Impact Investing and Micro Finance – it's growing appeal to Asian HNW clients

Video transcript

1. What is Micro Finance and why is it relevant to HNW clients in Asia?

Microfinance is a quite interesting asset class. It is related to loans to non-bankable people. We are disbursing loans to people located in the geographic areas in which we work, on the Silk Road countries, from Italy tol Hong Kong. The traditional and average loan and portfolio is about EUR 20,000. The microfinance industry is very diversified because it's quite different in terms of sectors. Starting from agricultural to logistics, trading, shops, the wellbeing industry and IT. At the same time it is a sector that is very important for social responsibility because through microfinance we are able to finance start-ups, as well as entrepreneurs, that need support for growing. I believe that this is so diversified and therefore such an interesting asset class that, for sure, it is interesting for investors that would like to diversify their portfolio, but at the same time would like to be de-correlated from the traditional financial market. That's why many family offices are enjoying investing in this asset class, generating quite interesting yield and at the same time, keeping a priority on the ESG agenda.

2. What is unique about your process and strategy?

The unique aspect of Mikro Kapital in microfinance is that we take care of the full chain – from investors till the final board over. We do not finance through third party micro financial institutions. We prefer to have a full view into all loans that are disbursed. We create a loan portfolio. We do not finance a third-party loan portfolio. I believe that this is quite innovative, and that this is very important for the risk profile of the investment itself. We saw during the COVID period, for example, that this approach was allowing us to be very careful in generating this loan portfolio and in the recovery rate as well. And we were able to have a clear understanding of what was happening in the daily life of our borrowers online in time exactly when this was happening. This is allowing us to keep a very low portfolio risk over 30 days and a very high recovery rate.

3. What options do you present to clients?

Mikro Kapital is offering different approaches to invest in microfinance. The traditional offer is based on a bond that is issued by our Luxembourg vehicle that is available on Bloomberg and is easily investible through the traditional Clearstream European platform. The bond is generating quite interesting yield, around 10% on 24 months, and is guaranteed from the underline of the activity that we do this loan portfolio and is guaranteed as well by the equity buffer that is owned by the asset management company. At the same time, for investors that would like to have a more junior investment and do not like the seniority of the bond, it's possible to invest in the equity. Or for investors that would like to have a more traditional vehicle, regulated vehicle, we have on offer the possibility of investing in the SICAV traditional fund, based in Liechtenstein.

4. As the founder - why did you start this business?

I very much enjoy being able to finance micro entrepreneurs and I enjoy this mostly because of the impact that my work is creating in the society in which we are working. I believe that our efforts in investing to create new entrepreneurs and in developing non-bankable entrepreneurs are fast generating a positive effect in the economic society everywhere in the countries where we are operating. That's why I decided to continue what I was already doing with the European Bank for Reconstruction and Development, and I decided to invest all my life in this direction. I am lucky to have 3,200 employees with me today to further this activity. From the beginning in Italy, I was always involved in financing entrepreneurs in difficult geographic areas. That's why I like very much the idea of being useful in developing difficult economies and in supporting entrepreneurs that are, for sure, the first engine of development of every economy, especially in European countries. In the beginning of 2000, I was invited by the European Bank for Reconstruction and Development (EBRD) to oversee the microfinance industry in the former Soviet Union countries, which I enjoyed very much. And even when I decided to leave the EBRD, I continued on the same path on my own. I am very interested in the activity that I do and obviously, I want to involve more and more people with me to reach our target. We would very much enjoy extending our geographic areas to new areas and Asia, obviously, is very interesting for us.