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 the financial and social analysis 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 (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 a slowdown 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.
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 once-off and integrated support to MFIs supported by LMDF. 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 consultants.
ADA’s team also offers more comprehensive technical assistance. These multiannual projects require a thorough preliminary analysis of the MFI’s needs. The projects can either be implemented by service providers (consultants) selected by ADA, or directly by ADA as a technical advisor without external 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.
Key figures 2021 LMDF
- 25 MFIs funded in 2021 with EUR 21,5 million disbursed
- A total of 48 MFIs benefit from an LMDF loan at the close of 2021 as recommended by ADA
- Outstanding portfolio: EUR 35,3 million
- 75 495 microentrepreneurs directly reached, of which:
- 65% were women clients
- 24% were agricultural clients
- 49% were service providers and small shops
Technical assistance by ADA of LMDF counterparties
- Total : 250 000 EUR
- 100 000 EUR for once-off interventions
- 150 000 EUR for integrated interventions
- 16 MFIs for which a once-off intervention was approved and disbursed
- 3 MFIs received integrated support: Lapo (Sierra Leone), Vision Fund (Dominican Republic), Vahatra (Madagascar).
Contribution to the SDGs
10.b and 17.3: Direct foreign investment
IN A NUTSHELL
ADA prospects, analyses and selects microfinance institutions (MFIs) with profiles sought by the LMDF fund and provides training and technical assistance to optimise their financial and social performance.
21 December 2022
ADA extends its investment advisory services to Uzbekistan
In addition to its existing investments in Kazakhstan, Kyrgyzstan and Tajikistan, ADA has now advised the Luxembourg Microfinance and Development Fund (LMDF) to venture into Uzbekistan for the first time.
10 October 2022
Avanza Sólido: a typical LMDF investee recommended by ADA
ADA only selects microfinance institutions (MFIs) that meet the strict LMDF financial and social criteria.
10 January 2022
Attract investors to your MFI via the ATLAS database
ATLAS is a validated, global microfinance database that contains information on financial service providers’ (FSPs) pricing, client protection as well as social and financial performance.