SDGs

Despite all the progress made in poverty reduction, 8.2 percent of the world’s population still lived below the international poverty line of 1.90 US dollars a day in 2019. As a result of the COVID-19 pandemic, the World Bank estimates that an additional 70 to 100 million people will slip into this extreme poverty. It is the poorest and most vulnerable who suffer the most from the economic consequences of the crisis – through loss of work, illness, overstretched health systems and the absence of social safety nets. Microloans and other financial services are particularly important in this situation. For example, they promote income generation activities or support low-income people to survive financial bottlenecks. More than half of the loan portfolio of the investment funds we manage was used in the services and commercial sectors last year, 22 percent benefited agriculture.

In many countries, women are legally, socially and economically disadvantaged compared to men. This has a negative impact on their self-determination in many areas of life, such as family planning or the pursuit of income-generating activities. The granting of small loans to women in developing and emerging countries contributes to improving the economic situation and status of these women, thereby enabling them to achieve greater self-determination in other areas as well. More than 80 per cent of the loans granted in 2022 benefited women.

Just to keep pace with population growth, the International Finance Corporation, a private sector-oriented subsidiary of the World Bank, estimates that some 3.3 million additional jobs will need to be created each month in developing and emerging economies by 2030.¹ This figure is likely to be even higher, as it is based on assumptions made before the COVID-19 crisis. Small businesses play a special role here, creating nine out of ten jobs worldwide. However, it is in the area of micro-, small and medium-sized enterprises – which UN Secretary-General António Guterres recently described as the “economic lifeblood of communities worldwide”² – that a financing gap of US$ 5.2 trillion (US$ 718.8 billion for micro-enterprises and US$ 4.5 trillion for SMEs) exists in developing and emerging economies. Promoting the growth of such enterprises through the provision of loans and other financial services is therefore an indispensable building block for achieving the eighth Sustainable Development Goal.

This sustainable development goal focuses on the manufacturing sector and small and medium-sized enterprises (SMEs). They often lack access to affordable loans. This deprives them of the capital they need for further development and job creation. The financial institutions of which the funds we manage acquire unsecuritized loan receivables do not lend exclusively to micro-borrowers, but also to a certain extent to enterprises with higher financial needs.

Before the Corona pandemic, inequality had been trending downwards worldwide. The so-called Gini coefficient had decreased in 38 out of 84 countries worldwide between 2010 and 2017. This coefficient shows how equally or unequally wealth and income are distributed in a region or country. During the pandemic, the most vulnerable groups, such as the elderly, children, women and migrants, were the most affected. To reduce inequality in countries, the funds we manage particularly refinance financial institutions in countries that are economically less strong. In 2022, just under half of the loan portfolio was deployed in countries that are in the lower income segment.