A look at the markets
Going into 2021, we have seen a continuation of 2020 with markets and investees showing signs of resilience and progress in the first months of 2021. In markets such as India, for example, investees have resumed normal business, making payments, disbursing loans, and working hard on making up ground on what was lost during a period of lockdowns and restrictions due to the Covid-19 pandemic.
Looking at Latin America, which has been dealing with the Covid-19 pandemic for almost exactly one year, a positive GDP growth rate is expected for 2021. Chile has been setting an example with regards to vaccination efforts, hitting the one million mark beginning of February. Both, the expected GDP growth and the vaccination campaigns, can be seen as a positive note for the long-term growth and stability once the economy recovers fully from the pandemic. In addition, the approval of a 3-year Extended Fund Facility of USD 1.78bn for Costa Rica by the IMF represents an encouraging sign for the future recovery of the country as well as the Latin American region.
With regards to the African continent, investees have shown strong resilience. Thus far, there have been no rescheduling requests from investees. In particular, the agriculture sector saw a positive performance without any notable disruption during the Covid-19 pandemic.
In Eastern Europe and Central Asia, countries with shorter lockdowns seem to have fared better on sustaining businesses. Similarly to the African region, with the start of the agro season, loan demand has been picking up in several countries.
Digital transformation in Africa
Internet growth rates in Africa are higher than in Asia, Latin America, and the Middle East, making the digital transformation in the financial sector across Africa a viable alternative to traditional banking. The Covid-19 pandemic has further contributed to this development. The digital ecosystem is dominated by payment solution providers and mobile money applications, expanding financial services to underserved parts of the population and becoming a supporting factor for microfinance. 70% percent of the continent’s financial technology is based in 4 countries (Egypt, Kenya, Nigeria, and South Africa) with countries like Ghana, Uganda, Cameroon, and Rwanda catching up rapidly. Digital innovations have been transforming lives across the continent not only in the financial sector but also in areas such as edutech and digital farming.
Digital transformation in the microfinance sector
Digitization plays a major role in the microfinance sector in CEE and Central Asia. More and more institutions have been launching mobile applications to facilitate the loan origination process. In Bosnia and Herzegovina, for example, the usage of online loan application has increased from 4% to 14% over the last 3 years. Digitization has been a key driver to facilitate sustainable growth by providing clients easy access to deposit and loan products, and automating back-office operation flows. Furthermore, digitization has been reducing the use of paper, the need for branch visits, and improving transparency. With the widespread use of digitization, institutions across CEE and Central Asia were actually well prepared and equipped to address social distancing challenges posed by the Covid-19 pandemic. However, challenges remain with regards to, for example, regulatory shortcomings to fully digitalise loan underwriting and issuing processes. Often digital signatures are not available and credit bureau data access still requires in-person authorisation.
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).
The use of UN Sustainable Development Goals (SDG) icons is for purely informational purposes in providing context for the impact proposition of the investments contemplated by the Fund. The use of SDG icons and/or any reference to the SDGs is non-promotional and in no way is intended to reflect endorsement of the Fund by the United Nations nor affiliation with BlueOrchard Finance, the Schroders Group or any of its subsidiaries.
Copyright © 2021, BlueOrchard Finance Ltd. All rights reserved.