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Combining financial returns and sustainable development – the case of Microfinance Etika - Alfi

Explore the intersection of financial returns and sustainable development through the case study of Microfinance Etika by BlueOrchard Finance in Luxembourg on October 14, 2004. Discover the birth of a new asset class with investments that offer double returns, attractive risk profiles, and high social impact. Learn how BlueOrchard Finance promotes social development through microfinance by facilitating access to capital markets, creating an appealing industry with limited credit risk and low volatility in financial returns.

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Combining financial returns and sustainable development – the case of Microfinance Etika - Alfi

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  1. Combining financial returns and sustainable development – the case of Microfinance Etika - Alfi Luxembourg, 14th of October 2004

  2. BlueOrchard Finance - Mission Promoting social development through Microfinance by facilitating access to capital markets

  3. Microfinance debt • The birth of a new asset class • double returns : social and financial • attractive fast growing industry • appealing risk – return profile • limited credit risk • low correlation with other asset classes in portfolio • low volatility of financial returns • very high social impact • universal access to capital / entrepreneurship promotion

  4. BlueOrchard Finance – Investors • Only private investors • Institutional • Pension funds • Fund of funds • Foundations • Individual • High net worth individuals • Private banking clients, Family offices • Some smaller investors, not yet truly retail • Increasing opportunities for public – private partnerships

  5. BlueOrchard Finance - Products • Dexia Micro-Credit Fund (Luxembourg SICAV) • USD 40 million Microfinance loan portfolio • 50 MFI in 20 countries • 180 loans since inception, over 75 millions disbursed • 6-year track-record, no defaults, 31% cumulated net return in USD • BlueOrchard Microfinance Securities I ( US SPV) • First international CDO in Microfinance • USD 40 millions to 9 MFI in 7 countries • 7-year maturity • ResponsAbility Global Microfinance Fund (Lux. FCP) • Main partner for a fraction of the direct debt portfolio • ~ USD 3 millions, various debt segments

  6. BlueOrchard Finance - Philosophy • Commercial approach : • Returns are a condition for long lasting flows of capital • We are not tapping charity money, but private professional investors • Long-term approach : partnerships with selected MFI • We are in the business for the very long-term • Mutual growth and benefit of financial innovations • Offer variety of funding products adapted to different MFI • Short and long-term ; small and large amounts • Leading, consolidating or starting MFI

  7. BlueOrchard Finance - Investment process • Complete data collection (paper and web database) • Field visit by BlueOrchard analysts • Additional external evaluation - rating • Additional questions - precisions • Credit Committee • Disbursement • Monthly monitoring through web database • Annual visits

  8. BlueOrchard Finance - Risk Analysis • Country risk • Transfer and convertibility, taxes • Microfinance regulating framework • Political risk • Industry risk • Competition level • Market saturation • Indebtedness level of MFI clients • Credit risk • Financial • Fiduciary

  9. BlueOrchard Finance - Credit Risk analysis • Financial risk • Liquidity (cash management) • Solvability (ALM, leverage, maturities and currencies matching, etc.) • Profitability (operational and financial) • Efficiency – Productivity (operational costs, credit officers’ productivity) • Special emphasis on portfolio quality • Fiduciary risk • Board and shareholders’ composition • Management and staff quality • MIS quality • Other commercial lenders • Reputation (networks, local support, etc.)

  10. Questions : Jean-Philippe De Schrevel BlueOrchard Finance SA Jean-philippe@blueorchard.ch + 41 22 781 6670

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