The microfinance market has become more complex in the aftermath of globally rising interest rate levels which emerged as a reaction to climbing inflation figures. Entering a new monetary cycle typically caused recessions in the industrialized world and led to distortions in Emerging Markets mainly caused by the withdrawal of capital, increased volatility in exchange rates and yields plus lower credit ratings. While all these aspects have been observed to some extent, the majority of countries have managed this difficult stage rather well. As we enter the second half of 2024, many central banks have already started to lower their rates or at least announced to do so. It is therefore fair to expect an ongoing stabilization of GDP growth on a low level.
Geopolitical risks remain relatively high and the security situation in some Latin American countries has deteriorated. The fund management is taking these dynamics into account when looking at new lending business. The diversification of the fund is still good but will probably not increase further in this environment in light of a conservative risk approach.
It is worth mentioning that for different reasons, we have lost amongst others Myanmar and Cambodia in the course of the first half year 2024 as invested countries and do not believe that the current situation does allow for a quick return here in the near future.
Please note: All data presented here, including loan volume and portfolio composition, is based on the respective annual and / or monthly reports, which are publicly available.
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