PGGM makes one of world’s biggest institutional investments in microfinance

Fund manager for Dutch healthcare fund commits €200m to small-scale lending over 2-3 years.

PGGM, the €88bn ($139bn) asset manager of Pensioenfonds Zorg en Welzijn, the Dutch healthcare pension fund, is making one of the world’s largest institutional commitments to microfinance – small-scale lending in developing countries – after announcing an investment of €200m with specialist fund managers over the next two to three years.
The fund manager has made its first investment worth €27m to the Dexia Microcredit Fund operated by Swiss fund manager BlueOrchard Finance. The initial allocation will make investments in microfinance projects in Africa, Asia, Latin America and Eastern Europe. Blue Orchard invests in financial institutions providing microcredit for families and small businesses that do not have access to regular financial institutions.
Alex van der Velden, head of sustainable investment strategies at PGGM, said: ‘With this investment program, we will achieve competitive returns through responsible investments that we believe have a low correlation to traditional asset classes. In addition, the program will promote economic development by giving families and small businesses in developing countries access to affordable credit.”The announcement is a further huge boost to fund managers in the microfinance sector following several large investments by banks and investors since the start of the year.
In February, French bank Crédit Agricole launched a €50m ($73m) fund in collaboration with Grameen Bank, run by Professor Muhammed Yunus the Nobel prize-winning pioneer of microfinance schemes in Bangladesh.
At the same time, Dutch civil service pension fund giant ABP and its US peer TIAACREF, the higher education and medical workers fund, were named amongst investors in a $125m fund close by Catalyst Microfinance Investors (CMI).
ABP already had microfinance investments amounting to approximately €20m at the end of 2007.
In December, 2006, TIAACREF launched a four-year project to invest $100m in microfinance. Its first allocation was a $43m private equity commitment to ProCredit Holding, a German microfinance specialist, which itself invests via a network of microfinance banks, notably in Eastern Europe and post-conflict countries in Africa.