Ethical Performance
inside intelligence for responsible business


pension fund points the way ahead on microfinance

May 2008

A large Dutch pension fund has provided the clearest sign yet of the growing interest in microfinance by starting a €200million ($314m, £158m) global investment programme in the sector.

PGGM, an €88billion fund for more than two million workers in healthcare and social work, has made a €27m initial investment in the Dexia Micro Credit Fund managed by BlueOrchard Finance, which specializes in microfinance. It will invest the balance over the next three years.

Geneva-based BlueOrchard, which issues loans to leading microfinance institutions, said PGGM’s investment is the largest yet in the microfinance sector by an institutional investor.

Deutsche Bank recently reported that microfinance projects are now attracting greater interest, with loans predicted to rise from their present $2bn to $20bn by 2015 (EP9, issue 10, p6).

Jack Lowe, chief executive of BlueOrchard, claimed investor confidence in the relatively ‘stable’ area of microfinance has increased rapidly, in part because of the current market turmoil. So far BlueOrchard has allocated 656 loans to 156 institutions. Alex van der Velden, PGGM head of sustainable investment strategies, said the investments fulfilled social responsibilities by giving tens of thousands of small-scale entrepreneurs in developing countries greater access to credit, and generated competitive returns.

Microfinance is often viewed as high risk because subordinated loans normally rank after other debt for repayment, but BlueOrchard says all its microfinance loans to date have been reimbursed without default.

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