Glossary
- Assets under management (AUM)
- AUM refers to the volume of assets that are managed by a financial institution (banks, asset managers, fund managers etc.) on behalf of their investors.
- Conventional investment
- Conventional investment exclusively focuses on generating a financial return.
- Credit bureau
- A credit bureau collects data about outstanding or previous loans of borrowers and makes this information available for microfinance institutions and other loan service providers. Credit bureaus boost the efficiency of lending, and at the same time effectively prevent over‐indebtedness.
- Double bottom line (DBL)
- The term “double bottom line” refers to a new way of extending the conventional bottom line that solely measures financial performance. It adds a second bottom line to the aspect of performance in terms of positive social impact. An increasing number of companies now opt for a means of measuring performance that includes social aspects.
- Development finance institution (DFI)
- DFIs are financial institutions that occupy the space between public aid and private investment. Very often they provide funds for investments in developing countries, for which there are not enough private funds available. Examples of development institutions are the German Development Bank (KfW), the Dutch FMO or the Asian Development Bank (ADB).
- Economically active poverty
- Economically active poverty refers to persons who have some form of employment and reliable income and who are not in food deficit or destitute. The distinction between extreme, moderate and economically active poverty is based on whether a stable and secure income can be generated that averts existence‐threatening over‐indebtedness, secures a certain degree of healthcare and permits the accumulation of assets.
- Extreme poverty
- Extreme poverty refers to living conditions where a person has to get by on less than $1.25 a day, the minimum subsistence level. According to estimates, at least 1 billion people are afflicted by extreme poverty.
- Grameen Bank
- Grameen Bank was the first ever microfinance institution worldwide, and was founded in 1983 by Muhammad Yunus, in Bangladesh. Grameen is still operating successfully in the microfinance industry today. The truly outstanding character of this bank is that 90 per cent of it is owned by its borrowers, while the remaining 10 per cent is in the hands of the Bangladeshi government. The enterprise and its founder Yunus were awarded the Nobel Peace Prize in 2006.
- Group loan
- The term “group loan” refers to a number of people who join forces in order to take out a loan. The members of the group vouch for each other and ensure timely loan repayments. The key element with this type of loan is the sense of mutual trust among all the borrowers involved.
- Impact investing
- Impact investing is a form of investment that generates both financial and social returns.
- Microfinance investment vehicle (MIV)
- MIVs are the link between investors and microfinance institutions. MIVs include funds that provide private and public investors with an efficient and diversified investment in microfinance.
- Microfinance
- Microfinance was called into life by Muhammad Yunus and his Grameen Bank in a bid to combat poverty in India and Bangladesh. Microfinance provides commercial financial services to those afflicted by poverty.
- Microfinance institution (MFI)
- MFIs are the contacts in the field for micro entrepreneurs. It is their responsibility to assess a borrower's creditworthiness, grant and monitor loans, and they are in charge of the customer care management.
- Microloan
- The term “microloan” refers to a loan, usually between a hundred and a few thousand dollars, that is commonly handed out without collateral. Microloans are given to impoverished people that have no access to the financial system.
- Micro entrepreneur
- A micro entrepreneur is a person who operates a micro enterprise. The term generally refers to people who operate their business either single‐handedly or together with other members of the family in order to make a living. Occasionally, a handful of other workers may also be involved. Within the context of microfinance, a microloan enables micro entrepreneurs to either establish or expand their business.
- Moderate poverty
- Moderate poverty refers to segments of the population with an income that only just covers the basic necessities in life such as minimal calorific intake, water, clothing, accommodation and basic healthcare.
- Non‐governmental organization (NGO)
- A non‐governmental organization is a private, independent and non‐profit‐oriented organization formed to pursue a social and socio‐political objective. The issues addressed by NGOs run the gamut of human concerns: environmental protection, human rights, development assistance, anti‐discrimination, migration and refugee issues, homelessness charity, drug‐counseling services etc.
- OECD
- The Organization for Economic Co‐operation and Development is an institution that comprises 34 member countries. The OECD's main objective is to promote higher economic and social wealth globally.
- Philanthropy
- Philanthropy denotes sponsoring or the charitable donation of financial means – with the aim of creating a positive social and environmental impact on society. Financial performance is thereby considered to be irrelevant.
- Poverty
- The term “poverty” denotes living conditions where a person has to manage on less than $2 a day. According to estimates, about 2 billion people live in poverty.
- Social performance
- Social performance measures the sustainable social impact that a borrower's financial commitment achieves (e.g. with respect to food, healthcare, education, etc.). Social performance and financial performance (profitability) are the cornerstones of microfinance. While profitability can be easily monitored, the measuring of social performance requires a range of sophisticated tools that manage to identify the nature and degree of social impact.
- Technical assistance (TA)
- TA denotes a particular type of consulting service provided to MFIs and their borrowers. Its goal is to promote social and economic advancement. TA fosters the efficacy and improvements of e.g. internal processes, or the strengthening of IT systems or risk management.
- Triple bottom line (TBL)
- Instead of focusing solely on its finances, the triple bottom line gives consideration to a company's social, economic and environmental impact. It therefore describes the separate financial, social and environmental “bottom lines” of companies that commit to it in a bid to make their contribution towards a sustainable development.
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