BlueOrchard

Microfinance Fund
Annual Impact Report 2022
Contents
Executive Summary 2

About BlueOrchard 4

The BlueOrchard Microfinance Fund:

Impact Strategy 8

Impact Performance Indicators 18

Portfolio Breakdown 20

Thematic Spotlight: Growth of Financial Inclusion and Its Institutions 27

Lessons Learned: Resilience of Our Portfolio 38

End Client Stories

Grace Lucia Rashida Carlos

Animal Farmer, Tanzania Artisan, Peru Tailor, India Mango Farmer,Peru

Page 9 Page 10 Page 24 Page 25

Financial Institution Case Studies

Page 30 Page 31 Page 32 Page 34 Page 35 Page 36

 Executive Summary Impact Theme: Financial Inclusion

The BlueOrchard Microfinance Fund Impact Report Regional Exposure Impact Dashboard (as of 31 December 2022)
2022 (the “Report”) takes a deep dive into the
impact achievements of the BlueOrchard Micro­
finance Fund (also referred to as the “Fund” or
“BOMF”) over the past year. This Report is to be read
in conjunction with BlueOrchard’s Impact Report

100%
17.8% South America
and with BlueOrchard’s extensive impact measure­
ment and management activities as described by
numerous publications of the BlueOrchard Academy. 55 countries invested in investments in
Emerging Markets

The key components of the Report are: i) an

introduction to BlueOrchard, ii) a presentation of
the Fund’s impact strategy, iii) an overview
16.4% East Asia & the Pacific
165 institutions financed
48%
BlueOrchard loans
on BlueOrchard’s methodology for measuring
and managing impact, and iv) the impact of the provided in local currency1
portfolio as of December 2022.

The objective of this Report is to highlight what the

Fund has achieved in terms of impact to date as well
13.9% South Asia
as lessons learned, and how it has contributed to the
development of financial inclusion as a sector over
20+ year in 80+ emerging and frontier markets.

126.2m jobs created by

FIs in the portfolio2
82%
female
The achievements of the Fund over the years are
13.5% Central America & end-beneficiaries
made tangible by its impact footprint, which offers
the Caribbean
concrete examples of how the Fund’s portfolio

53%
financial institutions (the “FI(s)”) have addressed
financial inclusion needs in their own respective
markets. Case studies from FI end-clients, namely 25.8m MSMEs3 supported
by FIs in the portfolio rural
end-beneficiaries
the entrepreneurs and businesses that receive FI
12.9% Caucasus
funding, illustrate this point and provide ground level
evidence of the Fund’s impact. Finally, because we
view it as our obligation to learn and apply those
lessons, the Report concludes with an overview of
8.2% Central Asia
what we have seen and taken away from our experi­
ence originating, managing, and monitoring a FI

USD 13.8k
portfolio over more than 20 years.
5.6% Sub-Saharan Africa
average loan size to MSMEs4
4.9% Eastern Europe

3.5% Global 167.5k Medium 31.4k Small 3.2k Micro

2.6% Western Europe
0.7% Middle East & North Africa

Please note while some financial institutions we invest in might have their headquarters in developed 1 Local currencies are hedged on fund level to reduce risk. 3 Micro, Small, and Medium Enterprises.
countries, the deployment of the loan takes place in emerging markets only, in line with our impact strategy. 2 Details on the methodology can be found on p. 19. 4 Details on the classification can be found on p. 19.
2 3
 About BlueOrchard
BlueOrchard (or “the Firm”) is a leading global impact with a positive financial return. BlueOrchard ble energy, affordable housing, and sustainable experts and an outstanding knowledge of our asset
impact investment manager and member of the has invested in more than 105 emerging and frontier infrastructure. Through the impact generated in classes. Our diverse and global team includes
Schroders Group. As a pioneer in the growing field markets through a network of over 490 financial these 8 thematic areas, we currently contribute professionals from different cultures, nationalities,
of impact investing, the Firm has a track record of institutions, 11 companies in the climate insurance to 15 out of the 17 SDGs⁵ across all three ESG⁶ and backgrounds, spread across seven offices
over 20 years across a range of strategies, a global sector, and 2 sustainable infrastructure projects. dimensions. on four continents. Everyone on the BlueOrchard
reach of 282 million beneficiaries, and manages the BlueOrchard’s impact investing work aims to BlueOrchard has proven itself time and time again team, whether in Switzerland, Georgia, Kenya,
largest commercial microfinance fund in the world generate positive impact in the following areas: as an investment platform for those seeking real Luxembourg, Peru, or Singapore is bound by a
(the BlueOrchard Microfinance Fund). As an impact inclusive finance, gender equality, education finance, impact, and we have done so over more than two shared commitment to the real difference impact
fund manager, we combine social and environmental climate insurance, energy efficiency, renewa­ decades by leveraging teams of locally based investing can make.

7 4 145+ 52% 35 35+ 105+ 490+ USD 10bn 282m

offices continents employees female nationalities languages countries invested in* institutions invested people reached
since inception

Contribution to 15 out of the 17 SDGs

L u xe m b o u r g

Switzerland
Georgia
Countries
invested in* as
of 30 December
2022 since
inception

Ke ny a Singapore

Peru
Local offices

Our Impact
Track Record
(selection)

2007 2009 2014 2018 2019 2020 2021

LuxFLAG Microfinance BlueOrchard BlueOrchard BlueOrchard BlueOrchard’s women BlueOrchard actively contributes to the conceptualisation BlueOrchard BlueOrchard BlueOrchard
Label awarded to BOMF for launches first becomes supports the empowerment strategy qualifies of the Operating Principles for Impact Management, is one contributes to the launches the becomes member
the first time. BlueOrchard Social Performance signatory to the creation of the for the 2X Challenge. In 2022, of the first signatories, becomes member of its advisory conceptualisation B.Impact™ of the G7 Impact
receives it again for BOMF Impact Reporting UN Principles SPI4 Alinus tool BlueOrchard joins 2XCollaborative, board in 2020, and verifies BOMF and its public assets and launch of GIIN’s Framework. Taskforce, established
and other funds in subse­ and Intelligence of Responsible for Microfinance a group of the world’s leading practice in alignment with them by Tideline/Bluemark in IRIS+ Impact Core under the UK’s G7
quent years. Tool (SPIRIT). Investments. Institutions. gender impact investors. 2020 and 2021. metrics system. 2021 presidency.

