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[Music]
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[Music]
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we're meeting today with Jean Philipe
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dosal founder of new Orchard a leading
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micro finance company and CEO of bamboo
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Finance welcome to knowledge award thank
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you very
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much would you offer a brief history of
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blue Orchard its Mission accomplishments
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and um and how you grow it into a$1
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billion fund over 10 years well the the
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original idea was uh uh to seek how to
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promote micr Finance globally because um
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we were convinced that micro Finance if
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properly done uh can have a tremendous
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impact on on on poverty uh what was
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attracting us as well well to micr
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finance was the ability to have um in
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one go an investment uh for social
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impact and financial returns and this
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idea that you don't have to trade uh
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social impact for financial returns and
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that you can actually achieve both at
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the same time so that was very appealing
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to us especially as X you know wart and
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grat um and uh so the combination of
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willing to do something good and using
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the traditional tools of mainstream
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Finance was was was attractive we were
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in in Geneva surrounded by you know
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private Banks and and Wealthy uh family
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offices and uh the ID very quickly
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emerged to sort of create a for-profit
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management company asset management
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company trying to channel private
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investors money into micro finance and
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delivering for them financial and social
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returns so that that was the beginning
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that you know that's the DNA of the
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company we called it blue Orchard so
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that people would remember the name uh
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we didn't call it mic micro invest or
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micro you know something um and um and
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then yes we started with a a very uh
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small seed uh money in our first fund
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with $10 million essentially seed money
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given by a bank um that took the risk of
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trusting us um and then progressively
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through our investments and then uh you
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know participations to conferences
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discussions with investors we attracted
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an increasing number of originally
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individual investors coming at micr
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Finance intrigued by the social impact
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and essentially impact First Investors
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and then you know realizing that
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actually they were getting their Capital
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back with some decent returns and some
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Market level returns in other words they
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well I don't know if you call it Market
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level returns it it all depends on your
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risk perception of micro Finance but we
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consider that given the the low default
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rates of micr Finance portfolios um over
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the actually a long period of time
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delivering a net Li plus 2% in US dollar
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uh in a very Diversified portfolio of
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microf Finance Loans to microf finance
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company was a market return and um
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actually I think uh institutional
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investors um voted with their feet
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because after four or five years of
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track record of um you know attracting
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wealthy individuals we suddenly uh were
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able to talk to uh fun of funds uh
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Pension funds and even um in the last
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two years Sovereign wealth fund so we we
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saw it as a as a grading increase in our
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of course investment processes but also
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uh as a as a as a demonstration that we
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could actually deliver the returns and
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and and be very effective investors in
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micr finance now that was blue Orchard
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um from the start you know very focused
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on fixed income in micro finance and
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then around 20072 2008 we decided to go
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into private Equity um because it was a
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need of the sector because we knew the
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sector quite well as well uh and were
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able ble to identify the the good
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opportunities for Investments and we
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created a second company called
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blockchain Investments to do private
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Equity investments in micr finance and
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then at the same time um we realize that
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uh obviously Financial inclusion is
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important but it's not the end of it
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right it's not it's just a little little
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piece of what low-income communities
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need to to have access to they need
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access to healthare you know uh
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affordable housing clean water clean
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energy um and we had this intuition and
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some other people have done it before as
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well um that there were probably out
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there social entrepreneurs uh for-profit
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companies trying to meet the needs of
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those low-income communities in those
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sectors and so we created another
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company called bamboo Finance um to do
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private Equity investments in non-micr
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finance related sectors right and we
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raised the fund uh very much a Pioneer
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fund uh $50 million now uh under
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management um for years you know in
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terms of investment activity and a
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decent portfolio of uh we think
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attractive you know uh portfolio
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companies the goal is the same uh to
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demonstrate to uh mainstream finance
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that you can actually have social impact
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while doing what they do every day which
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is investing money for financial returns
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and the reason why we're so much focused
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on on this combination of Social and and
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financial returns is um that
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although we admire philanthropy and and
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charity we believe that uh it will never
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be sufficient enough to to tackle the
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size the magnitude of the problem of
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poverty in the world and therefore
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private capital and mainstream those
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huge pools of private Capital waiting to
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be deployed should be deployed to also
