The impact investment manager, part of the Schroders Group, is targeting investments to bring financial services to the unbanked and SMEs in Asia and other emerging markets through its latest fund
- Fund aiming for total $300m of investment but could be bigger, first close due fourth quarter 2022
- Majority of investments likely to be in Asia, reflecting region’s large unbanked population
- Under-developed insurance market among those targeted
BlueOrchard Finance has launched a private equity fund with a target size of $300m (€283m) to help develop financial services for people with low incomes, focusing mainly on Asia and Africa.
The company said the BlueOrchard Financial Inclusion Fund aimed to extend financial services to up to more than 30 million low-income individuals and MSMEs, as part of the drive to meet UN Sustainable Development Goals. The focus will be largely on investments in microfinance institutions, micro-, small and medium-sized enterprise (MSME) financing, micro-insurance and technology.
BlueOrchard says the fund will be compliant with Article 9 of the EU Sustainable Finance Disclosure Regulation, which means it has sustainable investment (or carbon emissions reductions) as its objective.
Felix Hermes, head of private equity and sustainable infrastructure at BlueOrchard told Impact Investor that the fund aims to offer market rate returns to investors, while leveraging its expertise and active network of over 1,000 financial institutions to fulfil its impact mandate. He said private equity investment offered an excellent way for expertise and capital to reach what were mainly unlisted companies.
“The impact mandate is to promote financial inclusion for the 1.7 billion people still unbanked in the word, and to help SMEs, which are the largest engine of growth and employment in emerging and frontier markets – and for which funding is still a key constraint. We also want to help close the gap in in terms of insurance coverage, as over 50% of the world’s population doesn’t have a single insurance contract,” Hermes said.
First close for the fund is scheduled for the fourth quarter 2022. Hermes said that, while the total fund size targeted was nominally $300m, it could be scaled up to as much as $500m, depending on the investment climate.
Geographically, the fund plans to make some 50-70% of its investments in Asia, the region with the highest number of unbanked people, while 30-50% of investments would be directed towards Africa and up to 20% would go to Latin America. In terms of the scale of investment, the fund will typically target minority stakes of around 25-49% in mid-sized financial companies with a typical ticket being $10m-30m.
Since it was founded in 2001, BlueOrchard has invested over $9bn across over 90 countries. This is BlueOrchard’s second private equity fund, following a $150m climate-insurance focused fund which closed in late 2020.