ADA as an investment advisor for LMDF
ADA acts as an investment advisor for the Luxembourg Microfinance and Development Fund (LMDF). ADA carries out the prospection, selection and due diligence of innovative and impactful microfinance institutions.
In 2009, ADA initiated the creation of a private investment fund, the Luxembourg Microfinance and Development Fund (LMDF), through which investments (almost exclusively in debt) have since been made. As the mandated investment advisor to the LMDF sub-fund, ADA prospects, analyses and selects microfinance institutions with profiles sought by the fund. ADA only selects MFIs that meet the strict LMDF financial and social criteria and that add specific value to the market in which they operate.
ADA performs due diligence visits, presents investment files to the ad hoc committee and follows up on the investments in view of fulfilling the financial and social mission of the fund. At LMDF's request, ADA also supports the definition of the fund’s investment strategy. In addition, ADA closely collaborates with IforD/LMDF to ensure the complementarity and coherence of its investments with other development actors in Luxembourg.
For LMDF, 2021 was characterised by a return to normal after an interruption of activities due to the Coronavirus pandemic, as the outstanding portfolio reached an amount of 36 million in December and the portfolio quality returned to pre-pandemic levels.
Key LMDF figures 2021
- 25 MFIs funded with EUR 21 million disbursed
- A total of 48 MFIs benefited from an LMDF loan as recommended by ADA
- Outstanding portfolio: EUR 36 million
- 75 495 microentrepreneurs directly reached:
65% women clients
24% agricultural clients
49% service providers and small shops
ADA’s technical assistance complements LMDF investments
ADA complements the LMDF investments with training and technical assistance for the MFI counterparties to optimise their financial and social performance. This assistance will both improve their balance sheet and ensure appropriate consumer protection. More generally, this dissemination of best practices not only benefits the supported MFI but also helps to strengthen the entire inclusive finance sector in the countries concerned.
ADA provides both punctual and integrated support to LMDF MFIs. Punctual, once-off interventions co-financed by ADA include training, ratings, social performance assessments or specific projects such as developing an app or updating the customer protection policy. These activities are usually co-financed by ADA and are carried out by local consultants, suppliers or other inclusive finance partners.
ADA’s team also offers more comprehensive, integrated technical assistance. These multiannual projects require a thorough preliminary analysis of the MFI’s needs. The projects can either be co-financed by ADA, in which case ADA also helps with the selection of counterparties, or be implemented directly by ADA’s project officers and consultants.
For example, in 2021, ADA advised LMDF to invest 500 000 EUR in Vision Fund Dominican Republic (VF). The MFI focuses on offering financial services to poor people who would otherwise have little or no access to credit. It mainly offers loans in support of commerce, agriculture and manufacturing and is mainly present in the south of the country, where poverty levels are higher. VF complements its loans with financial education services without additional costs. The LMDF loan is complemented by ongoing integrated technical assistance by ADA to improve VF’s level of digitalisation.
Technical assistance by ADA of LMDF counterparties in 2021
- 16 MFIs for which a co-financed punctual intervention was approved and disbursed
- 3 MFIs are receiving integrated support: Lapo (Sierra Leone), Vision Fund (Dominican Republic), Vahatra (Madagascar)