Social capitalists attending the World Economic Forum are looking at raising capital from the oil-rich region to fund profitable philanthropic initiatives such as microfinance businesses.
"We hope that in the next two weeks, we'll be able to raise funds from here. Size-wise, we're looking at sky is the limit," Jean-Philippe de Schrevel, chief executive officer of BlueOrchard, a Geneva-based fund managers, which manages $1 billion (Dh3.67bn) worth of assets in 40 countries.
The company is set to invest in 20 hospitals in the rural areas of India and is also planning to develop low-cost housing units in Pakistan.
"So far, people that I have met in this region are at the least intrigued and at the best very interested to invest. And it is wonderful if people here can share global responsibility and sustainable development," Schrevel told
Emirates Business.
He said more and more investors are being enticed to invest on projects that give away something to the society while getting significant returns as well. "In our firm, those are the reasons why investors invest with us."
Schrevel, a member of the Philanthropy and Social Investing Council, added that profitability in microfinance projects compares well to traditional investments and are also less risky compared to conventional instruments.
"We are making seven-eight per cent net profits. Compared that to the 40 per cent loss recorded by traditional financial firms and you will see that we are in fact less risky," he said.
The growing realisation of the importance and positive effects of microfinance on poverty, on microenterprises or on households has generated considerable interest in its potential to reach low-income families who have traditionally been sidelined by formal financial institutions.
Opportunities to invest in funds geared towards microfinance have thus increased over the last few years, particularly focussing on investments that support sustainable development activities at the local level.
Interest has also been focussed on decentralised investment – where the local economy is emphasised, and local profits and benefits go back to the local economy.
Today, there are more than 100 MFI (microfinance initiatives) in the Arab region providing financial services to approximately 3.5 million Arab micro-entrepreneurs.
Over the past five years, these MFIs have achieved exponential growth and strong performance. Together, MFIs from Morocco to Yemen, from Egypt to Saudi Arabia have an outstanding loan portfolio of $1.5bn (as of year-end 2007).
As regulatory frameworks change regulations to allow for non-banking financial institutions and commercially licensed companies, the window for investment in small projects is opening.
Microfinance also caters to small to medium-sized banks and encourages relatively small projects. Although splashing liquidity, microfinance projects put in place strict credit process, he said.
"The quality of repayment in these markets is also much better. There's only around one per cent of default and that is far better than consumer of mortgage financing. We don't treat our customers as charity but as a client and that gives them self-esteem, which in turns empower them," he added.
DUBAI TO BE HQ
The World Economic Forum yesterday announced that Dubai will be the permanent headquarters for the annual summit on Global Agenda.
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