Investments in microfinance represent a new asset class that generate both financial and social returns. Capital markets face thus an opportunity with an interesting risk/return profile. BlueOrchard is dedicated to contributing to bridge the gap with the capital markets.

1. Financial return: the microfinance investment risk-return profile is attractive

Competitive return: microfinance debt offers a better return than monetary instruments (an estimated additional 150 to 200 basis points) with only a slightly higher level of risk: it is an excellent alternative to fiduciary deposits or certificates of deposits. Microfinance equity represents also an attractive longer term opportunity.

Systematic risk: Low volatility - Microfinance offers a lower volatility than traditional equities or bonds from emerging markets. It is materialised by instruments which are not yet quoted on stock exchanges and its value is not influenced by hard to predict interest rates and credit spread movements. Weak correlation - Microfinance is weakly correlated with political, economic or even climatic events. The informal sector is by its very nature a thriving place of permanent business creation, less directly linked to the fate of the formal economy. It is similarly weakly correlated with global financial movements on the major market places.

Specific risk: High solvency - The leading microfinance institutions make for very solvent institutions with low risk profile. Their main assets are loan portfolios of very high quality, as demonstrated by their exemplary low default rate (3% on average), usually much better than many traditional commercial banks. Strong diversification - Microfinance institutions have very well diversified portfolios. Their own credit risk is spread over thousands of micro-borrowers, evolving on markets with good growth prospects.

2. Social return: microfinance brings a new dimension to your money

By investing in microfinance, you contribute to the growth and poverty alleviation of micro-entrepreneurs through specialized financial intermediaries delivering financial services of all kinds (credit, savings, insurance). You push the frontiers of international finance and you help to launch local virtuous development cycles of capital accumulation, investment and job creation. Better housing, nutrition, health as well as better children education are among the most immediate social spill-over of microfinance operations on the welfare of the micro-entrepreneurs' families.