Interview with Valérie Arnold, a partner with PriceWaterhouseCooper (PWC), specialist in “impact investing” (investments with a social or environmental impact). Working from Luxembourg, she advises on responsible investment management, particularly in the field of micro-finance.
As she points out, over 35% of the assets invested in micro-finance via investment funds are from organisations in Luxembourg, a major financial centre that ranks second in the world in terms of assets managed through investment funds. “The core business of microfinance extends into social entrepreneurship projects and other projects where the primary aim is not financial profitability but social and environmental performance.”
What were Valérie Arnold’s expectations from the Convergences 2015 forum? Opportunities to meet project developers whose projects can be difficult to finance, but also investors who are involved in the current much-discussed shift towards a world that is not geared to profit alone. “In our role as advisors, we try to create links between these two different worlds, between people who have projects and ideas and people who have money and are looking to invest it in these areas.”
What is the main problem with microfinance? Briefly, says Valérie Arnold “there is a lot of money but very few organisations capable of absorbing it. In practice, investment funds provide money for microfinance companies working in emerging countries. These companies then offer micro-lending services. One line of credit from an investment fund will finance a great many micro-loans, but these demand costly management structures that many microfinance companies cannot afford. If they accept these flows of money, they take greater risks or may lose sight of the primary goal in their sector, which is to support entrepreneurship and not to extend consumer credit. The sector is becoming suffocated and microfinance companies need to restructure to be capable of absorbing new funds.”
The company and the investment funds that Valérie Arnold represents have not been affected by the microfinance crises in India, Morocco or Nicaragua, thanks to a risk spreading policy. “The portfolios are highly diversified, and our exposure in each country is low”, she explains. “Although some new investors may have felt concern, there are no more problems in microfinance than in traditional finance.”