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IPE special report May 2018

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Dutch funds’ appetite for microfinance grows

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NETHERLANDS - Dutch pension schemes have an appetite for microfinance initiatives, according to microfinance investment manager Blue Orchard.

Last year Dutch pension giant ABP, the scheme for civil servants, started investing into microfinance, financial credit services for people in the developing world, by placing €5m the Dexia Micro-Credit fund.

"At this moment our investments in microfinance is €10m," which is all placed in the Dexia fund, a spokesman for the fund said.

Jean Philippe de Schrevel, co-founder of Blue Orchard, which together with Dexia Micro-Credit Fund manages various micro-credit investment funds, said that there is a growing interest for this type of investment among institutional investors.

According to De Schrevel, already two Dutch and two Swiss pension schemes participate in micro-credit funds and Blue Orchard is in talks with five other large Dutch funds who want to apply sustainable development initiatives to asset management.

Besides the factor of social responsibility, according to ABP microfinance is a responsible investment: "The returns on micro credits show little relation to developments of the stock and bond market and is insensitive to macro economical developments such as interest and inflation movement," the spokesman said.

"Hence there is a good possibility to spread the risk in the total portfolios - the risks are limited by good management and micro credits deliver a reasonable yield."

Since Dexia set up its Micro-Credit Fund in 1998, according to the firm "the first commercial investment fund designed to refinance microfinance institutions specialised in financial services to small companies in emerging markets", the industry received a boost when last year UN secretary general Kofi Annan announced 2005 as the year of microfinance.

The microfinance sector is increasing rapidly: "Growth rates in the industry are about 30-40% per year," said De Schrevel; the fact that more pension funds are joining "is a recognition that the sector is growing and that it is sound".

Also globally institutional investors have responded: the $380bn US educational retirement savings group TIAA-CREF announced earlier this month that is earmarked $100m (€78.8m) for microfinance investments.

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