5 Sustainable Development Goals *The last loan in Russia matured in May 2016. Since then, BlueOrchard has strictly All figures are as of December 2022
6 Environmental, Social, and Governance avoided exposure in Russia on account to country risks.

4 5
 Impact Integration Across the development of our impact practice, processes,
Investment Process and tools. BlueOrchard also maintains a team of
technical assistance experts who support our
Impact management is at the heart of BlueOrchard’s portfolio companies with the implementation of a
investment process. The Firm has an investment wide range of value creation projects designed to
team of 68 impact investing specialists. In addition, enhance the impact that our investees can achieve
a dedicated team of 10 professionals focuses on the thanks to our contribution as an investor and
technical assistance partner.

Impact & Technical Assistance Teams

10 professionals
assistance team
in technical

3 assistance team
professionals in technical Investment Sourcing
Impact theme driving the
selection and filtering
the investment universe
opportunities Due Diligence
Conduct separate and
Investment Strategy independent impact & ESG
Define impact theme as part 2 assessments as part of the
overall DD process
of the investment strategy
(Theory of Change) Pre-condition to disbursement

1 Investment team 3

Investment team & Investment team, Risk team &

Investment solutions Operations team

Impact team
collaborating
with

Investor relations team & Investment team &

Communications team Technical assistance team

5 4
Reporting
Report on impact and
Monitoring
and Engagement The BlueOrchard
ESG data to investors,
regulators, and the
general public
Monitor annual and quarterly
impact and ESG data reporting Microfinance Fund
(BOMF)
Engage accordingly through or
with investment team
Involve technical assistance for
certain strategies for deeper
All figures are as of December 2022 engagement

6
 Grace
The BlueOrchard Microfinance Fund (contributes
to economic and social development and improves Fostering
access to financial services to vulnerable communi­ Gender Equality
ties with a strong focus on micro, small, and medium Animal Farmer,
Tanzania
enterprises (MSMEs) in emerging and frontier The vast majority of those unbanked are
markets. Established in 1998, the Fund is a pioneer women (about 800 billion),9 and financial
with a track record of over 20 years in financial inclusion plays a powerful role in further­ Grace Kissiri is a mother of five
inclusion. As of 31 December 2022, the Fund has ing their economic empowerment. Gender and a very proud and independent
supported over 1 million MSMEs and is an Article 9 considerations are still relevant, especially woman, who has built her wealth from
Fund under SFDR7. after Covid-19 having had a dispropor­ scratch by combining hard work and
tionate effect on women. The majority of endurance with considerable patience.
people living in extreme poverty are still What began with just a few cows has

Impact Strategy women and girls, amounting to a staggering

435 million, and crises, ranging from those
gone from strength to strength, and
she has now expanded operations
like Covid-19 to climate change, affect to also include fish, pigs, beans, and
BOMF provides senior and subordinated debt to women more due to their structural vulner­ maize.
microfinance and other financial institutions in ability.10
emerging and frontier markets. These in turn cater
to the needs of low-income group MSMEs who Microfinance has played a key role in
have difficulty accessing funding. The capital allows providing women and their households
individuals and MSMEs to finance their businesses access to financial services in emerging
←
in sectors such as agriculture, trade, and service, as markets. A large share of microfinance Trust and Support
well as paying for school fees and health expendi­ portfolios consists of women, which is also Thanks to eight loan cycles over the past 20
ture. By generating such outputs and outcomes, the reflected in the Fund – 82 % of end borrow­ years, Grace has been able to grow her busi­
ness significantly and build her own house.
Fund aims to contribute to reducing inequality in ers reached through BOMF are women.
Today, she says that having a financial partner
emerging markets. To achieve more inclusion of women in by her side who trusted and supported her
microfinance, a traditional gender-neutral made a big difference, allowing her to access
approach is often not sufficient: women credit and expand her business faster than
Including the Excluded entrepreneurs are more likely to be rejected
she would have been able to on her own.

for a loan; the amount of the loan is usually

Financial inclusion is a critical lever for economic lower, and terms are less favourable; and
and social development. It increases resilience collateral requirements are more stringent
against economic shocks and negative externali­ than for men. BOMF supports several
ties,8 especially for the poorer and more vulnerable financial institutions that primarily focus on
populations. It supports the growth of MSMEs and women clients and empowers more than 22
creates additional jobs. While there has been much million women, as demonstrated by client
progress in financial inclusion with average bank stories.
account ownership rising from 51 % in 2011 to
76 % in 2021, there are still 1.4 billion adults without For further details please read:
a bank account, and MSMEs still face significant Why tackling gender inequality is key to
barriers to adequate financial services. delivering real financial inclusion
→
For further details please read: Positive Impact on Generations
• Impact Private Equity – Fostering Financial Grace has managed to provide stability and
prosperity for her family and an education for
Inclusion in Emerging Markets
her children. Her eldest daughter is attending
• Why investors should care about financial university and plans to take over her mother’s
inclusion business.

7 Sustainable Finance Disclosure Regulation. We note that at time 8 Moore, Niazi, Rouse, & Kramer (2019)9 World Bank Global
of this publication, the updated Level 2 disclosure is awaiting Findex (2021)
approval with the Commission de Surveillance du Secteur 10 UNDAll figures are as of December 2022
8 Financier (CSSF) 9
 Lucia
Artisan, UN Sustainable
Peru
Development Goals (SDGs)
Addressed
Lucia Andrea Vega Prado learned the
art of straw weaving at a young age
and has now set up a small workshop
in her home where she makes purses,
cups, and cup holders from palm,
junco, and toquilla straw. The straw
has a natural colour. Therefore, she Through providing loans to Through providing loans to
dyes it according to her customers’ microfinance and other financial microfinance and other financial
wishes with natural substances such as institutions targeting low-income institutions targeting low-income
firewood and alum. groups and MSMEs, the Fund groups or immigrants, the Fund
allows them to participate in allows them to have access to
productive activities and move out financial services and participate
of poverty. in productive activities, leading to
empowerment and inclusion.

