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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:

  1. The microfinance fund is created and investors – such as insurance companies and municipalities ­– place money in the fund.
  2. The invested capital is forwarded to selected microfinance institutes around the globe. It is from these institutes that the entrepreneurs apply for loans.
  3. 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.
  4. 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.

 

 

Meet Nagarathna

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.

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