Ethical Investments and Microfinance Mutual Funds: An Empirical Analysis
This paper discusses the importance of evaluating the asset performance of microfinance investment vehicles (MIVs) in understanding the risks and benefits for microfinance investors.
The paper analyses MIV returns using market data. Given the boom in socially responsible investment markets, the paper states that improving fiduciary practices of microfinance mutual funds can create a new investment opportunity for investors who seek a reasonable risk adjusted return and low international exposure, with a high emphasis on social ethic aspects. Findings include:
- Microfinance, as an asset class, offers an adequate risk adjusted return and is weakly correlated with global markets;
- Investment in MIVs can positively affect a well-diversified portfolio in term of risk and return;
- Investing in microfinance can offer protection during financial turmoil.
Finally, the paper shows that measurement of microfinance mutual funds performance cannot disregard the social component, which should be carefully measured so that MFIs do not use vague social goals as an excuse for poor performance.
