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

Combining financial returns and sustainable development – the case of Microfinance Etika - Alfi Luxembourg, 14 th of October 2004. BlueOrchard Finance - Mission Promoting social development through Microfinance by facilitating access to capital markets. Microfinance debt

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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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