Ethical Performance
inside intelligence for responsible business


Microfinance loans will ‘grow in appeal’

March 2008

Microfinance projects are becoming more attractive to mainstream investors.

Deutsche Bank says the volume of such loans has risen ‘sharply’ and as a result it forecasts investment in microfinance institutions will rise from the current level of $2billion (£1bn) to $20bn by 2015.

While much of this money is likely to come from individuals and institutions with an interest in ethical finance, Norbert Walter, chief economist at Deutsche Bank, expects that microfinance will ‘increasingly appeal to a wider range of commercial investors’. Government-backed financial institutions will remain significant providers of funding, but the private sector will move in decisively, making up the lion’s share of investment by 2015, he says in a new report. Private sector investors ‘have barely started to explore the full potential of microfinance investments’, Walter said.

€36million ($54m, £27bn) of a €60m microfinance bond issue by Deutsche Bank in September 2007 was supported by private retail investors, with the rest coming from institutional investors including the bank, which put in e4m. The subordinated loans will be channelled via microfinance providers to at least 120,000 small firms in 15 developing countries.

Deutsche Bank reports that some microfinance institutions are beginning to make profits and there is potential for acceptable returns, with investors viewing this as a way of diversifying portfolios. It names the best performers as Grameen Bank, ASA, BRAC (all in Bangladesh), VBSP (Vietnam) and BRI (Indonesia). The rankings are based on the number of borrowers, gross loan portfolio and return on equity.

Deutsche Bank | Global | Responsible Investment

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