Through providing loans to

microfinance and other financial Through providing loans in
institutions targeting women, the emerging markets, the Fund
↑ Fund allows them to have access mobilizes private capital and
Traditions Passed Down through to financial services and participate promotes the investment viability
Generations
in productive activities, leading to of the respective regions to
The art of straw weaving has passed
from generation to generation within
empowerment and inclusion. strengthen the global partnership
Lucia’s family. From a very young age, to achieve the SDGs.
she watched her mother work with the
toquilla straw. Today, she is teaching the
craft to her own children.

→ Through providing loans to

An Ambitious Businesswoman microfinance and other financial
Lucia’s plan is to create her own asso­
ciation where she can lead a group of
institutions targeting SMEs11, the
artisans. She also wants to set up a stand Fund fosters employment and
with showcases in Catacaos, her home­ economic growth through SMEs.
town and one of the most important
tourist regions in northern Peru, where
she can display all the handcrafts she
makes.

11 Small and Medium Enterprises

10 11
 Impact Risk12

The main impact risks associated with financial inclusion debt are:

1) External risk: As we invest in emerging and frontier markets, we face risks posed by
the macro environment (e.g., political risk, country risk) that can disrupt our investees’
ability to deliver the originally intended impact. On a fund level, we mitigate this risk
through diversification across various regions and conduct rigorous assessments on
macro risk based on regulatory insights and market intelligence. BlueOrchard’s country
risk report and the political risk summary of a country is compiled by local staff with
direct access to market intelligence and the risk management team.

2) Execution risk: There is always a risk that FIs we invest in do not deliver on the
intended activities and outcomes level. We mitigate this risk through extensive on-site
due diligence where the impact objectives are discussed in detail and checked for
feasibility. Our local presence with seven offices across four continents ensures we are
close to our investees, local regulators and policy makers, and have a deep understand­
ing of them that minimises the execution risk.

3) Alignment risk: In case the impact is not locked into the business model of an institu­
tion, there is a risk of a misalignment or mission drift. For instance, a FI could diverge
from its original mission and address a different target sector that is not aligned with the
principles of the Fund. To address this risk, we only select FIs where impact is core to
their mission and target group, but also regularly monitor their data through our propri­
etary system, which will flag any deviations. In addition, the Fund also requires a use of
proceeds clause to establish the objective of a Fund investment in each legal agreement.

4) Unexpected impact risk: It is important to acknowledge that despite good intentions,

there is a risk that unexpected negative impact is experienced by our end beneficiaries.
To prevent any unexpected negative consequences, we conduct a thorough ESG due
diligence with a Do No Significant Harm (DNSH) principle. In cases we see gaps, we
engage with our investees and collaborate with other impact-driven investors such as
development finance institutions (DFIs).
BlueOrchard performs rigorous ESG assessments on their investees, particularly
focusing on the “S”. We ensure that FIs have appropriate lending and underwriting
practices, policies, and procedures that include fair treatment of customers, repayment
capacity analyses, and responsible collection practices. The assessment includes criteria
such as debt service coverage ratio, loan term (interest rate levels, fixed or floating rates,
repayment period), value of collateral, among others.
The development of the formal microfinance sector has contributed to greater consumer
protection, including protection against over-indebtedness and transparency through
the establishment of credit bureaus and associations of microfinance institutions. As
the market grows and financial institutions evolve into receiving banking licenses, much
of the MSME sector falls under banking and non-banking regulation and supervision,
increasing protection to clients.

12 A full list of impact risk contains evidence risk, external risk, stakeholder Animal Farmer, Mongolia →
participation risk, drop-off risk, efficiency risk, execution risk, alignment risk,
endurance risk, and unexpected impact risk. (Impact Frontiers)
12
 Impact Methodology B.Impact™ follows the Operating Principles for
Impact Management (“Impact Principles”)14 that
B.Impact™ Framework
BlueOrchard has maintained a rigorous ESG and were officially released in April 2019 after extensive
impact management practice and this has been consultations with asset owners and asset managers,
upgraded over time to reflect on our lessons learned including BlueOrchard. The Impact Principles are a
and investment experience of the past 20+ years. best-in class investment framework that has been
We have committed significant resources to designed to embed ESG and impact across all stages
developing proprietary ESG and impact manage­ of the investment process.
ment tools as well as tracking the Fund’s ESG &
impact footprint. This has enabled the Fund to B.Impact™ sets itself apart through its ability to
ESG Impact SDG
deliver both stable financial returns and a clear, measure and evaluate the social and environmental
demonstrable set of impact results to both our impact across different types of FIs and projects,
Assesses an investment’s Assesses the potential Provides an SDG mapping
investors and portfolio FIs. including microfinance institutions (“MFIs”), banks,
risks and practices in impact of each investment and alignment at investment
financial technology platforms, insurance technology
relation to three categories: along five dimensions: and fund level:
B.Impact™ Framework and underwriting platforms, and a range of other
In 2020, BlueOrchard launched an updated impact corporate and project-finance borrowers.
management and ESG assessment framework called What –
Environment SDG Universe
B.Impact™. B.Impact™ consists of managing and In addition, B.Impact™ and its impact measurement Investment Intent
measuring ESG risks and actual impact performance and management methodology have been peer
versus impact potential across asset classes and reviewed by an independent verifier, BlueMark. Social SDG
impact themes. It includes major enhancements in BOMF was among the first funds to participate How Much –
Material Assessment
policies and procedures, as well as at product and in the verification process for the alignment and Impact KPIs
Governance
tool levels, such as the upgraded and rebranded rigour of our impact methodology, demonstrating
SDG
SPIRIT13 into an impact and ESG assessment tool. the commitment of BlueOrchard to further advance Who –
Impact KPIs Matrix
transparency and integrity and contribute to the End Beneficiaries
development of the impact investing ecosystem.
SDG Reporting
Contribution –
Value Added

