Responsible Investor

SNS Asset Management: the growing pains and gains of microfinance

Fund manager raising cash for second microfinance fund as institutional commitments grow and industry debates sharpen.

Last week’s announcement by ABP, the €250bn ($315bn) giant Dutch pension fund for public sector workers, that it had extended its commitment to microfinance investing by an extra €50m, taking it close to the €100m mark, was an indication that institutions now take the strategy seriously. Other major microfinance investors to date include US peer, TIAA-CREF, the higher education and medical workers fund. Paul Spijkers, ABP’s chief investment officer says microfinance investment has the potential to provide the fund with a combination of strong growth and attractive returns, relatively uncorrelated from equity markets, in high growth economies. However, recent statements by Muhammad Yunus, awarded the Nobel Peace Prize for his work in lending money to poor women in Bangladesh, show a sector ill at ease with its new status as asset class for the world’s investors. Yunus reportedly told reporters at the recent 11th annual Microcredit Summit Campaign conference in Bali that the new language of microfinance such as ‘return on equity’ troubled him: “If you are making profits you are moving into the same mental mind-set as loan sharks,” he said. The sector is questioning whether both profit and non-profit models can co-exist.
Theo Brouwers, director at SNS Asset Management, which in 2007 launched its first microfinance fund and is currently fundraising for a second, believes that despite the reservations, the essential point is to get institutional

capital into developing countries where there is not enough of it. Brouwers says international investors are increasingly backing microfinance and the sector grew from $4.5bn last year to over $5.5bn this year. He estimates that total borrowing could reach about $250bn.
SNS has its background in the Dutch labour movement. SNS Asset Management, a subsidiary of SNS Reaal, the Dutch bank and insurance group, was founded in 1997 following a merger between SNS Bank and De Hollandse Koopmansbank, which was a manager of union funds and has run SRI money since 1976. The fund manager now runs €19bn in assets, all incorporating a sustainable overlay and also has a separate SRI research department. Brouwers believes that in the highly competitive field of asset management, running speciality funds such as microfinance creates a distinctive brand. SNS’s first microfinance fund, launched at the beginning of 2007, returned a net 6.4% over the year, which he says was one of the best performing funds in its sector. But the goal is not just financially related, he adds: “The other question is how you manage the social return? When you look at microfinance competition in different countries, you can see potential problems.” He alludes to the initial public offering of Mexico’s Banco Compartamos in April 2007, which raised $475m, but outraged campaigners when it was revealed that the bank was charging between 50-

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