Small Money Big Impact

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.

• Foreword ixPreface xiAcknowledgments xiiiAbout the Authors xvCHAPTER 1 Introduction 11.1 Fighting Poverty 21.2 Investing in Financial Infrastructure 71.3 Content Overview 8Notes 9CHAPTER 2 Microfinance – the Concept 112.1 History 122.2 Definition and Goals 152.3 Double Bottom Line 182.4 Financial Inclusion 212.5 Market Participants 242.6 Impact Investing 252.7 Preliminary Conclusions 29Notes 31CHAPTER 3 The Microfinance Value Chain 333.1 The Protagonists and Their Tasks 343.2 Regulatory Environment 363.3 Development Finance Institutions 373.4 Market Overview 393.5 Geneva: Birthplace of Modern Microfinance 423.6 Preliminary Conclusions 46Notes 47CHAPTER 4 Micro Entrepreneurs 494.1 Definition 504.2 Needs and Requirements 524.3 Micro Entrepreneurs 594.4 Preliminary Conclusions 67Notes 68CHAPTER 5 Microfinance Institutions 715.1 Definition and Goals 725.2 Types of MFIs 735.3 MFI Funding 765.4 Services 855.5 Regulation 885.6 Preliminary Conclusions 94Notes 96CHAPTER 6 Lending Methodologies 996.1 Traditional Credit Theory and Microfinance 1006.2 Lending Methodologies 1016.3 Socio-Economic Factors 1046.4 Late Payments and Over-Indebtedness of Clients 1086.5 Default Prevention and Restructuring 1106.6 Occupation: Loan Officer 1136.7 Preliminary Conclusions 114Notes 116CHAPTER 7 Loan Pricing 1197.1 Interest Rate Components 1207.2 Setting Sustainable Interest Rates 1277.3 Regional Differences 1277.4 Loan Recipients’ Willingness to Repay 1297.5 Preliminary Conclusions 130Notes 132CHAPTER 8 Social Performance Management 1338.1 Social Performance 1348.2 Measuring Social Performance 1358.3 Measuring the Outcome of Microfinance 1498.4 Social Rating Agencies 1518.5 Technical Assistance 1538.6 Linking Social Performance with Profitability 1568.7 Preliminary Conclusions 157Notes 159CHAPTER 9 Beyond the Reach of Microfinance? 1619.1 Prejudices and Reservations 1629.2 Preliminary Conclusions 171Notes 172CHAPTER 10 Investing in Microfinance 17510.1 Market Development 17610.2 Microfinance Investment Vehicles 17710.3 The Investment Process 18110.4 Loan Agreements and Pricing Policy 18710.5 Microfinance in the Overall Investment Portfolio 19110.6 Incentives for Investing in Microfinance 19510.7 Preliminary Conclusions 197Notes 199CHAPTER 11 Real and Financial Economy 20111.1 Microfinance Is Crisis-Proof 20211.2 Real Economy and Local Influencing Factors 20311.3 Financial Economy 20511.4 Stability Mechanisms 20711.5 Preliminary Conclusions 208Notes 209CHAPTER 12 Discussion of Results and Conclusions 21112.1 Win-Win-Win 21212.2 Onwards and Upwards 212Notes 215APPENDIX A Example of a Loan Application 217APPENDIX B Due Diligence of Socio-Economic Impact Factors 221List of Abbreviations 227Glossary 229References 233Photo Credits 243Index 245

Select Guide Rating