Given a choice, it is probably fair to say that most investors would leap at the chance of the opportunity to make a return while at the same time making a positive contribution to wider society. Some are even willing to make compromises on returns on the understanding that they only invest in companies and financial instruments that meet certain criteria on ethics and sustainability. The rise in the number of ‘sustainable’ and ‘ethical’ funds and indices and the value of the capital invested in them is testament to that. IFAs have also reported a rise in clients specifically requesting their investment portfolios reflect their wider values.
As such, the announcement that Europe’s first publically listed-microfinance institution plans to IPO in London will be a welcome addition to the roster of ethical investment options available to those investing online in ISAs and SIPPs. ASA International, a Dutch-Bangladeshi socially responsible lender that offers financial inclusion to the ‘unbanked’ is today expected to announce an impending IPO and planned July listing that will value the company at several hundred million pounds.
The World Bank estimates that around 2 billion adults globally lack access to ‘formal and regulated financial services’. One of the most damaging side effects of this exclusion is a lack of access to credit. For those living on or below the poverty line, being unable to take advantage of even modest financing puts up a significant barrier to being able to sustainably develop the kind of grass-roots businesses. This has been demonstrated as crucial to individuals, families and communities breaking the cycle of poverty.
Microfinance institutions offer modest, increasing credit lines to small business owners in developing countries. The recipients of microfinance do not have the paperwork, sometimes even personal identification documents, required by traditional banking structures. However, as well as fulfilling a crucial economic need, microfinance has proven to also be a sustainable business model when done right.
ASA International operates in 12 different emerging economies across Africa and South and South East Asia, including Nigeria, Pakistan and the Philippines. The company counts private equity firm Sequoia Capital and ABP, Europe’s largest pension fund, among its early stage investors and in 2017 registered 23% growth in pre-tax profits to $43.4 million (£32.77 million).
Originally founded as an NGO, ASA International subsequently expanded on a commercial basis. Chief Executive Dirk Brouwer believes the ASA’s commercial track record is now strong enough to have proven itself to institutional investors and traditional capital markets. At least 25% of the company is expected to be included in the July free float that will value ASA at between £250 million and £435 million.