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responsAbility launches $175m impact CLO for financial inclusion in EM

Anna Lyudvig
July 31, 2019, 9:54 p.m.

Word count: 459

responsAbility Investments AG, an impact asset manager, has closed a $175m securitization of loans to microfinance and SME-finance institutions in emerging markets.

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responsAbility Investments AG, an impact asset manager, has closed a $175m securitization of loans to microfinance and SME-finance institutions in emerging markets.

The underlying pool of assets are 26 newly issued senior bullet loans to fast-growing Microfinance Institutions and SME-Banks in 17 different countries in Latin America, Africa and Asia.

The proceeds will be used to fund financial intermediaries providing capital to 30,000 small businesses and 5.6 million microfinance borrowers of which 81% are women. 

Denominated in USD and with an expected maturity of three years, the securitization provides investors a choice of three different risk return profiles (senior, mezzanine, and junior) in a listed, transferable bond format.

The senior and mezzanine notes earn fixed interest rates and junior note returns will depend on performance of the underlying loan portfolio.

Key investors in this transaction include the Overseas Private Investment Corporation (OPIC), the US government agency, providing the initial capital necessary to mobilize the private institutional investment in the deal, and Alecta, the fifth largest occupational pension provider in Europe, and investing in the essential risk capital.

“OPIC is proud to partner with responsAbility to expand access to the financing of micro-entrepreneurs and small business owners – especially women – who need to grow their businesses, create jobs, and help their communities thrive,” said Tracey Webb, OPIC Vice President for Structured Finance and Insurance. 

Impact investing firm Calvert Impact Capital also brings US private capital into the deal. 

Songbae Lee, Director of Investments for Calvert Impact Capital noted that “this deal has great potential to serve as a template for making microfinance – and other impact investing deals – more accessible to a range of investors in the future. We’re excited to help scale responsAbility’s microfinance platform and ultimately, get more capital flowing to the communities that need it most.” 

responsAbility Investments AG is the originator and servicer of the loan portfolio.

JP Morgan acted as arranger and placement agent. Latham Watkins and Paul Hastings acted as legal advisors to JPMorgan and responsAbility Investments AG respectively. 

“This securitization shows that the fast-growing microfinance and SME finance space in emerging markets has now reached a maturity that allows it to access financing from mainstream capital markets,” said Thomas Müller, Co-Head Financial Institutions Debt at responsAbility. 

“This is an area of increasing focus for fund managers globally and applying capital markets technology to traditional impact investing creates the potential to open this sector to a wider range of investors,” added Eric Wragge, Managing Director, Securitised Products Group at J.P. Morgan.

“We are very pleased to have helped facilitate this flow of investment to emerging economies, where financial inclusion can make such a difference in the lives of small-scale entrepreneurs and their communities,” Wragge said. 

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