The last few months have been challenging for economies around the world, however, the resilience of the microfinance sector and a number of developing markets has been noteworthy. From our perspective in the field, many institutions have fared somewhat better than we had anticipated at the beginning of the crisis. There are a number of reasons for this – in many cases we saw countries coming out of lockdown in May and June with comprehensive plans for resuming normal activities. On the economic side, in many emerging markets, the situation seems to be evolving in a slightly better manner than initially assumed.

Particularly in South East Asia, where countries like Vietnam and Cambodia have reported relatively low levels of disruption despite their proximity to China, and they have done a good job of managing the situation within the constraints of their own healthcare systems. Latin America has faced more issues and consequently, lockdowns have needed to continue, which will likely have an ongoing effect for these economies. However, as countries start to open up again, we hope that micro, small and medium-sized enterprises (MSMEs) and microfinance institutions (MFIs) will be able to reboot their operations.

For many of the countries that we invest in, this is starting to come to fruition with the first wave passing and more normal economic activity beginning to resume. As a result, the curve has flattened with regard to rescheduling requests from MFIs which have slowed to a near halt in May. At present, we expect that approximately 12% of 2020 repayments to BOMF will be rescheduled into 2021. We are also receiving a significant number of requests for new financing or additional financing from existing investees. We are beginning to re-open the investment pipeline on a cautious basis to help meet this expanding demand which we believe further highlights the resilience of the market.

While a second wave is still possible, we anticipate that healthcare systems should be better prepared to respond to this, and governments have learned lessons on how to manage the situation from an administrative perspective. This should mean that ideally and practically speaking, the economic impact of a second wave would be less significant.

As the situation looks to be improving and countries are coming out of lockdown, we are looking at where we can provide support to smaller businesses by resuming lending to some of the most resilient institutions. After a couple of weeks of not lending, we are resuming our lending activity with caution, for example, we have recently approved a loan to a longstanding client in Paraguay, who we have been working with for more than a decade. It is one of the biggest institutions in the country and is in a position to support companies as they come out of economic lockdown and begin to resume more normal levels of activity. From an impact and credit risk perspective, in countries where economic recovery is taking place and where there are established, resilient institutions, it is a good time to be lending again.



The information in this document was produced by BlueOrchard Finance Ltd (“BOF”) to the best of its present knowledge and belief. However, all data and financial information provided is on an unaudited and “as is” basis. The opinions expressed in this document are those of BOF and its employees and are subject to change at any time without notice. BOF provides no guarantee with regard to the accuracy and completeness of the content in this document and BOF does not under any circumstance, accept liability for any losses or damages which may arise from making use of, or relying upon any information, content or opinion provided by BOF in this document. This document may contain references or links to other documents and websites and BOF has not reviewed such other documents and websites and is not responsible in any way in relation to the content of such documents and websites.  

The information in this document is the sole property of BOF unless otherwise noted, and may not be reproduced in full or in part without the express prior written consent of BOF.

All investments involve risk. We note specifically that past performance is not an indication of future results. Emerging markets impact investments involve a unique and substantial level of risk that is critical to understand before engaging in any prospective relationship with BOF and its various managed funds. Investments in emerging markets, particularly those involving foreign currencies, may present significant additional risk and in all cases the risks implicated in this disclaimer include the risk of loss of invested capital.

The materials provided in this document are for informational purposes only and nothing in this document can be construed as constituting any offer to purchase any product, or a recommendation/solicitation or other inducement to buy or sell any financial instrument of any kind and shall not under any circumstances be construed as absolving any reader of this document of his/her responsibility for making an independent evaluation of the risks and potential rewards of any financial transaction. We note in particular that none of the investment products referred to in this document constitute securities registered under the Securities Act of 1933 (of the United States of America) and BOF and its managed/advised funds are materially limited in their capacity to sell any financial products of any kind in the United States. No investment product referenced in this document may be publicly offered for sale in the United States and nothing in this document shall be construed under any circumstances as a solicitation of a US Person (as defined in applicable law/regulation) to purchase any BOF investment product.

The information provided in this document is intended for review and receipt only by those persons who are qualified (in accordance with applicable legal/regulatory definitions) in their respective place of residence and/or business to view it, and the information is not intended under any circumstances to be provided to any person who is not legally eligible to receive it. Any recipient of information from this document who wishes to engage with BOF in furtherance of any transaction or any relationship whatsoever must consult his/her own tax, legal and investment professionals to determine whether such relationship and/or transaction is suitable. 

By no means is the information provided in this document aimed at persons who are residents of any country where the product mentioned herein is not registered or approved for sale or marketing or in which dissemination of such information is not permitted.

BOF disclaims all liability for any direct or indirect damages and/or costs that may arise from the use of (whether such use is proper or improper), or access to, this document (or the inability to access this document).

Copyright © 2020, BlueOrchard Finance Ltd. All rights reserved.