Risk –
Impact Risks

ESG assessment – Impact assessment – SDG mapping –

conducted using a dedicated conducted using a dedicated impact KPIs15 mapped
tool, the ESG Scorecard, tool, the Impact Scorecard, against the UN SDGs on an
evaluating the practices of evaluating the potential investee and fund level.
investees that could result in impact of each investment
ESG and sustainability risks. following the five dimensions
of the Impact Management
Project (IMP).

aligned with

13 Social Performance Impact Reporting and Intelligence Tool

14 The principles are: 1) define strategic impact objective(s) consistent with the investment strategy; 2) manage strategic impact on a
portfolio basis; 3) establish the manager’s contribution to the achievement of impact; 4) assess the expected impact of each investment,
based on a systematic approach; 5) assess, address, monitor, and manage potential negative impacts of each investment; 6) monitor
the progress of each investment in achieving impact against expectations and respond appropriately; 7) conduct exits considering the
effect on sustained impact; 8) review, document, and improve decisions and processes based on the achievement of impact and lessons
learned; 9) publicly disclose alignment with the Impact Principles and provide regular independent verification of the alignment. 15 Key Performance Indicator(s)
14 15
 Impact Integration into the Investment Process

Step 1 Step 2 Step 3 Step 4

Deal Due Deal Negotiation Monitoring

Sourcing Diligence & Approval & Engagement

During the deal sourcing phase, the impact objective In the due diligence phase, BlueOrchard uses the For the deal negotiation and approval, the ESG and All companies receiving funding from BlueOrchard
of the Fund serves as a key guidepost in the develop­ proprietary B.Impact™ framework to conduct an impact assessment results are discussed alongside managed and advised funds are closely and regularly
ment of an investment pipeline. In the case of BOMF, on-site assessment of the FI’s impact. The the financial and operational analysis at the Credit monitored on both the impact and ESG performance.
the objective is to expand access to financial services companies are assessed based on the ESG and and Investment Committees. The loan is disbursed Due to the specific nature of loans to financial institu­
to communities in emerging and frontier markets. Impact Scorecards. Relevant documents like HR only after the ESG and Impact Scorecards are tions, BlueOrchard uses a proprietary investment
policy, code of conduct, and E&S17 policy, self- approved by the Impact Management Team. In management system, BlueOrchard Financial Services
Through providing debt capital, the Fund aims to reported data, as well as third party data such as addition, to address ESG gaps that have been identi­ (BOFS), which has been in use since 2012 to monitor
address: SDG 1 No Poverty, SDG 5 Gender Equality, RepRisk are used in this process. fied as areas of potential improvements, BlueOrchard investments. All companies are required to regularly
SDG 8 Decent Work and Economic Growth, SDG 10 includes legally binding ESG covenants in the loan report a set of pre-defined KPIs informing BlueOr­
Reduced Inequalities, SDG 17 Partnerships for the While performing the ESG analysis, the Impact contract. Impact targets and respective indicators chard of companies’ impact and ESG progress. Any
Goals. Only FIs that comply with the ESG criteria Management Team and Investment Team also are also key components of the tracking of impact material negative or positive change in the business
of BlueOrchard are eligible for inclusion in the Fund assess any ESG gaps that, if addressed, would outputs and outcomes as agreed and negotiated with model potentially affecting the environmental, social,
portfolio. improve the company’s processes and practices, the investees. or governance factor or the impact targets of an
as well as increase the probabilities of achieving the investee can trigger a review of the initial assessment
Fund’s impact target and financial returns. During the followed by engagement action.
above process, areas of potential improvements
are identified.

Environmental efforts
One key area of engagement for BOMF nowadays
concerns the environmental footprint of the FIs.
While some are making huge efforts to measure their
Environmental risks carbon footprint, there is still work to do given the
One area of increasing importance for the Fund is complexities of measuring greenhouse gas emissions,
the assessment of environmental risks. While some especially scope 3. The Fund has started estimating
small-scale microfinance institutions have low environ­ the carbon footprint of FIs through external providers
mental risks associated with their portfolio, larger (for example using the Joint Impact Model), and we
institutions might be more exposed as a result of the are also actively engaging with the institutions on
composition of their portfolios. We therefore focus on measuring their own footprint, as this is the first step
sensitive economic sectors with higher environmental towards setting net zero targets.
risks and check if the FI’s environmental management
system can properly mitigate these risks.

17 Environmental & Social Policy

16 17
 Impact Performance SDG Alignment
Indicators
Jobs Created or Maintained
by FIs in the Portfolio 25.8m 25.2m
As of 31 Dec, 2022 17 BOMF Investment Volume (trend over the last 10 years) MSMEs supported by micro-borrowers
FIs in the portfolio supported by FIs in
the portfolio
25.2m
micro-borrowers 595.1k
USD in millions per year Number in millions per year
supported by FIs in SMEs supported by
48% 2,500
the portfolio FIs in the portfolio

BOMF loans provided USD 13.8k 126.2m

140
in local currency18 average loan size to job opportunities
2,000 120 MSMEs21 created or maintained
- Medium: 167.5k by FIs in the portfolio

55 100 - Small: 31.4k (estimation based on

1,500 - Micro: 3.2k BOF methodology)
countries invested in 80
13.7m
1,000
60 rural clients reached
by FIs in the portfolio
165 500 40
53%
institutions financed 20 rural clients reached
by FIs in the portfolio 25.8m
MSMEs supported by
FIs in the portfolio
25.8m
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 USD 2.3bn

20

22
16

19
14

18
13

15

21
17
20

20
20

20
20

20
20

20

20
20
investments in
developing countries 25.2m
MSMEs supported micro-borrowers
by FIs in the portfolio providing access to
financial services supported by FIs in

126.2m
the portfolio:
4.4m
1m by FIs in the portfolio USD 13.8k
by BOMF
MSMEs supported by FIs in the portfolio average loan sizes to
MSMEs supported MSMEs reached by
by BOMF FIs in the portfolio

Number in millions per year 21.3m 13.7m

female clients rural clients reached

439 30
Methodology
The size and classification of the
reached by FIs in
the portfolio22
by FIs in the portfolio

