ACTIAM Institutional Microfinance Fund II

The second ACTIAM Institutional Microfinance Fund was launched in November 2008. The fund is a closed-end mutual fund, solely open for professional investors. Through investments in microfinance institutions, the Fund aims to include small self-employed entrepreneurs and farmers in developing countries in economic activity while generating a market based return.

The ACTIAM Insti­tu­tional Microfin­ance Fund II has been developed in part­ner­ship with Developing World Mar­kets (DWM). ACTIAM acts as fund man­ager and DWM as the invest­ment man­ager.

The Fund provides debt, equity and equity related funding to Microfinance institutions (MFIs) in developing and transition countries. MFIs provide credit and related financial services to individuals and small enterprises. The assets, income levels and/or cash flows of potential microfinance clients are usually too small to be eligible for financing from mainstream banks. In this way, the seemingly “unbankable” can participate in the economy and increase the standard of living for themselves and their families. In the last decades MFIs have managed to provide financial services to ‘the bottom of the pyramid’ while making a balanced return on their loans.

As the potential for MFIs to attract deposits is limited, they are dependent on external funding. This is where ACTIAM Impact Investing – among others – steps in with its ACTIAM Institutional Microfinance Funds.

Financial description

The Fund is managed as a mixed investment fund investing in a wide range of debt instruments as well as in equity and equity related instruments. Also within the instruments significant flexibility is designed, for example in terms of tenor and level of subordination, to provide maximum flexibility for both the MFIs and the Fund to fill the MFI’s funding gap and to provide the Fund with an attractive financial return. In addition to direct investments in MFIs the Fund will be able to invest in microfinance related assets such as securitization notes and participations in micro loan portfolios. The net return of the Fund is targeted at EURIBOR +/+ 3-8% or the fixed rate equivalent of 6-11%. The return stems from the accrued interest on debt investments, appreciation of equity stakes at the time of exit and foreign currency gains.