New partnership extends opportunities to reach more microfinance institutions in emerging markets including Uzbekistan
Dutch social impact investment crowdfunding platform Lendahand has partnered with Agents for Impact (AFI), a German impact investment consultancy, to expand its portfolio in emerging markets.
Lendahand operates by providing a platform through which European retail investors can invest their money in projects that help to alleviate poverty by providing loans to SMEs and entrepreneurs in countries in Africa, Asia, Latin America and Eastern Europe whilst earning up to 7% interest per annum.
AFI, which provides impact investment research, measurement and risk consultancy services, will help the platform extend its reach by overseeing the due diligence process and onboarding of microfinance institutions seeking affordable financing through crowdfunding.
Speaking to Impact Investor, Anshul Jindal, head of investments for Lendahand, explained the decision to work with AFI, which is based across nine countries in Africa, India, Southeast Asia, Central Asia, and Europe, was driven by the company’s extensive knowledge of impact investing and its network.
“Their knowledge of impact investing and deep relationships will help us reach out to new high impact investees with better risk adjusted returns for investors,” he said.
Andrij Fetsun, CEO for AFI, said: “We are delighted and proud to start our strategic partnership with such an impact-driven team as Lendahand. This joint commitment to pursue the SDG and ESG in impact investing will definitely bear its fruit and we can’t wait to see the positive impact and benefit of our collaboration.”
At the end of last month, AFI helped to onboard Vodiy Taraqqiyot Kredit (Vodiy), a microfinance institution in Uzbekistan, to the Lendahand platform.
Microfinance in Uzbekistan
Vodiy is a microfinance institution operating across Uzbekistan, providing loans to micro-businesses, including women entrepreneurs and craftsmen with no other sources of finance.
According to Lendahand, many micro entrepreneurs in Uzbekistan work in the informal economy and as a result, are unable to present official documents of their businesses to apply for a loan from a traditional bank.
The project aims to raise €250,000 as a loan, which will be used to fuel the growth of Vodiy’s loan portfolio to 14,543 borrowers as well as finance new branches.
“Vodiy is a highly impactful microfinance organisation, operating profitably for many years, with strong risk management practices. It offers highly impactful, risk adjusted returns to our investors,” said Jindal. “Uzbekistan is a very promising country, and we hope to onboard two to three more investment opportunities from the country over next few months.”
AFI used a proprietary tool to assess Vodiy’s sustainability performance and alignment to the United Nations SDGs across five key categories; staff, clients, rights protection, governance, and environment.
Closing the funding gap
Impact Investor reported last year that according to the World Bank, the annual funding gap between emerging market entrepreneurs and SMEs seeking funding and available capital from traditional financial institutions sits at around $5.2trn (€4.9trn).
Jindal said that closing this gap remained a complex and ongoing challenge.
“We don’t have the exact numbers, but the funding gap appears to be getting bigger instead of diminishing. Several factors in the global economic landscape, first the pandemic, and now the Ukraine war, have resulted in increased pricing across various sectors, which has only exacerbated the problem. This has also affected investor confidence in emerging market investments, so stabilising these economic factors will be vital to closing the gap in the future,” he added.
Lendahand acquired its European license for crowdfunding (ESCP) last year and can offer access to its platform to retail investors across Europe. The company said it was looking to expand to Spain, Germany and Italy and that almost 50% of new investors to the platform now originated from European countries outside of the Netherlands.
“The goal of Lendahand is to reach a point where investing equals impact investing. We want impact to be considered as an everyday metric alongside risk and return and are raising awareness among investors that they have it in their power to ensure this happens,” said Jindal. “Retail investors can speak with their wallets and take charge.”
