Alterfin Impact+ Programamplifying impact, reducing risk
A programme that protects the financial stability of the Alterfin cooperative
and enables it to finance more high-impact partners
The Alterfin Impact+ Program, or AIP (formerly the Alterfin Guarantee Fund), is a non-profit organisation separate from the Alterfin cooperative, funded by donations. It plays a central role in Alterfin's activities. Through it, we can also finance partners with high impact potential but higher financial risk.
The programme's mission
Every business needs financing to grow. But in rural areas, especially in low- and middle-income countries, getting a loan is very difficult.
For more than 30 years, Alterfin's role has been to finance microfinance institutions, SMEs and cooperatives that would otherwise have no access to financial markets. Naturally, this financing carries more risk.
This is where the AIP comes in. It reduces that risk and so extends Alterfin's impact through three mechanisms:
We lend to organisations that are still financially fragile but have strong social or environmental impact. By providing credit guarantees, the AIP covers all or part of the outstanding amount owed to Alterfin if one of them can no longer meet its repayments. This reduces our risk.
We select our partners against rigorous social, environmental and financial criteria. Yet some do not yet have the financial strength that conventional banks require; those banks judge the risk of non-repayment too high.
How can we finance them while protecting our cooperative members' capital?
To meet this challenge, Alterfin's founders created the Alterfin Guarantee Fund, now the Alterfin Impact+ Program. It can compensate Alterfin for losses if a partner defaults, but only for a minority of partners: those for which our investment committee has granted a guarantee.
Good to know: before turning to the guarantee, we first take other measures (closer monitoring, negotiation, restructuring where needed, etc.) to enable repayment. Only if these steps fail can Alterfin decide to call on the AIP guarantee.
We often lend in local currency, which means we take on the currency risk: the effect of unfavourable movements between two currencies. The AIP can cover all or part of this risk for Alterfin.
In many of the countries where we invest, local currencies are less stable than the euro or the US dollar.
Suppose we granted a partner a one-year loan in euros, and their country's currency lost 5% of its value over that year.
On top of the amount borrowed and the interest, the partner would then have to repay roughly 5% more in exchange-rate costs alone. A single swing in the financial markets is enough to put them at risk.
That is why we lend in local currency: the currency risk moves from the partner to Alterfin, which can have it covered by the AIP.
We believe the best way to limit the risk of our investment is to do everything we can so that our partners grow stronger.
To that end, the AIP finances targeted technical assistance projects, designed around specific areas for improvement identified together with the organisation concerned: for example, governance and management, market access and product development, the range of financial services offered, or capacity building.
Process:
- Alterfin selects partners based on their long-term impact potential.
- We guide them through the administrative process and work with them to identify qualified local consultants.
- Results are assessed through dedicated surveys, along with regular monitoring and reporting in the two years after the project closes.
Over time, we have seen that our partners needed more than loans. A growing organisation has to rethink its processes, streamline how it works, go digital and find new markets. But reorganising and training often call for outside expertise, and not every organisation can afford consultancy services.
That is why, in 2021, technical assistance projects were added to the AIP's tools. The AIP currently allocates a total of €50,000 a year to them.
How to contribute to the Alterfin Impact+ Program
A donation to the AIP is not an investment: it does not entitle you to shares or a dividend.
- Through a donation, at any time.
Thanks to our partnership with the King Baudouin Foundation, donations to the AIP made via the Foundation qualify for a 30% tax reduction, from €40 a year. - By donating your dividend.
For cooperative members only: each year, you can choose to give all or part of your dividend to the AIP. If made via the King Baudouin Foundation, a donation of at least €40 a year qualifies for the same tax reduction. - By passing on your assets.
Donate your shares to the AIP or name the AIP in your will. To find out more, see our page on gifts and legacies.
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