53%
MSMEs supported by underlying MSME clients are based
on their loan size at origination (in 82% rural clients reached
BOMF per million invested 25
USD). The following applies: female clients by FIs in the portfolio23
reached by FIs in
20 the portfolio USD 2.3bn
investments in
USD 13.8k
-Microenterprises
if loan is below USD 15k developing countries
15 providing access to
Average loan size at origination.
- Small Enterprises financial services
to MSMEs 19 10 if loan is between USD 15k
to USD 150k at origination.
5 - Medium
167.5k if loan is between USD 150k
to USD 250k at origination.
Medium
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 USD 2.3bn
For the number of jobs created, the investments in
31.4k number of MSMEs are multiplied developing countries
Small with the average number of providing access
MSMEs supported by FIs in the portfolio employees for each enterprise size to financial services
3.2k Female led MSMEs supported by FIs in the portfolio category as defined by the IFC21.

Micro Rural MSMEs supported by FIs in the portfolio

17 The data is as of 31 December, 2022 and may slightly differ 18 Local currencies are hedged on fund level to reduce risk. 20 International Finance Corporation: Small Business, 22 Based on reported data with 71% data coverage.
from the December 2022 factsheet since not all end of year 19 Details on the classification can be found on p. 19. Big Growth, 2021 23 Based on reported data with 61% data coverage.
data was up to date at the time of publishing the factsheet. 21 Details on the classification can be found above.
18 19
 Portfolio Breakdown Regional Exposure Breakdown

As of December 2022, BOMF supports 165 banks

and financial institutions, some of them having JSC Credo Bank
been in our portfolio and growing with us for over Produbanco 17.8% South America
20 years. The top five holdings are as stated to the 51% female | 37% rural
KMF
right, comprising 13 % of the total portfolio. JSC Top 5 ProCredit Holding
Credo Bank is a representative case of the kind of holdings TBC BANK
financial institutions we invest in, and a case study
can be found on page 36.

16.4% East Asia & the Pacific

ESG Assessments Breakdown Impact Assessments Breakdown 81% female | 69% rural

22% 18%
low ESG risk very high impact

78% 82%
medium ESG risk high impact 13.9% South Asia
96% female | 62% rural

In line with the investment policy and targets In addition to the ESG criteria, we only invest
of BOMF, we only invest in financial institutions in financial institutions that fall into the high or
13.5% Central America &
with low and medium ESG risk. An institution very high impact category based on the Impact the Caribbean
with a medium ESG risk would typically have low to Scorecard assessments. The evaluation is mainly 62% female | 45% rural
medium sector risk exposure in their lending port­- based on how much potential impact will be
folio as well as a good code of conduct, and social created, who is the target beneficiary, and what
policy to prevent over-indebtedness. An institution is our contribution as an investor. An investment
with low ESG risk would typically have low or close with a high impact would typically benefit a large
to no sector risk exposure in their lending portfolio, scale of people that were typically underserved, 12.9% Caucasus
51% female | 33% rural
institutionalised policies and well documented such as rural or female client groups. Investments
processes in place to manage social risks such as that fall under the very high impact category are
over-indebtedness. usually in contexts where the clients are particularly
underserved, such as in frontier markets or intersec­
8.2% Central Asia
tionality of rural and female client groups. 43% female | 62% rural
Financial Institution Tier Breakdown

5.6% Sub-Saharan Africa

76% female | 41% rural

Tier 1 Tier 2* 4.9% Eastern Europe

35% female | 43% rural
- Well managed and profitable - Promising
- Sustainable as a business model - Transforming and growing 3.5% Global
2.6% Western Europe
- Min USD 75 million in assets - Min USD 30 million in assets
0.7% Middle East & North Africa
- Min 5 years in operation - Min 3 years in operation 60% female | 58% rural

All figures are as of December 2022 *Tier 3 is defined as less than USD 30 million.

20 21
 Sector Exposure Breakdown

Other loans 8%
22%
9%
Trade
Mortgage/Housing

Viter Laban
Grocery Store Owner, Peru Consumption 14% Cesar Salirosas
Fruit and Vegetable Farmer, Peru

Tourism 1% 20% Agriculture

Construction 4%
5%
Transport

Vladimer Qarqashadze
Guest House Owner, Georgia
Production 8% 10% Services
Reni Nuraeni
Artisan, Indonesia

Productive loans Other loans

Trade Agriculture Service Production Transport Construction Tourism Other Consumption Mortgage/Housing
Small shops selling a Small to medium-sized Loans to the service Mostly loans to Asset financing for Loans to construction Small hotels or hostels, Loans to education Individual borrowers Loans for housing
variety of products, farms where the owner sector cover a range of manufacturing such the acquisition of companies support tourist guides providers, health have a wide range improvements or
typically employing 1–2 cultivates different businesses, including as tailors, handicraft, two-wheeler and part of the construction centres, or other of applications for incremental housing
persons. Products will products that are sold selling meals, account­ furniture production, or three-wheeler vehicles. project – for instance specific loans consumer loans ranging (building the house in
normally include fresh on the local market. ing services for SMEs, metal works. These are a critical floors, bathrooms, or from paying school incremental steps) are
and packed food and Producing a variety of or IT services. These aspect of transpor­ woodwork. Developers fees for children, typically small-size
small household goods. crops mitigates risk. loans are typically tation infrastructure, are generally not part health expenditure, investments that help
These farms may also working capital loans. a major source of of the portfolio. agribusiness, and microentrepreneurs
raise livestock. employment, and a asset acquisition that improve the quality of
critical enabler of enhances the quality their homes.
the digital economy. of life for households.
Another example Several of our investees
would be taxi operators undertake periodic
or small urban buses. surveys to check the
use of proceeds.

