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Review first quarter 2017

During the first quarter 2017, Triodos Microfinance Fund’s net asset value increased from EUR 339.2 million to EUR 351.5 million. The fund’s outstanding portfolio totaled EUR 300.8 million, an increase of 1.2% compared to the previous quarter. Triodos Microfinance Fund generated a return of 0.6% (Z-cap) for the first quarter of 2017.

The global economy showed a modest pickup in the first quarter of this year compared to the fourth quarter of last year, with growth driven by some rebound in the US, the continued accommodative monetary stance in Europe and somewhat better-than-expected economic activity numbers in China. In terms of commodity prices, metals and minerals prices continued increasing (by around 10%) in the first quarter. Agricultural commodities remained around flat. Oil prices fell around 5% in the first quarter of 2017, losing almost a third of the gains made in the fourth quarter, despite adherence of OPEC to the agreed production cuts. 

In January-March 2017, the US dollar reversed part of the sharp appreciation which took place post-US-election in the fourth quarter, losing 1.3% against the euro. Alongside the weakening of the US dollar, most emerging markets currencies weakened against the euro as well.

The returns on both the equity and debt portfolio were positive. The net FX impact (value changes on the total portfolio minus the results on hedging contracts) was less than 0.01% of the NAV, causing a negligible effect on the fund’s return. The level of provisioning of the fund has remained in line with that of the previous quarter. The fund continues to receive repayments on the loan amounts in arrears.

The fund’s liquidity position increased from 15.7% in the previous quarter to 18.2% of the net assets as a result of investor inflows during the quarter and repayments of loans. Unhedged exposures decreased from 25.0% to 23.2% as a result of an increase in hedged loan investments. The unhedged position on the loan portfolio decreased from 14.5% in the previous quarter to 13.3%.

The former Microfinance Organisation Credo in Georgia, an equity investee of Triodos Microfinance Fund, was granted a banking license by the National Bank of Georgia in March 2017. The institution is now named Credo Bank and the banking license will allow the institution to expand its delivery of sustainable financial product and services. 

In March 2017, the National Bank of Cambodia ordered MFIs and banks to cap their interest rates at 18%, from April 1st for all new loans disbursed. While the measure may benefit some borrowers in the short term, in the longer term it is expected to hamper the extension of microcredit especially in the rural areas, while it sends a negative signal about the quality and credibility of policymaking in Cambodia.

The fund’s investees in the county have mostly taken measures to weather the change. As a result of the regulatory change, a small downward adjustment was made to the valuation of the fund’s equity stake in its investee in Cambodia. The trigger for the adjustment is the lower expected future profitability due to the lower interest income, as loans are being re-priced over the years. While profitability forecasts have gone down, the impact is not material and is not expected to significantly impact operations.  


Triodos Microfinance Fund’s portfolio developed well during the quarter: the fund added three new investees to the portfolio in Kazakhstan, Tanzania, and Kenya and placed EUR 19.4 million in debt and equity investments with a total of 12 financial institutions.     

New investments

Asian Credit Fund, Microfinance Organisation LLC, Kazakhstan (new debt)
Asian Credit Fund (ACF) is a credit-only institution that focuses on serving rural households that earn income from small-scale agricultural activities. Through its network of branches, ACT reaches over 18,000 clients, of which 99% are female. ACF was one of the first microfinance institutions in Kazakhstan that offers energy efficiency finance products which now stands at 3% of its portfolio. 

Dawn Microfinance, Myanmar (new debt)
Operating in Myanmar, a country that started to welcome foreign investment in 2015, Dawn is a well-known microfinance institution that currently provides group loans to low income women. The institution is serving over 67,000 clients. Triodos Microfinance Fund also holds an equity stake in Dawn Microfinance.

National Microfinance Bank, Tanzania (new debt)
National Microfinance Bank (NMB) is the largest microfinance and SME finance bank in Tanzania.  Having the largest branch and ATM network in the country allows the bank to have a client base of more than 2 million clients with strong presence in the rural areas. The bank pioneered mobile banking in the country, being the first bank to offer mobile banking service in 2008. Growing its presence in the small and medium-sized enterprises (SMEs) and the agriculture sector segments is the bank’s next ambition. 

M-KOPA Solar, Kenya (new debt)
M-KOPA Solar is a global leader of ‘pay-as-you-go’ solar energy for off-grid customers, established by the people behind M-PESA, a leading player of mobile money platform. The company sells solar home system to rural low-income households in Kenya, Tanzania, and Uganda, employing innovative and affordable financing scheme and has reached over 400,000 households. Purchase and payment of the solar systems are offered through a leasing scheme using mobile phones, combining mobile payments with GSM sensor technology. By providing a loan to M-KOPA access to clean energy for low income people is increased and Triodos Microfinance Fund supports to leverage innovative financial instruments to fulfil people’s basic needs of energy.  


The global economy is forecasted to grow by 2.6% this year, a modest rebound, reflecting higher growth in the US and higher-than-expected economic activity in China. Still, the direction of US policies under the new administration continues to pose an unusual degree of uncertainty to the outlook. Higher oil prices, together with wage pressures in the US, are contributing to an increase in inflation and inflation expectations.

Despite recent disappointing economic activity and inflation data in the US, the Fed is expected to continue its policy of gradual monetary tightening. A higher policy rate will be supportive of continued broad dollar strength. This combination could be detrimental to Emerging Markets economies that are highly dependent on capital flows from abroad and/or have a high dollar debt. Still, accommodative monetary policy in Europe and Japan will provide an offset to US tightening, keeping financing conditions for emerging markets benign. The recent rally in global oil prices has lost steam. With risks on the downside, oil producers are likely to extend production cuts first agreed by OPEC in December 2016.

High investment productivity in the first quarter of 2017 is expected to continue in the next quarter, with more investments channelled to innovative institutions that provide access to finance for entrepreneurship and fulfilment of basic needs to the underserved markets.    

* All returns stated were calculated based on net asset value, including reinvestment of dividends where applicable. Past performance is not a reliable indicator of future performance.    

27 March 2017 - Prospectus amendments

The Board of Directors of Triodos SICAV II has made a number of amendments to the prospectus of Triodos SICAV II. More details can be found in the informative notice. This document can be downloaded here . As part of the procedure to amend the prospectus, shares of Triodos Microfinance Fund can be redeemed free of charge during the month notice period until 27 April 2017.

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