Tuesday, June 6, 2006
Dubai: European bank Credit Suisse says a micro-finance fund set up three years ago to lend to poor people in developing countries has been a star performer with a near-100 per cent payback record.
Burkhard Varnholt, head of financial products and investment advisory at Credit Suisse, told Gulf News the $50 million fund which re-finances mirco-finance organisations in countries like Cambodia, Afghanistan and Mozambique has the best risk-return profile among some 150 money market funds it tracks globally.
Money market funds invest in debt instruments that have a maturity of less than a year.
Varnholt said Credit Suisse has been pushing the “responsAbility Global Microfinance Fund, which helps provide short-term loans of an average size of $500 to mainly family-owned businesses in some of the world’s most impoverished nations, as a fixed income alternative.
“Most investors, when they think about bonds, think about lending their money to AAA states or companies,” Varnholt said.
“But would you ever consider giving your money to the poorest instead of the wealthiest, people who have no bankable securities to offer, nothing to give you but their word of honour that they will pay you back?” Yet, quite intriguingly, the payback rate of these micro-loans is 98.5 per cent and the credit-worthiness of this portfolio is actually superior to Credit Suisse’s own consumer finance loan portfolio, Varnholt said.