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solving the most critical issues of the
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world today so that's what we're after
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right uh and and our success is uh uh
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you know important but beyond our own
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little personal success what we're
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really after is demonstration
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replication and as we've seen in micr
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finance I mean 10 years ago when we
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launched the dexia microc credit fund
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with blue Orchard we had $10 million and
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we were probably the one of the two
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funds out there in the in the market uh
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today if you look at the the World Bank
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uh website C gap on on on micr finance I
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think you have 100 micr Finance
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investment vehicles uh and and you know
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channeling collectively something like
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six to8 billion US dollars to the micr
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finance industry so and that's in the
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space of 10 years um the idea with
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bamboo Finance today and our private
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Equity business is to actually hopefully
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do the same and then um you know be
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competed against be replicated be copied
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and then progressively be called a
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sector because if you're by yourself
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you're not a sector and you're not an
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asset class right so uh you're a Pioneer
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you're a Pioneer you you you you try to
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open paths and and and and show what
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what what you what people could do but
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then when you start talking about you
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know five six eight 10 billion dollars
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uh a multitude of uh of practitioners
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and those practitioners start talking in
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networks uh and start organizing
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themselves um um and start discussing
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about uh how do you rate a micr finance
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company uh how do you assess your social
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impact uh you developed a common
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vocabulary a common language that is
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recognized by mainstream investors then
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you progressively become an impact
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investing sector uh I don't think we're
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there yet uh but we're you know
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progressively going there so how big is
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bamboo Finance so together uh bamboo
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Finance is a a 25 person uh Team
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managing $250 million of through two
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private Equity Funds um and we're close
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to full investment and are about to
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launch you know generation funds so so
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250 million in four or five years in
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four or five years exactly and and
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people were actually amazed that we
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could raise this amount of money in a
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new field in in in what is uh uh a
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difficult financial situation worldwide
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right I mean 2008 2009 were not
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precisely the best years to raise money
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we raised $250 million on on on micro
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finance and non- microf finance so very
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happy about that the mix of investors
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that we have in our funds is is also
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quite interesting we have you know uh
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obviously High net worth individuals
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family offices but also um uh
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significantly actually in micr finance
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Pension funds European Pension funds um
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and then we were very proud of being
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able to convince uh an Abu Dhabi based
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Sovereign wealth fund to uh to test uh
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you know micr finance and impact
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investing in bamboo so um so that that
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makes for a very uh uh interesting uh
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key investor group if you want so
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they're investing in the in the blue
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Orchard micr Finance in the bamboo in
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the bamb in the bamboo private Equity
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Fund in both funds exactly so uh bamboo
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operates globally also then yes we
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operate globally uh as a matter of fact
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we have now offices in Bogota uh in uh
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Singapore we're looking at opening in
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East Africa uh somewhere to cover uh
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East Africa which is a very active
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region for uh social investing we have a
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a smaller office in San Francisco and of
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course our BAS in Luxemburg Geneva and
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Zurich uh and the ID is to progressively
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have most of our investment management
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capacity in in the regions so as a
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private Equity Firm uh you are then
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investing in companies around the world
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and tell me what kinds of companies you
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look for a particular size a particular
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stage of development and of course I'm
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assuming in a particular sector because
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they're they're aimed at some kind of a
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social impact result sure so so um uh
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typically so we're investing private
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Equity growth stage uh growth stage
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today in Impact investing uh means
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tickets you know of about 3 to7
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million um we are investing and looking
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essentially uh for the first fund uh at
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all kinds of uh sectors and companies we
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wanted this first fund to be fully
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Diversified by sectors and by
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geographies but we quickly realized that
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a few sectors are are emerging in terms
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of uh absorption capacity and and impact
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one is Healthcare uh another would be
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affordable housing a third would be
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energy those are clearly the the three
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you know prominent uh sectors of
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investment for us um we'd love to do
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some educational deals we have found uh
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two so far that were in our opinion
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worthy of Investments and um so growth
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stage means that those companies for us
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have a proven track record have tested
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their their business models in the
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market have a a beginning of a revenue
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they don't need to be totally break even
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yet uh but they need to have a very uh
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defined and aggressive growth plan and
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and and the capacity to deploy the
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equity that we're investing of course we
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will never take majority Stakes the the
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the objective for us is not to to own or
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control uh it's to be one of the
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partners of this group of initial
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promoters we uh take a very active uh
