ABP to double microfinance holdings again

NETHERLANDS - Major Dutch pension fund ABP expects to increase its investments in microfinance from $20m to around $40m (€28.4m) by the end of this year.

It is the second time this year the fund has announced it wants to double its investments as ABP said in March it had already doubled its investments in emerging market micro-credit to around €15m.

Huub Hamers, fund manager for structured investments in alternatives, said, in the fund's quarterly magazine, ABP is currently in talks with various funds about investing in micro credit.

ABP declined any to comment any further about those discussions with companies about the use of their funds, but it thinks micro credit is an attractive long-term investment for pension funds because of the limited correlation with the return on equity and bonds, as well as arguing the social aspects of the concept add to microfinance's appeal.

"Moreover, micro credit is hardly sensitive to macro-economic development such as interest and inflation," the spokesman added, saying the investments give a yearly return of around 6%.

ABP started with a €5m investment in the asset class in 2005. Its current allocation makes ABP the largest Dutch investor in microfinance.

Micro credits are small loans given out by financial institutions to local entrepreneurs in developing countries. These loans are distributed by local Micro Finance Institutions, of which there are currently around 10,000 globally.

Bangladeshi economist Mohammed Yunus, the pioneer of microfinance, and his Grameen bank, was awarded a Nobel peace prize in 2006 for their efforts in developing such investments.

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