Microfinance Investing: Perspective from a Private Banker

Joerg-Peter Hayn (Banque de Luxembourg): Why does a private bank offer microfinance investments to its clients? Countries like Greece, Portugal or Spain have become high risk investments; countries like Bolivia or Argentina have become safe investments.

Besides emerging market sovereigns, microfinance has become an important addition to a diversified portfolio for the bank’s clients. Don’t invest in the poorest countries or politically unstable areas (Nicaragua). Also, currently no microfinance investments in microfinance crisis-affected countries (e.g. India).

No entry/exit after initial subscriptions for 3 years (e.g. no early redemptions). Currency risks are hedged. Select institutions are audited by 3rd parties (such as Symbiotics).

Typical microfinance investor:

  • doesn’t need money for some period
  • doesn’t require guarantee for either principal or return
  • looks for better return than top quality sovereign bond (fund generates typical yield of 4% after fees)
  • want to feel comfortable with target investment (e.g. social value)
  • wants transparency

Provide close link to investment: Banque de Luxembourg hosts events at its head office with representatives from MFIs (Pro Mujer, Sathapana, Azercredit).

Future outlook: good opportunities in Latin America will become more rare (due to local financing); net return to investor will probably decline.

Some customers asks about social investments, but it’s a minority. Usually the bank is the one to introduce the opportunity to the investor. In all, about 50% of investors become more interested in social performance, while the other 50% more interested in financial performance.

Question: What do you see as your responsibility in client protection?

If you like this article, Share it!
  1. Greate article. Keep posting such kind of
    information on your page. Im really impressed by
    Hey there, You have done an incredible job. I will certainly digg it and in my opinion recommend
    to my friends. I am sure they’ll be benefited from this website.

  2. Influencing massive change can be a difficult task and sometimes a number of attempts need to be made, using different combinations of strategies.