• A study conducted by Invest in Visions confirms Microfinance resiliency to economic cycles and market disruptions.

• Increased diversification potential and improved risk-return ratio with microfinance.

Microfinance funds are assumed to being suitable for diversifying a portfolio because of the non-correlation to traditional asset classes and thus the asset class reduces the overall portfolio risk. In collaboration with the Technical University of Cologne (Technische Hochschule Köln), Invest in Visions has analysed the diversification effects of the microfinance asset class over an 18-year period.

The result: microfinance has the potential to improve the risk-return ratio of a classic mixed asset portfolio, but contemporary trends are emerging with regards to the direction and strength of the correlation and investors need to differentiate the proportion of microfinance in the portfolio more diligently, especially in times of (financial) crisis.

An asset class in turbulent times

As an impact investing product, microfinance claims to achieve social impact next to financial performance. In a recently published white paper “diversification effects of microfinance investment”, the authors analyse the scientific debate of the poverty-reducing effect of microloans and the historical diversification effects. Most macroeconomic studies published in the past have already shown a clear link between the spread of microfinance and a reduction in poverty and income inequality.

The results of the analyses on diversification effects and portfolio optimisation are far more exciting: the correlation analyses of all indices were examined over the course of 18 years and over three 6-year periods. Older studies were regularly limited in their information value due to shorter time periods or a small number of microfinance funds analysed.

The results reveal some surprising findings: negative correlations became weaker and positive correlations stronger with each period. The Symbiotics Microfinance Index (SMX) as benchmark for the asset class was compared with bond, equity, money, and crypto markets. In addition, a distinction was made between traditional and sustainability-oriented indices (naturally, the observation period for crypto index and all sustainability-oriented investments was shorter than 18 years).

Noticeable is a positive correlation in fixed income while the traditional equity markets show no statistically significant correlation. The correlation between microfinance and bond markets becomes increasingly stronger over time. Equally striking is the development of the correlation coefficient. For example, the coefficient of the MSCI Emerging Market Index was -.345 in the first six-year period, -.189 in the second period and then a remarkable +.127 in the third six-year period. This shows by way of example that the diversification potential of microfinance can also fluctuate considerably.

Edda Schröder, Founder and Managing Director of Invest in Visions, explains: “The asset class microfinance can generally be suitable for portfolio diversification, as this asset class tends to be resilient to economic cycles and market disruptions. However, you should also diversify and invest globally.”

The analysis also examined correlation behaviour in times of crisis when diversification potential is most important. The behaviour was analysed during a) the monetary crisis of 2010, b) during the pandemic, c) the start of the Russia-Ukraine conflict and d) in crisis year 2015. Even during the peak phases of each respective crisis, microfinance yields did not rise above the +/- 1% mark. This illustrates how low the volatility of the microfinance sector is, particularly in volatile capital markets. However, the number of significantly strongly positively correlated indices doubled during the coronavirus crisis year 2020 compared to the same period in the previous year. According to the study, if such shifts towards positive correlation were to occur, particularly during crises, this would significantly reduce the risk reduction effect. The constant returns of microfinance would then no longer serve as a counterbalance to the falling prices of the other markets to the same extent.

Microfinance in the portfolio reduces overall risk.

Finally, to assess the diversification potential, portfolios with different target values were constructed and compared for traditional, sustainability-orientated microfinance investments.

The empirical analyses show that in an equally weighted portfolio of different asset classes, the standard deviation of returns decreases as the microfinance share increases. This is due to the low correlation of the SMX with the other indices, which fluctuates significantly less around its mean value than the benchmark indices over the entire observation period (shortened period for sustainable and crypto indices). Microfinance can therefore reduce the overall risk regardless of the weighting. At the same time, greater diversification benefits can be achieved than with comparable equity and bond indices from the sustainability sector.

The study makes it clear that microfinance still has the potential to diversify a portfolio of traditional asset classes and significantly reduce risk. At the same time, however, sustainability-oriented investors must also expect a drop in returns if they integrate microfinance into their portfolio.

“For risk-averse investors in particular, microfinance is therefore an attractive investment that can increase the efficiency of the portfolio, even apart from the social return,” says Schröder.
The full study can be downloaded here: https://www.investinvisions.com/en/blog/press-releases/diversification-effects-of-microfinance-investments/

Incofin India Progress Fund has invested EUR 5.6 m (INR 500m) in Qul Fruit Wall Farm Installations Private Limited (Qul), a Kashmir based horticultural startup. Qul becomes the first agtech in the region to receive global institutional capital, marking a significant milestone for the startup ecosystem of the state.

Qul, founded in 2019, is a tech-enabled integrated platform covering the entire apple value chain from orchard installation, development and maintenance to controlled atmospheric storage facilities to digital supply chain integration with the national markets, thereby empowering 5,000 farmers in the Kashmir Valley.

Incofin aligns with Qul’s ambitious vision to quadruple apple yields in the next 5 years and expand operations to benefit 30,000 farmers. This partnership not only injects much-needed capital but also strategic support for Qul’s impactful mission.

The investment will not only crowd-in more private capital to Jammu & Kashmir but also support delivery of the potential of the horticulture sector, which supports the livelihood of half the population of the state.

Commenting on the investment, Rahul Rai, Partner at Incofin India shared “By leading this investment round, Incofin furthers its mission to back innovative agritech startups that make farming viable and sustainable. We are excited by Qul’s ambition to take Indian apples to the world stage.”

For more information, please see Incofin_Qul Press Release.

