Preventing financial exclusion: microfinance and solidarity finance

1) Products with strong social added value

Microfinance involves offering viable financial services to impoverished clients, notably including self-employed people with small-scale businesses or "microentrepreneurs", who are unable to access the formal banking system. In most cases, these financial services concern credit and savings, but they may also include other specialized services such as insurance or leasing.

Microcredit enables these people to start up a small income-generating activity: a microenterprise. Loans are then paid back thanks to income from this business, which may also allow them to set aside some funds for savings or financing other needs.

2) AXA and microfinance

AXA is focusing on microfinance projects on which it can provide its expertise as a leading financial protection group, contributing to the development of populations by combating financial exclusion. This also represents a first step towards microinsurance. Alongside these efforts, the Group is investing directly in various organizations specializing in solidarity finance.

2.1) AXA World Fund Development Debt

In 2005, AXA IM supported the UN International Year of Microcredit with the AXA World Fund Development Debt fund, which is developing microfinance and supporting local economies, notably in Latin America. The award-winning AWF Development Debt fund, with an equivalent average rating of "A" for portfolio securities, is based on bonds and primarily those issued by supranational bodies and local development agencies as well as short-term securities issued by microbanks.

In line with this focus, AXA IM has invested in the Caja Municipal de Trujillo, one of the best microbanks in Latin America in terms of both its performance and its social impact. This institution in northern Peru is directly financing the activities of more than 90,000 people. The majority of its clients are micro and small-scale entrepreneurs, who were previously excluded from the formal financial system. Similar investments are being made in other Latin American countries, such as Ecuador and Brazil.

2.2) Global Commercial Microfinance Consortium

AXA joined forces with several international investors (Merrill Lynch, Storebrand, CNP Assurances, HP, Cisco, State Street Corporation) and national development agencies (Agence Française de Développement, UK Department for International Development, US Agency for International Development, etc.) to launch the Global Commercial Microfinance Consortium in 2005.

This is a dedicated 75 million dollar investment fund for microfinance institutions in India, Pakistan, Peru, Kosovo, Mozambique and Nicaragua. Loans are notably granted to small-scale entrepreneurs and self-employed workers such as small storekeepers or farmers, drawing on grassroots networks of local people that have already been clearly identified in previous programs by Deutsche Bank -which used to be running this project, and is now in charge of managing the fund. This represents a major step forwards for microfinance, opening up wider access to financing, and AXA is backing this initiative, with some 3 million dollars already committed.

2.3) International Finance Corporation

In 2005, the International Finance Corporation, the World Bank Group's dedicated private-sector subsidiary, and PlaNet Finance, an international solidarity organization working to develop microfinance, launched MicroCred. The aim is to create and develop a group of microfinance institutions serving customers who are excluded from the traditional financial system. In this way, MicroCred invests in microfinance banks or companies and provides these organizations with any technical assistance needed to become leading microfinance institutions in their countries.

AXA is one of the private investors involved in this project, with some 2 million euros invested in 2005. At least 60% of investments will be carried out in Africa.

2.4) Société d'Investissement France Active

Société d'Investissement France Active (SIFA) represents one of the France Active association's tools for intervention, working to facilitate the integration of people in precarious situations through economic activity or the integration of people who are excluded from traditional bank financing channels. In this way, the SIFA is able to offer microcredit services for integrating firms that employ people who are in great difficulty or are disabled. AXA IM is one of the SIFA's leading shareholders.

Furthermore, in line with its collective pension savings scheme, AXA France offers a solidarity fund that AXA's employees can invest in. The SIFA represents 2.4% of this scheme's assets out of a total of some 80 million euros, combining both performance and solidarity.

2.5) Association pour le Droit à l'Initiative Economique

The French association for the right to economic initiative (Association pour le Droit à l'Initiative Economique, ADIE) helps people who are excluded from the job market and the traditional banking system with a view to setting up their own businesses and creating their own jobs. It has adapted the principle of microcredit, which is particularly effective for the economies in developing countries, to meet the needs seen in France. 80% of the loans to business creators are granted through partnerships with financial institutions such as AXA. The ADIE represents 2.8% of the AXA solidarity fund, under its collective pension savings scheme.

2.6) Habitat et humanisme

This association was founded in 1985 with a view to offering low-rent housing for people in difficulty as well as support for putting in place a process for their integration. This housing is deliberately located in town centers, with around 1,000 units available. The association also runs 445 temporary housing units for emergency situations. H&H represents 1% of the assets in AXA's solidarity fund, offered in connection with the Group's collective pension savings scheme.