“When interest rates rise, it’s usually good news for banking sector profits since they can earn more money on the dollars that they loan out. But for the rest of the global business sector, a rate hike carves into profitability.”
— James Garret Baldwin, Consultant, Writer and Editor at Investopedia
With the latest inflation data coming in and both the FED and BoE deciding to pause rate rises for now, it seems like we have reached the peak of the rate cycle. Developing markets have already peaked in terms of interest rates with economies from Mexico to South Africa deciding to keep rates steady ahead of the FED’s decision, rather than continuing to increase, and some like Poland even cutting rates. That said, inflation is still running hot globally and the expectation is that the elevated rates will need to persist for a longer period in order to fully tame inflation. Notably, the FED is signaling that high rates will continue well into 2026, in contrast to the market’s expectations of a quick return to historically low rates after the peak is reached.
The rising rates over the past year have been beneficial for the yield we have been able to generate on our credit facilities as we moved to variable rates and benefited from the rising rate environment. Despite the rapid rise in rates, our partners and the underlying SMEs have proven to be quite resilient and we have not noted a material increase in credit events. Given current levels of inflation, we do not expect that rates will materially decrease within the next year and therefore expect that we will continue to be able to generate higher yields. However, this does not mean that we are resting on our laurels. In anticipation of the eventual turning of the cycle and decreasing rates, we have placed floors on all variable rate facilities and more importantly are working with partners to build strong relationships and ensure that the value provided by our offering remains competitive in a lower interest rate environment.
On the impact front, we wanted to highlight our inaugural SME Client Investor Roadshow in Bogota, Colombia that took place on September 5th and 6th. During the event, select investors embarked on a meaningful journey, engaging directly with AGC’s partners and Colombian SMEs, and gaining insights into the tangible impact of their investments on local communities and businesses. AGC’s Co-CEO Sudha Bharadia emphasized the importance of witnessing the on-the-ground impact of their investments, highlighting the bridge created by the fund to support the growth of SMEs. Calvert Impact Capital and a private investor echoed these sentiments, commending AGC’s close relationships with local financial institutions and their clients, while also praising the impressive and thoughtful business leaders they encountered. The event underscored the tangible and positive effects of AGC’s investments on SMEs, entrepreneurship, and livelihoods in Colombia, leaving participants inspired and eager to support AGC’s mission further.
We are now gearing up for conference season with a lineup of impactful events on our calendar. Sudha Bharadia will be attending and speaking at the 2x Global event in Luxembourg from September 27th–29th; the GIIN Investor Forum in Copenhagen on October 3rd–5th; the 100 Women Impact Investing Symposium in New York on October 10th; Apex Invest London on October 18th; and SOCAP in San Francisco on October 23rd-25th. If you will be attending any of these events, please do let us know, we would love to have a coffee with you.
Lastly, we wanted to take a moment to remember a dear friend of AGC and a pioneer in gender-smart investing, Suzanne Biegel, who sadly passed away recently. We will miss her fierce, passionate, and determined leadership but are grateful for the legacy she leaves behind. We are thankful that we were able to participate in so many of the initiatives she catalyzed: the Wharton Social Impact Initiative, Gender Smart Summits and Toniic events. We extend our deepest condolences to her family. She will be truly missed.
At the heart of AGC is staying true to our mission of providing liquidity to SMEs, particularly those that are women owned or women led. Please contact Sudha Bharadia, Co-CEO at email@example.com for further information.