The problem is most severe in Africa, where fewer than one in five people have a bank account. Triodos Fair Share Fund aims to play a catalysing role in the development of the microfinance market into a fully-fledged, integral part of the financial sector in developing countries. We speak to fund manager Jacco Minnaar about the fund’s work, and how it’s expanding in Africa.
Can you tell us a little about the Fair Share Fund?
“The Triodos Fair Share Fund (TFSF) is an open-ended fund for Dutch private investors. It started in 2002 and has since, grown consistently. The focus of the fund is to provide equity and debt to established microfinance institutions and banks. At this point, the fund exceeds EUR 250 million assets under management and has more than 16,000 investors.”
How does microfinance compare to charity?
“Microfinance is not charity. It is about giving people at the lower end of society access to financial services (savings, loans, payments, insurance) that help them manage their lives and businesses. The objective is to have impact by giving them the tools and resources to better manage their lives and/or business and therefore, their quality of life, and also by gaining a balanced financial return. TFSF’s long-term return has been above 6% in EUR.”
“Overall, microfinance provides important tools for people to manage their lives. It provides people with useful services that give them more control over their lives, including the option to save, transfer money, start or grow a business.”
Jacco Minnaar, Fund Manager, Triodos Fair Share Fund
How are you expanding investment in Africa and why is it important?
“Countries in Africa have the lowest financial intermediation on earth, generally less than 20% of the people have a bank account. Recently we’ve added two new microfinance institutions to our emerging markets portfolio: Enda in Tunisia and EFC in Uganda. Both Enda and EFC Uganda fit perfectly as extensions in our growing portfolio in Africa as they aim to work with the underserved population.
“Enda is our first investment in Tunisia; its objective has been to bring microfinance to the forefront in Tunisia and improve the quality of life for the rural population, specifically targeting vulnerable entrepreneurs. It has become the leading microfinance institution in the Tunisia and Arab region, serving over 248,000 clients – 41% are rural clients and 67% are female. A loan provided by Triodos Microfinance Fund and Triodos Fair Share Fund will enable Enda to further grow its portfolio and expand its outreach in Tunisia.
“EFC focuses on improving the living conditions and contributing to wealth creation through access to financial services. It is dedicated to assisting the underserved market by providing specialised lending services exclusive to micro and small businesses. This approach has a lot of potential in Uganda, as the small business sector is largely underserved. While still young, EFC Uganda has reached more than 590 loan clients, with over 40% being female. A loan from the Hivos-Triodos Fund and Triodos Sustainable Finance Foundation will support the expansion of EFC Uganda in the upcoming years.”
What role does Triodos play in the microfinance institutions it invests in?
“We provide loan finance to enable microfinance institutions to expand their lending portfolios. The loans we provide also help expand the range of services they offer. Triodos does best is help guide the financial institution to diversify its product range, so that customers have access to savings and insurances and deposit products. These products help build a relationship with the client and a level of commitment. Savings, specifically, helps people sustain spending.
“In selected cases, we make equity investments in the institution, in which case we become an active shareholder with a minority share and take a position in the board of directors. This way we can help to share our knowledge and experience with the institution.”
What’s the real impact of these investments?
“There are many examples of people that have set up successful businesses or employed others in their villages or where they can now send their children to school. While there’s a perception that microfinance is reserved for entrepreneurs, almost anyone can benefit and people can take micro loans out to pay off another loan or to pay for household expenditures.
“Overall, microfinance provides important tools for people to manage their lives. It provides people with useful services that give them more control over their lives, including the option to save, transfer money, start or grow a business. Microfinance has a positive impact but at the same time, microfinance by itself cannot lift all poor people out of poverty.”
What are your ambitions for the Fund in the future?
“As it stands, 2.5 billion people globally do not have access to finance. The fund intends to grow and serve more microfinance institutions and banks and in turn, they can address the needs of underserved clients in developing countries.”
Jacco Minnaar has almost 15 years’ experience working within the financial sector in the Netherlands, Asia, Africa and Latin America. Before joining Triodos Bank in October 2006, Jacco worked as manager of the Financial Markets Development Program of International Finance Corporation (IFC) in the Mekong region. Since January 2009, Jacco has been Fund Manager for Triodos Fair Share Fund. Jacco also is Regional Manager for Latin America and Africa. He served on the Board of Directors of Reliance Financial Services (The Gambia) until June 2010 and is still active as a board member for Centenary Bank (Uganda) and iFinance in DR Congo. Jacco is passionate about fighting inequality and gets inspiration from the entrepreneurship and energy he encounters when travelling to and working in emerging markets.
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