When it comes to finance, especially international one, we are used to hearing head-spinning figures. Whether they are expressed in percentage growth rates, absolute values or volumes traded. Despite its name, speaking of microfinance – that business of financing small entrepreneurs who would find it difficult to obtain credit from traditional circuits – this perception holds true. One figure above all: the global impact investing market was valued at $2.5 trillion in 2021 and is projected to reach $6 trillion by 2031. We refer here to impact investing because microcredit, by its very nature, is a financing activity with great social impact, which contributes decisively to entrepreneurial development and financial inclusion. Impact investing is part of the broader dimension of ESG finance – Environmental, Social, and Corporate Governance – that type of financing activity that takes environmental, social, and corporate governance aspects into account. The positive impact guaranteed by microcredit concerns also, if not mainly, the gender inequality dimension. For example, at the end of 2020 the entire global microcredit market was around USD 160 billion with about 140 million end beneficiaries, of which 81% globally were women.
And how can investors contribute to this positive development without giving up the search for yield? The solution is to make microcredit a dimension in which to invest, a chance provided by companies such as Mikro Kapital, a group specialized in the use of microfinance techniques for investing in small businesses across emerging areas of the world. Taken into account from this point of view, microcredit can be of great interest to all those investors who look to impact investing to diversify their portfolios through financial instruments unrelated to the general market trend and thus potentially safe from the daily shocks. On top of that, the business model of Mikro Kapital cuts the “Middle Man”. This model allows a full overview on the flows, from investors to end-borrower, reducing risks, optimizing the returns and eliminating costs related to intermediaries. Additionally, the local presence of the MFIs, allows a constant monitor and support to the end-borrower further reducing the risk of non-repayment of the debt. As indicated, this is a fast-growing market with an important presence of institutional investors who look at SMEs as one of the most dynamic sectors of the economy.
Information and data provided by Mikro Kapital