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relationship to the portfolio companies
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we are sitting on the board that's a a
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condition Quon uh we uh and then we
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engaged uh we engage on a monthly basis
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very very actively or investment
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managers have a limited set of portfolio
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companies three to four portfolio
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companies maximum that they're
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monitoring and always on a four eyes
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Principle as well um and they bring uh
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very significant value added I believe
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in terms of uh uh organization of
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governance in terms of definition of
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business plan in terms of financial
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management uh operation and um so far I
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think the feedback uh from the portfolio
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companies was very positive in terms of
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our engagement do you help do you help
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them to find new personnel and talent as
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they grow absolutely so so actually as a
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matter of fact on our website WE Post
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their job postings uh we we we help them
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look for a key personel uh obviously
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we're we're you know CFO level CEO um in
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the organizations um for some of them we
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even help in fundraising um uh you know
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see for Co investors uh introduce them
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to our Network um yeah could you give me
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some examples of the kinds of projects
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that you've done so far um one example
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that we are very proud of is uh an
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investment We Made in India uh in a
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chain of rural hospitals uh problem in
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India 80% of the health care sector is
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urban when the needs are rural 80% of
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the healthcare sector is tertiary care
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when most of the needs are primary and
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secondary we uh met a group of doctors
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had started their hospitals uh no
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thrills high quality 50 B hospitals in
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one state in kataka they had four
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hospitals two of them break even two of
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them on the way to break even and they
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had this grandio plan of you know going
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to 50 Hospital serving a million
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low-income people well today uh two
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years after our investment they have 12
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hospitals they serve 250,000 patients
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from low income communities in cartica
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they're entering a second state and you
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know they just closed an additional
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round of of fundraising attracting you
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know much larger private Equity Funds
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than ours which we see as a success um
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and I think they'll be on track to to
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getting their 50 hospitals in two to
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three years and serving this 1 million
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um uh client or patient uh Bas and then
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this is just the beginning because if
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they have proven this business model you
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imagine how many states you have in
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India and how many you know low income
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you have in India it's just mindboggling
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to so the beginning of you defining a
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sector here absolutely uh and and of
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signaling to much larger private Equity
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Funds that there is a
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sustainable financially attractive
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business model but with huge social
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impact and the fact that we have or we
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will be proving hopefully that the
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intrinsic part of the business model is
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helping low-income communities get
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access to Primary Healthcare will um so
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we hope um prevent follow on investors
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not to divert the mission of the of the
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company right because in itself serving
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low income in rural areas will be proven
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very profitable so that's at least the
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the the the theory that's what we what
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we hope for we have not made any exit
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yet uh on the impact investing where the
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jury is still out in terms of our will
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fair for our investors but we believe
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that we have a strong case you mean when
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it comes to when it comes to exiting our
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private Equity Investments obviously
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that's one example another example that
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I find very uh very attractive again in
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India is um one of U electrification of
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uh uh villages in in in Bihar which one
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of the poorest state in in in India um
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and and that's you know I'm not an
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engineer but essentially the rise husk
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of the rise production is then burn to
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produce from biomass produce electricity
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uh through gasifiers uh that they can
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install in in villages I mean to me uh
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again knowing that we'll be investing a
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couple million dollars alongside others
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uh in this company help them Electrify
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the whole of bear uh villages that have
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never seen the light in in in their
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history I think it's a it's a
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fascinating story as well um again on
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track to uh to I think being also a
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solid Financial investment but with
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tremendous social impact another example
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um let's see
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um access to education to higher
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University education in Mexico I mean
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uh hundreds of thousands of poor
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students with no access to University
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and still capacity to do it right with
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skills intelligence we are invested
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since two years in in a company lending
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money to very poor people to get access
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to
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University thinking that we'll hopefully
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with them and with others uh be able to
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to send uh you know the students to to
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universities is is is going to be very
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rewarding uh socially for the people
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financially for or investment but also
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think about the human capital of the
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country that you're building uh for
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generations and for the very long term
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that's also very satisfactory so I mean
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those are three examples and and there
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are many more but um tell me how you see
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um bamboo evolving over the next 3 to 5
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years oh if I had my way
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I I think
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um one thing I've learned over the last
