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Impact in Microfinance

The issue

An estimated 2.7 billion people, or close to half the world’s population, have no access to formal financial services. They are unable to open a bank account, negotiate a loan to start a business, or buy insurance.

Access to these financial services has a fundamental impact on the lives of millions of people. It enables them to build their assets gradually, develop micro, small and medium-sized enterprises, and improve their income earning capacity, to create employment and provide a financial cushion for the future.

While there still is a long way to go to make sure that everyone, everywhere, has access to a diverse range of financial services, the past ten years have seen a tremendous growth of financial services offered to poorer people by an increasing number and variety of financial institutions.

The industry has proven that low income populations are bankable and can be offered financial services in a sustainable way. On the back of the microfinance industry's success, commercial banks in developing countries have partnered with microfinance institutions (MFIs) to reach lower income customers. In some markets MFIs have transformed into licensed banks, allowing them to further expand their products and services.

Diversification is important for MFIs and banks, and an essential element for growth. For MFIs, diversification is geographic with institutions focusing their services on difficult to reach communities in rural areas. Moreover, many MFIs are broadening their range of loan products to better meet the specific needs of their existing and potential clients. Besides loans, they also offer their clients the chance to save or to take out insurance. For this reason, ‘inclusive finance’ is increasingly used to describe this kind of activity: access to a broad package of financial services for everyone, including loans to small and medium-sized enterprises.

However, significant challenges remain, not least because millions of people are still excluded. As the microfinance sector becomes more mature and integrated into mainstream financial systems, the landscape in which it operates becomes more complex. In recent years aggressive growth and increased competition led to the financial system overheating and the over indebtedness of clients. Growth and profitability was put before the interests of microfinance clients prompting questions about the wisdom of prioritizing financial gain over sustainable development.

As the industry matures it must address its challenges in a balanced way in order to shape an inclusive financial services industry that keeps the interests of its low-income clients at its core.

Triodos Bank’s vision

Triodos Bank has been one of the leading investors in the microfinance sector since making its first investments in the industry in 1994. We recognised that sustainable development, and addressing inequality, exclusion and poverty issues in particular, was a global issue and have been applying our expertise in the inclusive finance sector to address these international challenges ever since.

Over the past ten years we have seen microfinance rapidly evolve and expand. Many national governments across all continents have come to recognize the importance of building inclusive financial sectors – where the majority of people have access to financial services. The financial inclusion gap has appeared on the agenda of the United Nations and G20, for example. Increasingly, investors have recognized the potential for social and financial returns from microfinance, and direct funding towards it.

As an investor we can influence the direction the inclusive finance industry takes. We share this responsibility with everyone involved in the value chain – investors, microfinance institutions, banks and other stakeholders – to understand, acknowledge and act in the interests of clients; clients, who are typically living on low-incomes and constrained by limited financial knowledge, power and influence. Focusing on the interests of these individuals and their families is the only way to achieve long term sustainable financial results.

To help shape an inclusive financial services industry that keeps the client’s interests at its core, a group of investors, including Triodos Investment Management, worked together to draft Principles for Investors in Inclusive Finance. These investors believe that specific principles for investors in inclusive finance will strengthen the movement towards responsible finance. The principles have been developed with a broad group of stakeholders including UNPRI (United Nations Principles for Responsible Investment Initiative) and were launched in January, 2011.

Triodos Bank supports the sector in other ways too; it recognises that we live in an interconnected world, where changes in one country – such as economic crises – can have a profound impact on the other side of the globe. These connections also present enormous opportunities, so Triodos Bank co-founded the Global Alliance for Banking on Values in 2009, a network of banks promoting the use of finance to deliver sustainable development for unserved people, communities and the environment.

So what does Triodos Bank do about it?

Since 1994, our assets under management in the inclusive finance sector have increased to EUR 437 million, making us one of the leading investors in the industry.

We focus on long-term relationships, based on transparency and fairness, with financial institutions that demonstrate a sustainable approach towards providing financial services to underserved communities.

Through specialised funds1 – Triodos-Doen, Hivos-Triodos Fund, Triodos Fair Share Fund and Triodos Microfinance Fund – we provide finance to 99 emerging and well-established MFIs and banks across 45 countries. We hold equity stakes in 18 leading MFIs and banks and play an active role on the Board of Directors – a platform to share our knowledge and expertise about sustainable banking. Our investments continue to diversify from pure MFIs towards broader financial institutions that offer larger loans (to small and medium-sized enterprises), or other financial products, such as leasing. ‘Inclusive finance’ reflects this broader focus on expanding access to affordable and responsible financial products and services to those traditionally excluded.

We work together with our clients to shape the direction of the industry to address key strategic challenges, such as supplying finance for renewable energy projects or sustainable agriculture practices. This is an important part of the strategy for Triodos-Doen and Hivos-Triodos Fund in particular.

We provide finance to those financial institutions that seek to balance people, planet and profit. This vision of sustainability forms the basis for our investment policy and is an integral part of its analysis and decision-making process. We make use of a Sustainability Management System to guarantee that this process is effective and transparent. This system is continually being refined to keep it in line with new market developments and to further deepen the impact of our sustainability philosophy.

The microfinance institutions and banks we finance reach 6.4 million savers (2011: 7.5 million) and 6.9 million borrowers (2011: 7.9 million), of which 65% are women, and 48% of whom live in rural areas.

The declining numbers are primarily due the changes in the composition of the portfolio of Triodos Investment Management’s Emerging Markets funds. During the year the funds exited nine larger, well established institutions where Triodos Investment Management’s impact has necessarily declined over time. At the same time it entered 12 smaller institutions, with fewer borrowers and savers, where these funds can have a larger qualitative impact.

A short description of all MFIs and banks in our portfolio and a number of key indicators can be viewed at Know Who We Finance.

1 The funds are managed by Triodos Investment Management, a 100% subsidiary of Triodos Bank.



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Amounts in thousands of EUR

Hivos – Triodos Fund

Triodos – Doen Fund

Triodos Fair Share Fund

Triodos SICAV II – Triodos Microfinance Fund

WWB-Isis Fund







Assets under management






Number of institutions financed
























Amounts in thousands of EUR

Hivos – Triodos Fund

Triodos – Doen Fund

Triodos Fair Share Fund

Triodos SICAV II – Triodos Microfinance Fund

WWB-Isis Fund







Assets under management





Number of institutions financed