22 23
 Rashida Carlos
Tailor, Mango Farmer,
India Peru

Rashida Begam runs a tailor “The loan has been very helpful. It also meant that I was able to attend Carlos Ochoa, a 55-year-old farmer “Before, I grew rice, and now I grow mangos. Before there was
shop in India. Following in the a business finance course and get feedback and support in develop­ and father of four children, owns the more water, so we sowed rice, all of this area was filled with
footsteps of her father who was ing my business plan – it was more than just money! As a result of the Santa Rosa farm in Peru and works rice paddies. Now, we have water shortages and because of
also a tailor but passed away loan and the changes that I was able to make to my business, things in agriculture for more than 20 years. that I grow mangos instead and the entire harvest is exported to
when she was just 18 years old, are running very well, and I have not had any financial difficulties in His entire family is dedicated to Europe and Asia.”
Rashida decided to open her own amortizing the loan and paying the interest. Also, I feel much more agriculture, following the family
tailor shop in 2014. With the independent today, something I’m very proud of.” tradition. Carlos used to rent the land, “For the future, I hope to keep growing trees and maintaining
help of a microloan of USD 2,800 but when he got the opportunity to the soil quality, and perhaps buy a larger fumigation tank. We
she was able to develop her “I want to build the business up even more, and I think I will probably buy a plot of land, he used his savings get loans every year, and it helps us to work and improve the
business, hire two employees, take out another loan to allow me to do this. My dream is to be known to buy it and is today the owner of a plantation. It helps us to keep it in good condition and improve
and purchase two sewing for my great designs and keep things interesting for my clients. I also farm that employs about 40 workers the furrows and the roads.”
machines. want to continue supporting my family and hope that one day my during harvesting season.
daughter may take over the business.”

24 25
Thematic Spotlight:
Growth of Financial Inclusion
and Its Institutions

Since the early days of microfinance in 1970s, the Staying True to the Spirit of Microfinance
sector has provided access to financial services
– primarily loans – to underserved people. It has At the same time, the spirit of financial inclusion stays
demonstrated that this group is reliable in their the same. Micro enterprise loans are still the majority
repayment and servicing the poor is possible at of MSME loans provided by BOMF, comprising 57 %
commercial terms. According to the World Bank, of the total portfolio. The Fund primarily targets filling
account ownership among the poorest in low- and a gap in financing need, whether that is a need from
middle-income countries has more than doubled micro enterprises or SMEs. Several of our investees
from 30 % in 2011 to 67 % in 202125. As countries demonstrate the story of growing and developing
develop economically, the financing needs of the in line with their end clients and their needs, while
underserved also shift. Micro and informal sectors staying true to their mission of providing financial
recede, while formal SMEs become a larger share services to the underserved.
of the economy.

MSME Financing as a Key to Resilience

MSMEs play a critical role in the development and

resilience of many low-income countries by being
the largest employer and boosting job creation,
raising income, reducing vulnerability, and increasing
investments in human capital. Yet, access to capital
is challenging and a limiting factor for growth and
development for many of the MSMEs.

Growing Together with our Investees

and Their Clients

The evolution of BOMF over the last two decades

reflects this transition in the needs of end beneficiar­
ies. We have long-standing relationships with many
of the FIs in our portfolio, which have grown from
smaller microfinance institutions into banks, not only
serving more end clients but also accompanying
their clients on their growth. As demonstrated by our
stories, many end clients who set out with a small
loan to start their business are now employing several
people and continue to expand their business.

← Fisherman, Philippines 25 World Bank, 2021

27
 Financial Inclusion Across Regions in BOMF (as of 31 December 2022)

Number of Financial Institutions (FIs) Average Loan Size to MSMEs

16
USD 11.6k
Micro: 4.3k | Small: 25.4k | Medium: 183.2k

12
USD 24.2k
Micro: 4.6k | Small: 36.8k | Medium: 164k

Middle East & North Africa

Eastern Europe

3
Central Asia
10
USD 1.8k Caucasus USD 10.1k
35 Micro: 1.7k | Small: 20.1k | Medium: NA
Micro: 3.3k | Small: 27.4k | Medium: 139.9k

USD 28.7k
Micro: 4k | Small: 43.2k | Medium: 170.8k
South Asia

Central America & the Caribbean

Sub-Saharan Africa 21
USD 10k East Asia & the Pacific

Micro: 2.6k | Small: 29.3k | Medium: 200.6k

23
South America

USD 2.4k
Micro: 1.5k | Small: 22.8k | Medium: 135.9k
14
USD 1.8k
Micro: 1.2k | Small: 30.6k | Medium: 169.4k

29
USD 10.2k
Micro: 3.5k | Small: 27.2k | Medium: 155.9k

28 29
 Ecuador
USD 942m Central America
& the Caribbean
USD 411m
Total Assets Total Assets

South America Tier 1 Guatemala Tier 1

1.5k Employees 3.1k Employees

562 Loan Officers 1.7k Loan Officers

53 Branches 154 Branches

Banco Solidario is a leading player in microfinance in 37 % in 2011 to 64 % in 202125, and there has been Founded in 1988, Fundación Génesis Empresarial stays true to its mission of serving mostly rural and
Ecuador, offering microcredit and consumer/credit an increasing need for financing SMEs. The average is a microfinance entity specialized in promoting female clients, enabled by technology.
card loans to low-income populations. The bank loan size of the bank grew from USD 1,948 to the development of all communities in Guatemala.
was founded in 1994, when microfinance was still USD 2,698. Génesis provides micro and SME loans, together The institution makes extensive use of data mining
unique, and was the first micro lending institution in with financial education and business training to to drive its growth strategy and decisions. It collects
Latin America that did not begin as an NGO. Nevertheless, the bank still stays true to its mission: clients and non-client beneficiaries. Specifically, social and economic data from clients, which help
54 % of its loans still go to micro enterprises, and 78 % of the foundation’s loan portfolio is dedicated identifying and monitoring clients’ current and
Over the following 20+ years, Solidario grew from a half of its clients reported monthly household to productive loans under USD 2,000, serving potential needs for services and funding and take
bank requiring a loan below USD 1 million to a bank income between USD 385 and 1,000. Further, mainly female entrepreneurs (72 % as of December proactive measures. For example, Génesis collab­
in need for a USD 10 million loan in 2022, reflecting Solidario introduced a mobile app (SoliAmbiental) 2022) located in rural areas. In 2021, the founda­ orates with local SMEs in the construction sector,
the growth and change of needs of the country. that loan officers use to perform social and environ­ tion was awarded with the financial inclusion Smart from which Génesis’ clients can acquire materials
Account ownership in Ecuador has risen from mental evaluations of microcredit clients. Campaign Certification, an initiative that aims at they need for home improvements or renovations,
creating an environment in which financial services and then link the purchases to loans that have been
are delivered safely and responsibly to low-income pre-qualified. Also, the institution uses smartphones
clients. during client visits to simplify and speed up the
310.3k USD 2.7k 54% 50% collection of data, and it implements mobile wallets
Active Borrowers Average Loan Size Female Clients of MSME Lending
Génesis Empresarial grew over the years from an and self-service ATMs to increase its outreach in rural
institution serving 130k clients in 2010 to one with areas to serve its clients better across the country.
over 322k clients as of December 2022. Génesis

