Small Money Big Impact: Fighting Poverty with Microfinance

"This book is a standard reference. It is an invaluable contribution towards the further development of current strategies in the fight against global poverty."
Prof. Klaus Schwab, Founder and Executive Chairman, World Economic Forum (WEF)

PRAISE FOR SMALL MONEY

"Impact investing is a megatrend! Fanconi and Scheurle provide an insightful and very well–researched look into this new Asset Class. A must–read for any private or institutional investor."
Boris Collardi, CEO, Julius Baer Group Ltd.

"Small Money Big Impact is a great read and door opener to this meaningful topic."
Deval L. Patrick, MD BainCapital; former Governor of Massachusetts, USA

"A thoughtful reflection bringing timely input to the new field of impact investing, with the great benefit of being based on rich experience in microfinance."
Prof. Michael Chu, Harvard Business School

"A meaningful and timely contribution for any investor."
Tadashi Maeda, CEO, Japan Bank for International Cooperation (JBIC)

"Poverty is man–made and it can be finally overcome by providing adequate skills and professional, efficient finance to individuals."
Monika Beck, Director Compliance, Kreditanstalt für Wiederaufbau (KfW)

"Microfinance is like a fabric weaving its threads across the world. Business leaders need to be smart enough to realise how important impact investing has become."
Omar Qandeel, Member of the Board, BlueOrchard Finance

Foreword

Preface

Acknowledgments

About the Authors

Chapter 1: Introduction

1.1 Fighting Poverty

1.2 Investing in Financial Infrastructure

1.3 Content Overview

Chapter 2: Microfinance the Concept

2.1 History

2.2 Definition and Goals

2.3 Double Bottom Line

2.4 Financial Inclusion

2.5 Market Participants

2.6 Impact Investing

2.7 Preliminary Conclusions

Chapter 3: The Microfinance Value Chain

3.1 The Protagonists and their Tasks

3.2 Regulatory Environment

3.3 Development Finance Institutions

3.4 Market Overview

3.5 Geneva: Birthplace of Modern Microfinance

3.6 Preliminary Conclusions

Chapter 4: Micro Entrepreneurs

4.1 Definition

4.2 Needs and Requirements

4.3 Micro Entrepreneurs

4.4 Preliminary Conclusions

Chapter 5: Microfinance Institutions

5.1 Definition and Goals

5.2 Types of MFIs

5.3 MFI Funding

5.4 Services

5.5 Regulation

5.6 Preliminary Conclusions

Chapter 6: Lending Methodologies

6.1 Traditional Credit Theory and Microfinance

6.2 Lending Methodologies

6.3 Socio–Economic Factors

6.4 Late Payments and Over–Indebtedness of Clients

6.5 Default Prevention and Restructuring

6.6 Occupation: Loan Officer

6.7 Preliminary Conclusions

Chapter 7: Loan Pricing

7.1 Interest Rate Components

7.2 Setting Sustainable Interest Rates

7.3 Regional Differences

7.4 Loan Recipients Willingness to Repay

7.5 Preliminary Conclusions

Chapter 8: Social Performance Management

8.1 Social Performance

8.2 Measuring Social Performance

8.3 Measuring the Outcome of Microfinance

8.4 Social Rating Agencies

8.5 Technical Assistance

8.6 Linking Social Performance with Profitability

8.7 Preliminary Conclusions

Chapter 9: Beyond the Reach of Microfinance?

9.1 Prejudices and Reservations

9.2 Preliminary Conclusions

Chapter 10: Investing in Microfinance

10.1 Market Development

10.2 Microfinance Investment Vehicles

10.3 The Investment Process

10.4 Loan Agreements and Pricing Policy

10.5 Microfinance in the Overall Investment Portfolio

10.6 Incentives for Investing in Microfinance

10.7 Preliminary Conclusions

Chapter 11: Real and Financial Economy

11.1 Microfinance Is Crisis–Proof

11.2 Real Economy and Local Influencing Factors

11.3 Financial Economy

11.4 Stability Mechanisms

11.5 Preliminary Conclusions

Chapter 12: Discussion of Results and Conclusions

12.1 Win–win–win

12.2 Onwards and Upwards

Appendix A

Example of a Loan Application

Due Diligence of Socio–Economic Impact Factors

Notes

List of Abbreviations

Glossary

References

Photo Credits

Index

PETER A. FANCONI is the Chairman and former CEO of Swiss–based BlueOrchard Finance, one of the leading asset man– agement companies in impact investing. Peter demonstrated his entrepreneurial and social competences in various positions, including CEO of the Vontobel Private Bank, CEO of Harcourt Alternative Investments and managing partner at PwC. He also serves as Chairman of Swiss bank Graubündner Kantonalbank (GKB) and as board member of academic and charitable institutions worldwide. Peter is a renowned lecturer and published writer in the field of finance and impact investing.

PATRICK SCHEURLE is the CEO of Blue–Orchard Finance. Prior, he acted as COO and CFO at BlueOrchard. His broad experience in finance includes senior positions at Bank Vontobel and Credit Suisse. He further served with a leading management consultancy focusing on governance and value creation. Patrick holds a PhD in finance from the University of St. Gallen, Switzerland, where he also held an assistant professorship. He is the author of several well–known finance books and regularly publishes on developments and research in impact investing.