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Microfinance

An investment with a social impact

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Generating both financial and social returns

Around the world more than 1 billion adults are considered unbanked and have little or no access to financial services. Many of these people engage in business activities, but most do so without access to loans and banking products that support income-generating activities.

Microfinance is a form of impact investing that aims to generate returns for investors while also having a positive social and/or environmental impact.

Investing in shared prosperity

Through microfinance, financial institutions provide low-income individuals with loans and other financial products and services, with the intention of helping them to improve their economic situation and standard of living.

As an initiative that the UN supported when it established the millennium sustainable development goals in 2000, microfinance is widely recognised as a tool for increasing financial inclusion. It empowers people to develop their businesses and invest in healthcare, housing and education for themselves and their families. BlueOrchard was established in 2001 as part of this UN initiative. The BlueOrchard Microfinance Fund was the first ever commercial microfinance fund and today is the largest of its kind.

Why invest in microfinance?

Impact investing was developed as a way to deliver positive and measurable social and environmental benefits while also achieving a financial return. What makes microfinance attractive as an impact investment is that the social and/or environmental impact and the investment return have equal priority, resulting in what is known as a triple bottom line.

With its aim of facilitating inclusive growth and shared prosperity, microfinance investing serves to align with the objectives of leading development institutions such as the World Bank. As an asset class, microfinance offers the potential for attractive, stable returns that have a low correlation to other asset classes.

Why Schroders for microfinance?

In the microfinance market, the barriers to entry are high and operators require specialist knowledge and expertise. In 2019, we partnered with BlueOrchard to provide investors with access to microfinance through the world’s leading impact investment manager with a track record of more than 20 years in the asset class.

BlueOrchard manages the world’s longest-running microfinance investment fund, which launched in 1998. Through an investment process that involves rigorous on site due-diligence, proprietary research and a strong approach to risk management, BlueOrchard invests in microfinance institutions (MFIs) that provide loan capital, savings, insurance and other financial products to low-income groups. It also helps MFIs to expand their outreach, improving the quality and appropriateness of their offerings, and developing new products.

With offices on four continents, BlueOrchard’s investment professionals are located directly in the regions where they are investing.

Microfinance at a glance

An experienced impact investment manager with a track record of more than 20 years in microfinance investing and $6.5bn invested*
Providing access to an asset class that has a low or no correlation to other asset classes
Robust investment approach that combines rigorous on-site due-diligence, proprietary research and tools with strong risk management
Triple bottom line investments that aim to provide financial returns and a social and/or environmental impact
Supports and increases financial inclusion by providing micro entrepreneurs with capital and other services to support income-generating activities
Available in a variety of structures, including closed-ended, semi-liquid and UCITS

*As at 31 December 2019

Please contact your Schroders representative for more information on the BlueOrchard strategies available in your market.

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Past performance is not a guide to future performance and may not be repeated.

The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested. Exchange rate changes may cause the value of any overseas investments to rise or fall.

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