322.4k USD 867 72% 80% 70%

Active Borrowers Average Loan Size Female Clients Rural Clients of MSME Lending

25 World Bank, 2021

30 31
 South Asia USD 277m
Total Assets

Tier 1
India
1.6k Employees

456 Loan Officers

125 Branches

Kinara Capital is a non-banking financial institution in 2022, and the fintech has expanded its product
established in 2011. The fintech focuses on driving offerings to include short-term working capital and
financial inclusion of an underserved segment: the bill discounting loans. Its responsiveness to client
small business entrepreneurs operating in the formal need was also reflected in the institution’s consid­
micro-small-medium-enterprise (MSME) sector in erable resilience in managing the recent Covid-19
India. Kinara offers fast and flexible, collateral-free pandemic. Kinara furthered its blended-tech
productive loans which are primarily used for asset operating model with a new client-facing multilin­
purchase and working capital requirements. gual myKinara App to overcome the challenges
posed by the lockdown and movement restrictions.
Like other regions, India has seen a sharp increase
in the number of people gaining access to finance. The institution maintains a strong social mission
Account ownership in the country has grown from as micro-borrowers still constitute 70 % of its loan
35 % in 2011 to 80 % in 2022. One of the contributors portfolio. The social impact of Kinara’s work has
to India’s growing economy is the MSME sector, led to over USD 100 million in incremental income
which contributes to 30 % of India’s GDP and generation for the small business entrepreneurs and
nearly 50 % of country’s exports. The MSME sector to over 250k jobs supported in the local economies
provides employment to over 120 million in India across 100+ cities in India. Embarking on a new
and is regarded as the backbone of the economy. decade of growth, and led by a women-majority
leadership, Kinara Capital is a fintech institution
Reflecting the changing needs, Kinara Capital’s dedicated to serving the ‘missing middle’ credit
offerings have developed in line. The average loan gap of MSMEs which are largely overlooked by the
size grew from USD 4,923 in 2017 to USD 6,917 formal lending institutions in India.

30k USD 6.9k 100%

Active Borrowers Average Loan Size of MSME Lending

27 Ministry of State for Micro Small and Medium Enterprises, 2022 Female group loan, India →

32
 East Asia & the Pacific
USD 400m Sub-Saharan Africa USD 1.1bn
Total Assets Total Assets
Kenya
Indonesia
Tier 1 Tier 1

6.6k Employees 1.7k Employees

4.9k Loan Officers 93 Branches

805 Branches

MBK Ventura is a microfinance institution which ers across Indonesia and is focused on expanding Family Bank, founded in 1984 with a strong strategy to grow its balance sheet and eventually
launched its operations in 2003. Its name “Mitra the outreach to newer geographies within Indonesia social mission of serving tea farmers excluded become a Tier 1 bank in Kenya.
Bisnis Keluarga” is Indonesian for “Family Business during 2023. from the banking system, grew from one branch
Partners”. The institution focuses on low-income to 93 branches countrywide in Kenya today. The As of December 2022, loans to MSMEs amounted
women primarily in rural and semi-urban areas, and While the country’s economy has been growing, bank became a fully-fledge commercial bank in to 30 % of the gross loan portfolio with an average
by the end of December 2022, MBK Ventura had need for microfinance initiatives in the country May 2007, and started growing fast after having loan size of USD 5,558. In 2021 the bank earned
reached over 1.47 million clients, of which 100 % are remains high. 52 % of Indonesians are still excluded achieved the one-billion-shilling mark for the an award as “Best Tier II Bank in Digital Experience
female and 68 % live in rural areas. from the financial system,26 which is reflected in first time in 2013. & Customer Responsiveness” and in 2019 won
MBK Ventura’s main products being microfinance “Best SME Bank in Kenya”. Furthermore, the bank
MBK’s gross loan portfolio has grown from USD loans of approximately USD 100–300. At the Family Bank continues to maintain a focus on provides loans to education institutions, reaching
208 million to USD 325 million between Jan/21 same time, the institution actively tries to design MSMEs, primarily in agriculture, education, a total of 695 institutions from pre-primary and
and Jan/23, during which time, the institution has other products to meet its clients’ needs such transport, and trade, enabling businesses that are primary institutions to tertiary colleges and
onboarded about 321k new clients. Despite its as emergency loans offered at zero interest rate, essential to livelihoods. The loan from BlueOrchard universities.
growth, the institution remains primarily focused on water and sanitation, and improvements of business supports the implementation of its 2020–2024
providing working capital loans to women borrow­ premises.

124.9k USD 5.6k 30%

1.5m USD 209 100% 68% 100% Active Borrowers Average Loan Size of MSME Lending
Active Borrowers Average Loan Size Female Clients Rural Clients of MSME Lending

26 World Bank, 2021

34 35
 USD 820m
Caucasus Total Assets

Georgia
Tier 1

3.5k Employees

900 Loan Officers

81 Branches

JSC Credo Bank is a Georgian bank that focuses on and a highly qualified management team. Credo
serving MSME businesses, specifically in agriculture has made all payments in full and on time, even in
or in rural areas. The bank used to be a microfinance the recent challenging environment.
institution that started as a World Vision initiative in
1997 and developed over the years into an institu­ Despite the growth of Credo, the bank remains
tion with a banking license in 2017. Credo Bank is true to its mission. MSME lending accounts for
the fifth commercial bank in Georgia. 78 % of its portfolio with an average loan size of
USD 1,283. The majority of its clients are in rural
Credo has been a long-standing investee of BOMF areas. The bank provided moratorium relief to many
since August 2007. The first loan was of USD 300k. of its clients during Covid-19, contributing to the
Today, the bank is a leader in the Georgian micro­ agricultural production and price stability of the
finance market with strong corporate governance sector and the Georgian economy.

