“The big picture is less bad than we thought a few months ago. The worst risks of a very severe recession or energy rationing have abated. The past year has been a lesson in humility when it comes to economic forecasting.”
— Frederick Ducrozet, Head of Macroeconomic Research at Pictet Wealth Management
Our thoughts are with the people of Turkey and Syria, and we extend our sincere condolences to all who lost loved ones in the recent earthquakes that have hit the region. To the people of Ukraine, we continue to hope for a peaceful resolution to war.
Both economic and financial markets had a tough time last year. Not long ago, expectations of a global recession were widely assumed. But many market indices have started off strong in 2023, their best start to a new year in decades. And consumers have managed to cope with economic turmoil. Optimism seems to be re-emerging, having acknowledged that there is still a reasonable case for pessimism. Central banks have their work cut out for them to “get inflation under control”. Their determination to return inflation to a target of 2% is leading to higher costs for business loans and mortgages across Europe which, in turn, are holding back economic growth.
With a strong dollar and US interest rates shooting up from near-zero to between 4.5 per cent and 4.75 per cent, lending to micro-SMEs in developing economies is challenging. There is, however, real optimism within the global impact lending market. According to a recent article in the Financial Times, “Fund managers are optimistic that the booming market for impact lending to small businesses in developing countries can survive sharp increases in global interest rates, after coming through the coronavirus pandemic relatively unscathed.” This optimism stems from the global impact lending market currently sitting at over $1tn as a result of investors seeking investments that can make a positive impact on society.
At AGC, during the course of 2022, we made good progress with deploying capital in a sensible way and we continue to have a deep investment pipeline. 2023 has started very positively for us and we have delivered a strong 50/52bps financial return for January. Since we changed the way in which we charge interest on our facilities to a new floating rate model, we are increasing the target net return range of our fund to 5-7% per annum going forward. We feel confident that in the current interest rate environment and with a solid focus on good portfolio management, we will be able to achieve returns within this range.
In other news, our Co-CEO Sudha Bharadia gained insight into how cashflow momentum is helping a Colombian business, Vive Agro, and their agricultural operations to move forward. In our case study, we share the story of how receiving reliable financing in collaboration with our financial institutional partner, can help businesses contribute to smart economic growth. As the company leads in its sector for employment opportunities and ethical practices, their strategic plans for 2023 are certain to continue innovating responsible farming methods.
As always, if you have any comments, suggestions or concerns, please do not hesitate to contact Sudha Bharadia, Co-CEO at firstname.lastname@example.org.
The AGC Team