MARKET COMMENTARY FEBRUARY 2016

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1 I. Month s Highlights The first two months of this year were relatively calm with very low demand for debt funding in most microfinance markets. This is common as the first quarter usually experiences slow growth in microfinance portfolios, but this year the trend was exacerbated by several factors. These include low prices of commodities, high volatility of currencies, economic slowdown in Russia and to some extent in China. However, it s worth highlighting the fact that the trend in the microand small-enterprises sector is still positive and there has been significant funding demand from financial organizations specializing in that segment of the market over the last year irrespective of the developments in the world markets. In February, the fund s total microfinance investment portfolio yield was around 6.1% p.a., with a duration of around 1.4 years. The fund s February performance was 0.20% for the EUR (P) Share Class and 0.24% for the EUR (I) Share Class. III. Local Currency Updates In February, developments in the global currency market were influenced mostly by investor sentiment on uncertain outlook for the world`s economic growth, commodity prices and central bank monetary policy. Global currency market volatility heightened in February and is likely to remain elevated in the coming month. On the microfinance equity side, the market was very active in January and February this year, with a number of deals happening on all continents, particularly in India where several MFIs are getting ready to obtain their microfinance bank licenses, but also in Cambodia, Nigeria and Kenya among others. II. Fund Performance Vision Microfinance In February, the Dual Return Vision Microfinance Fund stayed almost fully invested in microfinance with a liquidity level of around 10% during the month. Several new deals were booked for disbursement in March to park the inflows coming into the fund. Fund Management Team: Dr. Arman Vardanyan, Mag. Christoph Eckart & Yehdega Tedros C-QUADRAT Asset Management GmbH Page 1

2 IV. Social Impact Corner At the end of 2015, Ms. Yehdega Tedros, Microfinance Portfolio Manager of the two Dual Return-Vision Microfinance funds, visited several MFIs and some of their clients micro-entrepreneurs in the Caucasus region. Below is her report on FINCA Armenia and one of its successful micro-clients. borrowers, with an average credit per borrower of around USD, as of the end of January, The institution offers its clients a range of products and services specially designed to meet their unique financial needs through a network of 37 branches/service points covering all regions while specifically targeting micro- entrepreneurs located in remote areas. The MFI operates a call center to improve its customer services and introduced a tool in order to make the loan underwriting process more cost and time efficient. In terms of social responsibility, the institution focuses on client protection and on creating a sound working environment for the employees. FINCA Armenia is committed to achieving balanced social and financial performance objectives and follows traditional corporate values such as transparency, reliability and accountability. FINCA Armenia FINCA Armenia was founded in 1999 as a non-profit charity foundation by FINCA International the US based non-profit network and a pioneer in microfinance. Later in 2009 the Microfinance Institution transformed into a Universal Credit Organization. FINCA Armenia aims to alleviate poverty through lasting solutions that help people build assets, create jobs and raise their standard of living. FINCA has taken a leading role among Armenia s microfinance institutions during the last 17 years of operation and manages a total loan portfolio of around 60 USD millions. It serves more than 52,000 active Photo: FINCA Armenia FINCA Armenia plays an important role in providing financial services to excluded people actively engaged in community activities, technical assistance as well as donations, such as providing raincoats to school-age children from poor families. Page 2

3 Meet a Client Mr. Arman Gharibyan, Yeghegnadzor, Armenia Mr. Gharibyan, a 68 year old father of three children, worked as an economist at a bank for a long time and has been retired now for a couple of years. During his career as an economist he saved a part of his salary and invested it in a piece of land once he retired. The land was used to farm pigs and chicken and it provided him with an additional income to his pension. However, this was not enough to save or to invest in anything else. He discussed this with his friends who were all micro-entrepreneurs and were in the same financial situation. Together they decided to take a group loan from FINCA Armenia. He invested his 500 USD in additional food for his pigs and chickens. The group loan from the MFI helped him to sell more chickens and pigs which increased his monthly income from 130 USD to around 168 USD. He and his friends chose FINCA Armenia because of their flexible conditions and their dedicated employees. Photo: CGAP In Their Own Voices: Microfinance Clients speak out about How They re Treated The Smart Campaign, a global movement to embed a set of clientprotection principles into the fabric of the financial inclusion sector, recently released My Turn to Speak intensive research across four countries that reveals, in clients own words, how they are treated by their financial service providers. IV. Microfinance-News Insights into the Financial Lives of Smallholder Families There are an estimated 500 million smallholder households (approximately 2 billion people) around the world. These small-scale farming families make up a significant portion of the world s poor who live on less than two dollars a day. Until now, little was known about their financial lives. The new CGAP report documents the financial lives of a select group of smallholders in three countries, offering a unique window into the struggles, risks and trade-offs they face on a daily basis. The report also provides recommendations on the types of financial services that could improve the lives of this important group of people. Photo: The Smart Campaign Page 3

4 Tracking the growth of digital financial services Mobile money is reaching more than 411 million people globally. Moreover, it is available in 85% of countries where the vast majority of the population lacks access to a formal financial institution. However, while the success to date is to be celebrated, the future success of mobile money depends on the industry s capacity to adapt to a changing landscape. The findings from the 2015 report provide insights into both current and future trends, giving better visibility on what is changing and how to adapt. Photo: CGAP Page 4

5 Legal Disclaimer This commentary is for general information only. It does not constitute any recommendation to buy or sell nor offer any investment advice. It merely summarises the key characteristics of the fund. The content of this document is not a substitute for investment advice or other consultations. The full details of the fund can be found in the simplified or full prospectus, supplemented by the respective latest audited annual reports and the respective semi-annual reports ( if these are more recent than the last annual reports). These previously mentioned documents are the only binding basis for the purchase of fund shares. They are available for free in electronic or printed form at Axxion S.A., 15, rue de Flaxweiler, L-6776 Grevenmacher, Luxemburg, Phone: , The information in this commentary is to be used under one s own responsibility only. Prior to an investment decision, potential investors are strongly recommended to read the full prospectus, the annual report and the semi-annual report (where applicable) and to consult a financial advisor, lawyer and tax accountant. All data and information has been compiled with utmost care and we rate the used sources as trustworthy. However, we cannot guarantee their completeness and correctness. No liability is accepted for any and all liability for investment losses or other damages resulting from investment decisions based on this information. Past performance is not a guide to future performance. Investment funds are subject to currency fluctuations which can lead to a loss of the invested capital to the point of a total loss. The risk disclosure statement is explicitly referred to in the fund prospectus. Page 5