Microfinance investments independent from capital market fluctuations: LuxFlag

By Matthew Fuchs

Microfinance Focus, Dec. 16, 2009: Microfinance investment vehicles (MIVs) remain “largely de-correlated” from other capital markets, a study of by LuxFlag of MIV performance during the economic crisis has found. Despite a slowing down in the pace of investment and an increase in cash positions, these MIVs have demonstrated resilience, posting positive though relatively low returns during the global economic crisis.

Despite some low performance during the economic crisis, the consistent growth in MIV assets demonstrated increased investor interest in the sector, the report said. There were also no major redemptions during the crisis, the report found.

The Luxembourg Fund Labelling Agency (LuxFlag) awards labels to regulated, for-profit MIV funds which have invested at least 50% of their assets directly in MFIs or indirectly via other vehicles. The MIV may be domiciled in any jurisdiction that is subject to a level of national supervision equivalent to that available in European Union countries. It is also required that 25% of investee MFIs be rated by an independent agency.

LuxFlag funds include the Dexia Microcredit Fund, managed by BlueOrchard, ResponAbility Global Microfinance Fund, and the European Fund for Southeast Europe (EFSE).

The Luxembourg Fund Labelling Agency (LuxFLAG) is an independent, non-profit association created in Luxembourg in July 2006. The object of the agency is to reassure investors that the MIV actually invests, directly or indirectly, in the microfinance sector.

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