Inclusive and innovative finance

Luxembourg’s finan­cial cen­tre has con­sid­er­able exper­tise, which may also be made avail­able to inter­na­tion­al devel­op­ment. For more than 25 years, Luxembourg’s Devel­op­ment Coop­er­a­tion has been active­ly sup­port­ing the devel­op­ment of micro­fi­nance and inclu­sive finance to reduce glob­al pover­ty, to pro­mote eco­nom­ic devel­op­ment, inclu­sive growth and the socio-eco­nom­ic inclu­sion of women and young peo­ple. In this way, Lux­em­bourg has become a key cen­tre of excel­lence for inclu­sive and inno­v­a­tive finance.

Today, micro­fi­nance invest­ment instru­ments based in Lux­em­bourg account for over half the assets under man­age­ment in the sec­tor. These funds are main­ly invest­ed in devel­op­ing coun­tries and thus con­sti­tute a sig­nif­i­cant pro­por­tion of the direct for­eign invest­ment in these coun­tries. This is an exam­ple of the lever­age that pri­vate funds can have in pro­mot­ing sus­tain­able devel­op­ment across the world.

In 2020, Luxembourg’s Devel­op­ment Coop­er­a­tion con­tin­ued its sup­port to var­i­ous play­ers active in inclu­sive finance.

Through the Cat­a­pult sem­i­nar: Inclu­sion Africa, the Lux­em­bourg House of Finan­cial Tech­nol­o­gy (LHoFT) sup­ports African fin­techs and facil­i­tates the scal­ing up of the most promis­ing solu­tions through the cre­ation of partnerships.

As part of the fight against the COVID-19 health cri­sis, which affect­ed busi­ness­es glob­al­ly, a COVID-19 response fund to sup­port micro­fi­nance insti­tu­tions and their clients was cre­at­ed with ADA, the MFA’s main part­ner in the inclu­sive finance sec­tor. Luxembourg’s Devel­op­ment Coop­er­a­tion also sup­port­ed the coor­di­na­tion of investors with a view to ensur­ing suf­fi­cient liq­uid­i­ty for actors on the ground dur­ing these dif­fi­cult times.

In part­ner­ship with five of these impact invest­ment funds, the Small­hold­er Safe­ty Nets project Upscal­ing Pro­gramme (SSNUP) was launched by Min­is­ter Fay­ot on 2 Octo­ber, dur­ing a vis­it to the House of Micro­fi­nance. This project, imple­ment­ed by ADA, receives co-financ­ing from the Swiss Direc­torate for Devel­op­ment and Cooperation.

A new agree­ment was signed with the glob­al microin­sur­ance net­work, Microin­sur­ance Net­work (MiN), whose sec­re­tari­at is based in Luxembourg.

On 5 Octo­ber 2020, the Alliance for Finan­cial Inclu­sion (AFI), a glob­al net­work made up of about 100 finance sec­tor reg­u­la­tors, joined Luxembourg’s inclu­sive finance ecosys­tem by open­ing its Lux­em­bourg office.

The year 2020 also fea­tured the Euro­pean Micro­fi­nance Week, an annu­al fix­ture for experts in the sec­tor, whose flag­ship event is the pre­sen­ta­tion of the Euro­pean Micro­fi­nance Award. On 19 Novem­ber, at an online cer­e­mo­ny, the award was pre­sent­ed to the Muk­ti­nath Bikas bank in Nepal, in recog­ni­tion of its inte­grat­ed sav­ings mod­el tai­lored to clients’ needs.

In Jan­u­ary 2020, Lux­em­bourg, with Bam­boo Cap­i­tal Part­ners and a coali­tion of part­ners, launched the SDG500 invest­ment plat­form, ded­i­cat­ed to the financ­ing of the Sus­tain­able Devel­op­ment Goals (SDGs). The platform’s aim is to col­lect USD500 mil­lion for six funds in order to invest in the hun­dreds of busi­ness­es in the emerg­ing and bor­der mar­kets or devel­op­ing mar­kets. Lux­em­bourg is par­tic­i­pat­ing in three of these sub-funds through con­ces­sion­al financ­ing: the ABC fund, the BLOC Smart Africa fund and the BUILD fund.

The Lux­em­bourg Micro­fi­nance and Devel­op­ment Fund (LMDF) is a pub­lic-pri­vate micro­fi­nance invest­ment fund whose activ­i­ty con­sists of tar­get­ed sup­port for small and medi­um-sized micro­fi­nance insti­tu­tions. Through its invest­ments in Asia, Africa, and Latin Amer­i­ca, the fund, which in 2020 had grown to more than EUR39 mil­lion, financed more than 55,000 micro-entre­pre­neurs and cre­at­ed mea­sur­able results in terms of finan­cial inclusion.

Togeth­er with the Min­istry of Finance and the Min­istry of the Envi­ron­ment, Cli­mate and Sus­tain­able Devel­op­ment, Luxembourg’s Devel­op­ment Coop­er­a­tion con­tin­ues to sup­port invest­ment in sus­tain­able projects. Through tech­ni­cal assis­tance to the Forestry and Cli­mate Change Fund (FCCF), Luxembourg’s Devel­op­ment Coop­er­a­tion pro­motes invest­ment in trop­i­cal forestry projects in Cen­tral Amer­i­ca, with the objec­tive of restor­ing sec­ondary or degrad­ed for­est areas and mak­ing them eco­nom­i­cal­ly, envi­ron­men­tal­ly and social­ly viable.

To trans­form and mod­ernise fam­i­ly farms in Burk­i­na Faso and Mali, and to facil­i­tate their access to financ­ing, the NGOSOS Faim is imple­ment­ing the Agri+ project under the man­date of Luxembourg’s Devel­op­ment Coop­er­a­tion for the 2016 – 2022 period.