How did the fund perform in the first half of 2025?

ERSTE RESPONSIBLE MICROFINANCE achieved a slightly positive performance of +0.6% in 2025 (as of 2 July 2025). The majority of the sub-funds invested have trended positively in the year to date, although we had to make occasional value adjustments for investments in microfinance institutions. The fund volume has declined over the past few months and currently amounts to EUR 84.1mn. We continue to expect a stable and positive performance in the coming months (the May indicator suggested a performance of about +0.3%). Outflows from the fund are financed on an ongoing basis by reducing the weighting of the highly weighted fund components in the umbrella fund.

The fund is currently invested in 16 target funds, one of which is being divested. The fund's investment ratio has been kept very high, with the average account balance in the low single-digit percentage range. Since its launch, the fund has achieved an average performance of +1.87% p.a., with volatility of 0.61% over the past 36 months. Despite difficult phases such as the Covid pandemic and wars, 78% of the months over the past five years have been positive.

What were the dominant developments on the global microfinance markets in the past months?

The global microfinance market continued to develop dynamically during the financial year. The macroeconomic environment presented a mixed picture, with economic strength in emerging and developing countries often strongly decoupled from the economic environment in industrialised nations at a very regional level. Inflation rates declined again in numerous emerging and developing countries. Key-lending rates were recently lowered in many countries where the fund invests. Microfinance companies remained robust despite these conditions.

The war in Ukraine and the Israel/Palestine conflict are causing regional tensions, but have little direct impact on the fund, which has only very small investments in these countries. Growth in the global microfinance market returned to double digits in the past twelve months, with numerous new loan agreements signed with microfinance institutions (MFIs). The trend towards lending in local currencies continues to grow. Local currencies achieved a mixed performance vis-à-vis the US dollar during the financial year, although the dollar weakened in the international environment, particularly in recent months, due to emerging trade and tariff conflicts. There were no major shifts in regional weightings. Central Asia, South/Southeast Asia, the Pacific region, and Latin America offer significant growth potential. The capital base of the large MFIs remains sound, with the PAR 30 ratio, which measures the proportion of microloans that are at least 30 days past due, recently stable at around 4.5%–5.0%, and microloan default rates significantly lower.

What are the expectations of your fund management team with regard to global economic development and trends, among other things, for the second half?

We expect uncertainty to remain high in the second half of the year due to US trade policy and geopolitical tensions. That being said, the market appears unfazed by this, with equities at record highs and low credit spreads. This is partly due to US President Trump's frequent backtracking, but also to the continued healthy fundamentals of companies and solid economic data. The fund's high current yield of 5.3% and the already very weak starting level of the US dollar against the euro also point to a positive performance outlook.

How broadly based is microfinance worldwide – and where does it have the greatest potential?

Microfinance is a global topic, with ERSTE RESPONSIBLE MICROFINANCE currently investing in 85 countries and well over 400 individual microfinance institutions. The most important regions are South and Southeast Asia, Central Asia, and Central and South America. Strong demand continues in countries such as Uzbekistan, Georgia, and Mongolia, as well as in populous countries such as India, Vietnam, and Indonesia. There is still great potential in Africa, but many countries do not offer ideal conditions due to regulations and the political situation, although individual countries such as Kenya are also showing strong development. The size of microloans varies greatly around the world, as loans to small and medium-sized enterprises have also increased in recent years. The average loan amount ranges from EUR 3,000 to EUR 4,000. Studies show that default rates for microloans are below 2% worldwide.

We monitor various key figures such as PAR 30, which indicates the proportion of loans with repayment delays of 30 days or more. For large microfinance institutions, this figure remains stable at between 4.5% and 5%. Thanks to joint efforts to defer or restructure repayments, the effective default rates are significantly lower. On average, 65% of the fund's borrowers are women. Here, too, studies have shown that women who take out microloans tend to have a higher repayment rate. This may also be due to their sense of responsibility for their families and their children's education. The rural population – another important issue in curbing rural exodus – accounts for 54% of loan customers. Investments in microfinance institutions, which account for an average of 6-7%, performed well for the most part in the past year.

Why does microfinance remain a growth market with stable demand?

Global demand for microfinance products – not only loans, but also other financial services such as microinsurance – remains very strong. We therefore expect the microfinance market to continue growing strongly and dynamically in the current year. Microfinance institutions that are required to publish regular balance sheets in order to obtain financing are generally well capitalised. Compared with previous years, higher interest rates were achieved for loans from MFIs in the course of the year, and this effect is also being felt at ERSTE RESPONSIBLE MICROFINANCE with a certain delay.

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