Micro and SME Finance Market Outlook 2018

Markets, risk-return profiles, impact

For the last eight years, the Market Outlook has provided analysis on financial sector trends.  In this edition, the results of the analysis illustrate how MSME finance combines attractive yields at or above market rates with a solid and understandable risk profile. In doing so, it shows the value of MSME finance as an investment topic, to the benefit of financial inclusion across emerging economies. 

The key findings of the 2018 Market Outlook are:

  • In 2018, global economic growth will accelerate, driven by developing markets.
  • The recovery in commodity prices will be beneficial for growth and portfolio quality in major commodity exporters.
  • Using a newly developed methodology, responsAbility has mapped key micro and SME finance markets in terms of financial sector coverage and medium term potential for cross-border financing.
  • This analysis shows that most key markets, even those that are relatively mature, have considerable remaining potential for growth.
  • Using a track record of nearly 15 years, responsAbility has compared historic default and loss rates to those shown by Moody’s for different rating tranches.
  • The result: MSME finance debt portfolios display similar historic loss rates to securities rated Ba3 by Moody’s.
  • Spreads for investments in such portfolios are in line with or higher than those of listed securities with a similar risk profile.
  • The study also introduces a methodology for impact measurement based on the United Nations’ Sustainable Development Goals.
  • Together, the rating system and impact measurement are designed to provide investors with transparency on the risk-return profile of our offering and the impact of the portfolios measured according to the UN Sustainable Development Goals (SDGs).

About this Publication

By Paul Hailey