361.3k USD 1.3k 53% 62% 78%

Active Borrowers Average Loan Size Female Clients Rural Clients of MSME Lending

Dressmaker, Georgia →

36
 Lessons Learned: Important Information All investments involve risks. Past performance is
not a guide to future performance and may not be

Resilience of Our Portfolio Marketing material for professional clients only. repeated. The value of investments and the income
from them may go down as well as up and investors
Marketing material for professional clients and may not get back the amounts originally invested.
qualified investors in Switzerland only. Exchange rate changes may cause the value of
In the last few years, there have been many macro, Crises also showcased that ensuring responsible investments to fall as well as rise. Performance data
political, and geopolitical events happening that lending practices is critical. For us, this has been Please refer to the prospectus and any other legal does not take into account any commissions and
affected the global markets, with the Covid-19 crisis among our highest priorities. We have applied fund document before making any final invest- costs, if any, charged when units or shares of the
being particularly damaging. The impact of those rigorous due diligence process and investment ment decision. fund are issued and redeemed.
events was more severe in emerging and frontier analysis to ensure that all FIs have appropriate
markets, especially among those that are financially lending and underwriting practices. We have looked This document was produced by BlueOrchard Emerging markets impact investments involve a
vulnerable. at criteria such as debt burden, interest rates, Finance Ltd (“BOF”) to the best of its present unique and substantial level of risk that is critical
repayment capacity, and profit levels even closer. knowledge and belief. Information herein is to understand before engaging in any prospective
Many of our investees have been impacted by Processes such as collection practices and monitor­ believed to be reliable, but BOF does not warrant its relationship with BOF and its various managed
short-term liquidity constraints, especially in ing portfolios on branch level have been scrutinised, completeness or accuracy. BOF has expressed its funds. Investments in emerging markets, particu­
countries where strict lockdowns were imposed. to especially prevent burdening clients during own views and opinions in this document, and these larly those involving foreign currencies, may present
MSMEs could not operate their businesses normally challenging times. may change. They do not necessarily reflect the significant additional risk and in all cases the risks
and sometimes failed to process payments to their opinion of Schroders Group. implicated in this disclaimer include the risk of loss
lenders. In many of the countries we are invested in, While the recent macro environment has been of invested capital. To understand specific risks of
the local government was not in a position to offer challenging for all, the overall volatility has remained BOF is part of Schroders Capital, the private an investment, please refer to the currently valid
significant support to the MSMEs at that time, nor stable in the Fund with sovereign defaults having markets investment division of Schroders Group. legal investment documentation.
the financial institutions. only limited impact on our portfolio. Our investees
and our portfolio alike have shown resilience, and BOF may decide to cease the distribution of any This document may contain “forward-looking”
Many of the financial institutions, especially the this resilience allows us to be optimistic that our fund(s) in any EEA country at any time but we will information, such as forecasts or projections. Please
larger ones, took initiative to support their clients investees will continue to weather more storms publish our intention to do so on our website, in line note that any such information is not a guarantee of
and extended payment deferrals to them. This while staying true to their mission of supporting with applicable regulatory requirements. any future performance and there is no assurance
helped many clients overcome the crisis, and today micro, small, and medium sized businesses that that any forecast or projection will be realised.
the vast majority of the MSMEs have gone back form the backbone of emerging and frontier market This information is a marketing communication Scenarios presented are an estimate of future
to normal payment schedules. In some jurisdic­ economies. and is not to be seen as investment research. As performance based on evidence from the past
tions, the governments also came to support, and such it is not prepared pursuant legal requirements on how the value of this investment varies, and/
deferrals have been supported through measures Every challenging market and political situation we established for the promotion of independent or current market conditions and are not an exact
such as relaxation of loan loss provisions. have dealt with over the past 20 years has given investment research nor subject to any prohibition indicator. BOF does not in any way ascertain that
us a unique opportunity to focus our financing and on dealing ahead of the distribution of investment the statements concerning future developments
Even when the local government could not provide advisory services towards who needs this most research. will be correct. Unless this fund contains a capital
aid, our investees have shown resilience in the and who can contribute to positive change by guarantee, what you will get will vary depending on
face of crisis. Many of them have been working reducing inequalities. The job is far from done and The information in this document is the sole how the market performs and how long you keep
in high-inflation and volatile macro- and political our commitment stands by those entrepreneurs that property of BOF unless otherwise noted and may the investment/product. Performance is subject to
environments, and as a result developed strategies can have their life improved by accessing financial not be reproduced in full or in part without the your individual taxation circumstances which may
to manage business and financial risks through­ products and services and hence contribute to express prior written consent of BOF. change in the future.
out such events. For instance, BOMF investees the socio-economic development in their own
in Ecuador continued to serve their clientele and countries. Any reference to sectors/countries/stocks/securi­ This document does not constitute an offer to
payments to investors, while the government was ties are for illustrative purposes only and not a anyone, or a solicitation by anyone, to subscribe
defaulting on its debt. Even during the heights of the recommendation to buy or sell any financial instru­ for shares of a fund managed or advised by BOF.
sovereign debt crisis, none of our Ecuador investees ment/securities or adopt any investment strategy. Nothing in this document should be construed as
has had any covenant defaults. advice and is therefore not a recommendation to
buy or sell shares. An investment in a fund entails

38 39
 risks, which are fully described in the fund’s legal upon request at BlueOrchard Asset Manage­ notice of the outsourcing and the data protection Copyright © 2023, BlueOrchard Finance Ltd. All
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40 41
 www.blueorchard.com BlueOrchard Finance Ltd

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