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the last 10 years is that even though
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you you grow fast you don't have to to
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rush it um better to and again in the
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spirit of being able to demonstrate
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something better to build steadily your
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case and deliver results to your first
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set in of investors and then build from
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there and and and and send very positive
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signals so today we manage $250 million
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were 25 people you know working from
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three Regional
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Offices my goal for the next two years
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is probably to double that um with
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economies of scale so you know probably
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less stuff as we as we increase or our
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our funds on of management that's one
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set of ambition that's very selfish you
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know uh having also exited a few
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Investments and and proven to our
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initial investors that they were right
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to trust us uh prove to uh all the
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wouldbe investors that they should come
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come into the sector and then and then
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and then hopefully contribute to the
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learning of the industry and the
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creation of the sector by sharing best
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practices and and and examples and uh
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hopefully returning to uh knowledge at
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foron in five years and telling you
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about great stories and and exits that
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we will have
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realized uh there there's been a lot of
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publicity uh when it comes to microf
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finance now just shifting back I guess
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to Blue Orchard um over the last you
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know several months uh some micr finance
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companies uh um have had problems
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there's been more defaults than there
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had been originally as it got so
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successful that success saw some of even
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the nonprofits develop a profit making
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arm uh and then some commercial Banks
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moved into this space And so there's
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this perception U that that there's you
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know the phrase is bleeding the poor for
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for example right um and so I'm just
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wondering what your what your view is of
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that um and how uh how you your company
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views that and and whether how how
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extensive that problem
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is it's a difficult question um and one
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that calls for a a balanced answer
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um I do think that um problems are still
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limited to a few geographies and uh uh I
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would call saturated
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markets I think they usually are
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triggered by a combination of causes
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some internal some
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external I don't think well the first
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thing I would say is that it to me and
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to Bamboo and blue Orchard it doesn't
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put into question the role of micro
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Finance
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fundamentally and and the objective of
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financial inclusion for the so-called
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unbankable people and so so let's not
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throw the baby with bath water that's
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that would be the first answer um so yes
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Financial inclusion is important yes
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micr Finance is important and that's why
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I said at the beginning if you do it
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properly micr Finance works anywhere
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right now where do you see the problems
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uh fast uh and exponential growth of
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some companies usually uncontrolled with
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weak management with weak weak
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monitoring with weak management
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information
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system um and essentially problems that
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are building and are factually hidden by
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the sheer growth of the assets and the
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portfolio right that could be one the
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other um probably
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uh an excess of competition in some
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saturated markets I mean urban markets
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in Central America where you have 10 15
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micro finance companies chasing the same
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you know low income communities in the
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same slums or in the same suburbs I mean
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of course lead to to over ineptness of
00:20:47
clients um and and you have some I would
00:20:51
say lenders or micro Finance operators
00:20:54
that are less regarding than than than
00:20:57
others when it terms when it when it
00:20:59
comes to to um uh credit worthiness and
00:21:04
and and checking the credit you know
00:21:07
quality of of the would be borrower so
00:21:11
probably some uh overheating or over
00:21:14
competition in in those Urban centers
00:21:16
and then um probably some meula from
00:21:20
from the micr finance investment
00:21:22
vehicles where you know at the beginning
00:21:25
as I said we were by ourselves and the
00:21:27
world was ours
00:21:28
uh when suddenly you have 100 funds
00:21:31
chasing the same 200 micr finance
00:21:33
companies willing to land to those micr
00:21:35
finance companies then suddenly the same
00:21:37
thing happens just as micr Finance Banks
00:21:39
become a bit more
00:21:42
uh uh uh softer or less regarding when
00:21:46
it comes to credit quality of their own
00:21:48
borrowers some micr Finance investment
00:21:50
vehicles may have done the same thing
00:21:52
with micr Finance Banks so so that's uh
00:21:55
unfortunately a a NE negative
00:21:58
consequence of of success if you want um
00:22:02
now to the opposite you have some
00:22:04
geographies where you have uh a huge
00:22:07
need of resources you have micr Finance
00:22:09
operators because they're operating in
00:22:11
difficult you know legal environments or
00:22:13
political environments in some parts of
00:22:15
Africa uh that do not get access to
00:22:17
finance so is there a need for finance
00:22:19
and should this Finance be challenged
00:22:21
where it's really needed absolutely but
00:22:23
to me again it doesn't put into question
00:22:26
the need of micr Finance and um also
00:22:29
what has been termed the
00:22:30
commercialization of microfunds see when
00:22:33
we we started and and I started more
00:22:35
than 12 years ago but uh when when when
00:22:37
we started looking at micro Finance
00:22:40
programs or micro Finance operations
00:22:44
first of all it was called micr credit
00:22:46
not micro finance and it was usually
00:22:48
credit only institutions not for profit
00:22:51
or for profit that were lending to you
00:22:54
know small
00:22:55
entrepreneurs but the idea has always
00:22:57
been at least for us and a few players
00:23:00
in the industry to actually
00:23:03
progressively
00:23:05
specialize grow professionalize those
00:23:07
credit only companies into progressively
00:23:10
full-fledged Banks because what poor
00:23:13
people really need is not so much credit
00:23:15
in fact it's savings the first the First
00:23:18
Financial need that poor person will
00:23:19
tell you is is actually be able to put
00:23:22
at work the money that he has saved in
00:23:24
some safe place convenient location and
00:23:27
getting him some return on his money
00:23:29
instead of putting it you know under the
00:23:31
mattress that's the first need and you
00:23:33
only get that if you have a Commercial
00:23:35
Bank regulated so to me the the term
00:23:38
commercialization is very positive the
00:23:40
fact that you have specialized very
00:23:42
professional commercial microf Finance
00:23:44
Banks able to offer saving Services
00:23:47
different kinds of credit services but
00:23:48
also now wiring transfers and even some
00:23:51
insurance uh is is a very positive trend
00:23:55
that I hope will not be put into
00:23:57
question right now
00:23:58
obviously as as always when you have
00:24:00
fast growth and some saturation and high
00:24:03
competition and and you know
00:24:05
excitement you have some players uh that
00:24:09
that you know believe that they can take
00:24:11
advantage of uh of an an attractive uh
00:24:15
environment and and business development
00:24:17
and then sometimes uh essentially spoil
00:24:19
the market for for everybody so I really
00:24:21
think that that's what happened okay
00:24:24
well thanks very much for joining us
00:24:25
today my pleasure appreciate for coming
00:24:27
by
00:24:30
[Music]
