over the coming months as they navigate the restrictions put in place in response to Covid-19. Once the immediate challenge has passed, it will then move into the ‘growth and recovery’ phase, supporting institutions as they grow their MSME portfolios, create jobs, and continue their mandate to increase financial inclusion and reduce inequality.
Peter Fanconi, Chairman of the BlueOrchard Board of Directors, said: “As impact investors, it is during times of crisis that we have the greatest responsibility to support the most vulnerable members of society. If measures are not taken to do this, more than a decade of progress towards ending poverty could be lost in a few short months. We firmly believe that impact investing has a role to play in helping to overcome this current challenge.”
Philipp Müller, Chief Executive Officer at BlueOrchard, said: “While emerging and frontier markets have been relatively resilient so far from a public health perspective, this is partly due to the swift and effective action of many governments in implementing measures to limit the spread of the virus. Many of these restrictions pose their own challenges, particularly for markets in the developing world where economic activity is weighted towards entrepreneurial activities from MSMEs. This initiative has allowed us to quickly gauge appetite from investors across both the public and private sectors and mobilise funds to support those most severely impacted.”
Maria Teresa Zappia, Deputy CEO and Chief Impact and Blended Finance Officer, said: “BlueOrchard has a long history of collaborating with development finance institutions and other investors via a blended finance model. The support of development-oriented institutions is crucial to ensure that contractions in household income and consumption as a result of Covid-19 do not wipe out the progress in financial inclusion has been achieved over the last two decades via microfinance investing and other financial inclusion initiatives. Providing liquidity to cash-stricken small and micro enterprises is the only way to ensure that millions of entrepreneurs in emerging and frontier markets are not pulled back into poverty.”
The initiative would be Luxembourg-domiciled, with the first closing planned for July 2020.
About BlueOrchard Finance Ltd
BlueOrchard is a leading global impact investment manager and a member of the Schroders group. The firm is dedicated to fostering inclusive and climate-smart growth in emerging and frontier markets, while providing attractive returns for investors. BlueOrchard was founded in 2001, by initiative of the UN, as the world’s first commercial manager of microfinance debt investments. The firm has built a distinct track record in offering premium impact investment solutions, including credit, private equity, and sustainable infrastructure. Being an expert in innovative blended finance mandates, the firm is a trusted partner of leading global development finance institutions. BlueOrchard has invested to date more than USD 6bn for sophisticated global private and public clients, enabling tangible social and environmental impact. For additional information, please visit: www.blueorchard.com.
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