The Microfinance story
Microfinance is a way of making capital available for people in developing countries, when starting or growing a business. In other words, it provides loans to entrepreneurs who normally lack access to financial services, so that they can invest in their businesses and improve their livelihood.
When SEB debuted with a microfinance fund in 2013, it was the first bank in Sweden to launch such a fund.
How microfinance funds work
In short, this is how microfinance funds work:
- The microfinance fund is created and investors – such as insurance companies and municipalities – place money in the fund.
- The invested capital is forwarded to selected microfinance institutes around the globe. It is from these institutes that the entrepreneurs apply for loans.
- The microfinance funds operate for a certain period of time, for example over five years. While the fund is running, millions of people in developing countries get access to financing.
- The fund is ended. The borrowers have gained a chance to change their lives through entrepreneurship, the investors have aided them in doing so, plus earned interest on their money.
Case – SEB Microfinance Fund II
In June 2019, SEB Microfinance Fund II reached its closing date. This is what the fund achieved during the five years it operated:
- Over 6,6 million entrepreneurs in developing countries got financing for their businesses.
- Over half of the loans were granted to women.
- A large amount of the borrowers lived in the country-side in countries such as India, Tunisia and Paraguay.
- The fund contributed to four of the UN Sustainable Development Goals, namely: ending poverty (1), gender equality (5), decent work and economic growth (8) and reduced inequalities (10).
- The investors in the fund got an average, yearly interest of 8,3 percent on their investment.
This is Nagarathna from the village Naharu Doddi in India. As an effect of a microloan through the SEB Microfinance Fund II, she was able to start a business raising and selling silkworms. This, in turn, meant she could afford putting both her children in school – a perfect illustration of how microfinancing and entrepreneurship can change lives.