BlueOrchard Finance, a Swiss impact investment manager, and the Asian Development Bank (ADB) have signed a US$50 million risk-sharing agreement for microfinance coverage in the latter’s developing member countries (DMCs).

The company is the first impact investment manager to work with the ADB’s microfinance programme.

Its flagship fund, the BlueOrchard Microfinance Fund, will invest in selected microfinance institutions (MFIs) and banks.

ADB will participate in the default risk of the capital-taking organizations in order to increase both the risk appetite of the fund and the capital invested in DMCs.

In addition, this partnership aims to encourage the private sector to increase the flow of capital to deepen financial inclusion.

In times of liquidity and financing challenges, the risk-sharing agreement makes it easier for MFIs to access finance for their further lending.

This will expand financial inclusion and thereby contribute to the achievement of the Sustainable Development Goals, such as reducing poverty and gender inequality and improving access to clean water and sanitation.

In addition to increasing microfinance coverage, the ADB and BlueOrchard partnership aims to facilitate access to new markets and segments.

These include financing for adaptation to climate change and the associated strengthening of resilience.

Over the next four years, more than 150,000 borrowers and micro-businesses in India, Indonesia, the Philippines and other developing countries are expected to receive funding under this partnership.

ADB’s microfinance program, launched in 2010, has supported US$1.8 billion in loans and raised US$881 million in co-financing. It has given more than 8 million borrowers access to microcredit, 98% of whom are women.

Suzanne Gaboury, Director General of Private Sector Operations at the ADB said,

“Loans from microfinance institutions are a lifeline for underserved customers such as low-income households and small businesses. This is especially true for companies that are run by women. We support them to cope with the Covid-19 pandemic and to recover from its effects.”

Philipp Müller, CEO of BlueOrchard said,

“We are proud to be the first impact investing manager to partner with the ADB microfinance program. We look forward to further promoting financial inclusion in Asia together with the ADB in the future.”