Incofin, a global impact investor, continues to fuel the remarkable journey of Banco FIE with an infusion by Invest in Visions for USD 10 million. This substantial commitment marks another chapter in a partnership, focused on financial inclusion in Bolivia, that spans over 15 years.  

Incofin and Invest in Visions confirm its commitment with new financing to Banco FIE for USD 10 million. It is not the first investment in Banco FIE of the impact investor. The partnership between the Belgian impact investor and the Bolivian microfinance bank goes back more than 15 years.  

In 2022 Banco FIE won the European Microfinance Award on Financial Inclusion that Works for Women. The microfinance institution impressed the jury because of the way it incorporated a gender-related dimension into its products and services, making them more accessible to women. Banco FIE provides a wide range of products, including micro-insurance, digital financial literacy and technical support to enhance agricultural productivity among women. 

The bank succeeds in bringing Bolivia’s vulnerable into the financial system, supporting the economic ventures of hundreds of thousands of Bolivians who otherwise would have been left out in the cold. Banco FIE swears by inclusion, quality and transparency. No financial return without social return has remained the guiding principle. The bank, for example empowers its clients to modernize their businesses: Banco FIE offers a simple procedure whereby entrepreneurs can very easily set up a web page with a payment button to sell their products online. 

Banco FIE is currently the largest microfinance bank in Bolivia with more than 1 million customers. Incofin’s investment reaffirms its commitment to drive inclusive progress, empowering Banco FIE to continue its journey of financial inclusion, social transformation and economic empowerment in Bolivia.  

@Ximena Behoteguy, @Fernando López Arana @Cecilia Delgado  

#investinvisions #financialinclusion #BancoFIE #sustainableinvesting #MarcaMagenta 


Incofin Foundation, a private foundation established in 2021 by Incofin Investment Management with the purpose of scaling social and environmental impact that complements the return of its investments, has recently launched a project funded by the Inter-American Development Bank’s innovation branch (IDB Lab), and supported by the GSMA, a global organization unifying the mobile ecosystem to discover, develop, and deliver innovation foundational to positive business environments and societal change.

The project “Innovation in Agtech and Digital Agriculture for Small Farmers” aims to improve smallholder farmers’ profitability, access to finance and markets, and climate resilience by catalyzing the capacity, investment readiness, and uptake of agtech solutions in six countries of Latin America: Bolivia, Colombia, El Salvador, Honduras, Paraguay and Peru. The project will launch an Innovation Call to identify 14 agtech solutions championed by agtech services providers or start-ups, financial services providers, agricultural cooperatives, and agribusinesses. GSMA’s experience in running innovation calls in the agtech field will constitute a valuable support for Incofin Foundation to select promising agtech solutions capable of providing high-quality services to smallholder farmers. The selected agtechs or projects will receive technical assistance grants and potential financing for piloting, rolling out, or scaling up services helping to amplify the potential of 30,000 smallholder farmers in increasing their profitability, climate-resilience, and gender equality.

This project with the Inter-American Development Bank, GSMA and their impact investor networks represents a strategic opportunity to engage with digital agriculture stakeholders in Latin America and promote technology as a tool to increase impact for smallholder farmers. Through this initiative, Incofin Foundation will seek to incorporate new pathways to address the challenges that the agrifood sector faces today for a better and more sustainable future.

We are thrilled to announce that Incofin has been honoured with the prestigious title of Belgian Asset Management Company of the Year for the third consecutive year in 2023, as awarded by Global Banking & Finance Review. This remarkable achievement signifies our unwavering commitment to the impact investing space.

Incofin’s third consecutive win underscores the increasing recognition within the global financial community of the profound impact we’ve made in the impact investing space. With over two decades of dedication to the development of the impact investing sector, Incofin has built a proven track record in the financial inclusion and agri-food domains worldwide. In 2023, we proudly introduced the Water Access Acceleration Fund, marking our entry into the drinking water sector.

We extend our thanks to Global Banking & Finance Review, partners, clients, and the Incofin family for their support. This three-peat victory is a testament to our ongoing commitment to driving meaningful change in impact investing. Stay tuned as we continue our journey toward a more inclusive and sustainable future.


Today (Oct 16th, 2023), being the ‘World Food Day’ and the theme of this year is “Water is life, Water is food. Leave no one behind”, Incofin’s Water Access Acceleration Fund (W2AF) announces its first investment of in Rite Water Solutions (India) Pvt. Ltd. for EUR 7.5 m. 

With this, W2AF marches into the next step of success and impacting the world by providing access to safe and affordable drinking water to millions through its investment. The fund’s overarching goal is to bring safe drinking water to 30 million people in water-scarce areas by 2030.

W2AF is an impact-first blended fund that invests in safe drinking water enterprises, primarily in Africa and Asia. W2AF’s investors include Danone, BNP Paribas, U.S. International Development Finance Corporation (DFC), the Danish development finance institution IFU, Norfund, Aqua for All, and the U.S. Agency for International Development.

Incofin is a leading global impact investment firm headquartered in Belgium with EUR 1.4 billion Assets under Management. Incofin has a vintage of 22 years globally and primarily focuses on sectors being agri-food, financial services, water. It has made investment across 65 countries and has 100+ global team members based out of 7 global offices.

Rite Water is India’s rural affordable drinking water and tech backed company providing comprehensive, cost effective and sustainable solutions for safe drinking water to habitations across India where water sources are chemically & biologically contaminated. With this investment in Rite Water, Incofin’s W2AF is steadfast in common ambition to provide 50 million litres of drinking water everyday by 2028 through this investment.