- Long-term debt
Culture, connections and competence
- Impact strategy
- Investment advisory team
- Business partner input
- ESG advice and requirements
Accessing responsible and affordable financial services remains a challenge in the developing world, especially for underserved populations such as people who live in rural areas, women and low income households. Inclusive microfinance institutions (MFIs) help to fill this gap by providing loans and other critical services that help people and businesses invest in opportunities, manage their finances and recover from shocks. Financial services also play a critical role in enabling access to other vital services such as education, energy, water and sanitation.
We believe investing in financial inclusion is an attractive business opportunity. Microfinance investment has the potential to generate positive impact in parts of the world where it is needed the most - and attractive financial returns for investors.
Viktor Andersson, Head of Microfinance, has extensive experience managing large microfinance investment portfolios and sourcing impact transactions in Latin America, Africa, and Asia. He works closely with DWM, a leading global impact and microfinance investment firm. They work as one team where:
Viktor focuses on portfolio construction and chairs the Fund Credit Committee, which decides on which MFIs the fund should lend to.
DWM sources and structures the transactions and manages the underlying relationships with the inclusive financial institutions.
DWM, headquartered in Stamford, Connecticut, USA, is an emerging and frontier markets investment originator and manager with extensive capabilities through its 16 global locations across Latin America, Eastern Europe, Africa, Middle East and Asia. They have a longstanding track record in microfinance and impact transactions since 1999.
Through this partnership, Trill Impact has access to DWM’s expertise in sourcing microfinance transactions, managing relationships on the ground, and fund management activities.
The microloan should be used for productive purposes, meaning to finance the business and ultimately generate income for the microentrepreneur.
The most common way these entrepreneurs utilize the microloan is to boost productivity, or increase output.
Since the microenterprises generally have large profit margins the microentrepreneur can usually generate significantly larger profits than the costs of the loan.
In addition to microloans, microfinance institutions may also offer other products, helping individuals with personal aspects of their lives beyond the commercial microloan, such as:
Home improvement loans for an extra room in their house to be used as a shop, educational loans, paying for e.g., school fees, school uniforms, school books, etc, or solar power loans to buy an off-grid solar power system to provide clean energy for e.g., proper lighting and mobile charging devices.
Initial screening and eligibility analysis: Impact framework is completed to document theory of change, the five dimensions and to quantify expected impact on key metrics (aligned with IRIS+). Investment must fit with our theory of change and avoid excluded activities.
Full due diligence: DWM Impact IQ completed by potential investee (MFI) and quality checked by DWM. Impact score assigned and site visit conducted to verify responses and clarify questions.
Credit committee review: Trill Impact and DWM partner through the credit committee. The committee confirms that the MFI fits with the impact goals, flags potential ESG risks and identifies needed covenants or provisions to strengthen impact or ESG management. This is discussed with the investee, which has the opportunity to improve its impact and ESG profile.
Ongoing investment management: Impact performance compared to expectations is tracked through annual data collection. Portfolio-level analysis performed to analyze yearly data and benchmark results.
Ongoing collaboration: DWM collaborates with the MFIs and provide feedback to improve impact and financial results.
Exit of a relationship: Long term relationships with the investees are sought, but sometimes a relationship is exited due to macro, currency, credit or portfolio aspects. Continuity of impact at the investee level is then sought. The impact generated against the targets is assessed and analyzed.
The Theory of Change model is part of the IMPACT approach above and covers the Ideate phase. Before funding an MFI, we confirm that this credit investment fits with our theory of change.
Below, learn more about how the Theory of Change is applied within Microfinance to test the investment's impact delivery process before providing credits:
Culture, connections and competence
Microfinance institutions equipped to drive impact outcome beyond investment horizon related to the following themes:
All credit investments must meet the five dimensions of impact:
Trill Impact and DWM, integrate impact measurement and management throughout the entire investment process above.
Social and environmental results are assessed and tracked across the whole investment cycle.
Company-level impact and ESG analysis is conducted through desktop research, site visits, and discussions with MFI company management.
This robust impact measurement and management system enables Trill Impact Microfinance to select and lend to the MFIs with high potential for impact and to manage social and environmental results. It also helps to learn from experience that is important for future investments.