Microfinance: Then, Now and Next, with Rochus Mommartz

Rochus Mommartz, the outgoing CEO of responsAbility who has been leading the company from 2016 to 2025, shares insights from over three decades in impact investing — reflecting on milestones, challenges, and the transformative power of financial inclusion.

Guest:
Rochus Mommartz, Chief Executive Officer 2016-2025, responsAbility Investments AG

Hosted by:
Luise Ammerschuber, Founder Yess Impact

Follow responsAbility Investments on LinkedIn: https://www.linkedin.com/company/responsability-investments

Transcript

0:01

Welcome to Voices of Impact Investing, the responsAbility Investments podcast.

In this episode, "Microfinance: 0:06

Then, Now and Next". Rochus Mommartz, the outgoing CEO of responsAbility, who has been leading the company from 2016 to 2025, shares insights from over 3 decades in Impact investing, reflecting on milestones, challenges, and the transformative power of financial inclusion. In conversation with Luise, Ammerschuber, founder of Yess Impact, he explores what Microfinance has achieved and what is next. Welcome to today's webinar hosted by responsAbility. I'm Luise Ammerschuber, and it's a great pleasure to be here with you today to host this conversation. I'm here with Rochus Mommartz, who's the outgoing CEO of responsAbility. You have 35 years of experience in impact investing globally with a focus on sustainable investment in emerging markets. And I think with all this experience, you're the best person really to have this conversation with. Thank you for all of the questions that you submitted. We've tried to integrate as many as possible today. And Rochus, it is such a pleasure to have this conversation with you, and I'm looking forward to hear more about your experience, your lessons learned, and also some of the next steps. Thank you so much. It's a pleasure being here. Absolutely. So nine years as the CEO, when you think about your journey, is there one word of how you could describe it? And why do you choose that word? If you allow me, two words instead of one? First word which comes into my mind is people. Asset management or working in the field of impact, it's all about people and having the opportunity to build teams to work together with very smart, interested, curious people. It's the first thing, which is, I think the most important what we are doing and it means people in the company, but of course on the ground also. And the second word is, let me say, learning. Why learning? Because still yes, impact investment or microfinance or investments in emerging markets with a certain purpose, is looking back now on some history. But still we are pushing the frontier and that means one has to be a bit courageous, curious to see, and yes, pushing that frontier means also there is learning all the time, which I think describes it best. I think these are some great terms. How did you actually get into this field, impact investing, a combination of finance and development? Was there a particular moment and experience or maybe even a person that got you into it? So 35 years back I was working in academics at university level and I really have to admit, I didn't really know where to go. And then it was an opportunity given to me for a consultancy work for six months to work in Latin America to look at, at that time we said credit granting NGOs, that that was the term used at that time to look at the time and to do sort of an assessment of 40 institutions in Latin America. And I said yes. So it's very interesting. I didn't speak Spanish yet, so I had to learn it on the go. And the moment when we started to do that work, traveling across Latin America, visiting the institution, the most decisive moment was being with final beneficiaries. So with the people. And once you are, so to say, as we say, in the field or with the people, and you allow yourself to listen to the people, just what is their perspective? That was, for me a very decisive moment because I understood what the difference a relatively tiny thing can make to the lives of people. It's extremely impressive to see, and especially if you didn't speak Spanish. Yeah, I learned, I have to say, after six, after six months, my Spanish was OK, I have to say. But it was. But like with all of these trips, you must have had some really unusual or also funny experiences there. Can you give us one of the anecdotes? Yeah, there you can imagine there is over the many years in so many countries, in countries going through all type of challenges, political challenges or all type of situations. Is it funny? Yes. One thing which comes into my memories, we were flying, we had to visit an institution in the Amazonas and we were flying there with a very small plane. And we suddenly found out that the pilot is sleeping. Yeah. Is it funny? I don't know whether it's funny, but it certainly was the moment where everybody, the five people on that small plane, we were all shocked, but he was, he was not, you know, he was just sleeping also. And it all ended fine. But no, there are a lot of moments which of course when I go back to the memories, we won't have the time here to go into that. But yes, I think. But instead of saying, Oh yes, there are these things which are standing out just to see all of these people are the people, the beneficiaries, the micro entrepreneurs, but also the countries. So they just they want to progress. Yeah. And that if I, when I sit back right now and I think about it, this is what sticks most. They want to be a partner. They don't want to get brands, so to say they want to be in business with us. You know, it's a globalized set up. We've all seen, when you go on a trip, a field visit, it is extremely impactful, the things that you see and you've shared a bit already about it. Was there a particular moment where you felt the impact that microcredits have, the most vividly? Yes, this is really, and it goes back to individual encounters with a person, a group of women, a family on the ground. Because when you, when you sit in their small hut together with them or and you just are in a conversation and try to understand what it means for them, a very tiny amount of money. So we are talking about in Group loans, we are talking about $50 a $100. Some more advanced micro entrepreneurs might be $1000. So but still in our perspective. So these are relatively tiny amounts. But then the keyword is opportunity, having access in this case to financing to credit or not having access. And what does it do with the people? So with a mother running a small business and then having, I have the $80, now I can buy, I can buy books for the school, for kids and I don't have to say that I can't. I can do this! That makes a big difference. Yeah. So that's for me the most decisive, still today. When I wake up, and I think after 35 years, why I'm still excited about it? Because I know that there are not hundreds, there are millions of people, opportunity which they otherwise wouldn't have, that makes a big difference. It is absolutely touching to see every time again and again, no matter what country we're in. Yeah. Also, one of the things I find very impressive about microcredits is, when you look at extreme times like pandemics or economic catastrophes or they have been extremely resilient. Why do you think that is? And how do we adapt microcredits as well to still serve customers in those difficult times? Oh, yeah, there are probably 2 aspects to this, or many, but let's concentrate. And you can imagine this is one of the questions when we started with responsAbility 20 years back, one of the most heard of question from

investors: 8:13

oh, is it super risky? It must be super risky to go to these countries and financing. So the informal economy if I'm allowed to say so. So why is there resilience? Because now we know from the track records there is resilience. But why is it? The resilience comes from, as an investment topic, because these people on the ground, the final beneficiaries, are exposed all the time to real challenges. They have to, if you want. so they have to develop a surviving spirit and life continues. Yeah. And you have this aspect that people who are receiving this money, they know this is a very great opportunity for them, whatever the circumstances are, they continue to work. They have to because there's no option. There's no Social Security system. So they have to continue. And they also know it's also important, you know, to keep themselves in the business because life continues. They want also to get access to a loan tomorrow. That's one. So really the circumstances of these people and, yes, their life circumstances. But the second is,

in investment: 9:31

diversification. Yes there are millions of people. So the investment risk is very broadly distributed across many people. And that results in, when we look from an investment perspective as an investment topic to microcredit or microfinance, they say overall the investment topic shows a very high level of resilience. It's a super interesting point how the local resilience feeds into the resilience of microcredits in general. Absolutely. But since I've heard about microcredits, I think that's like 2 decades ago or longer. One thing that people have always criticised is that people are at risk at going into higher debt, overindebtedness basically through the microcredits. What do you say to these critics? First, absolutely it is a duty and obligation of each microfinance institution. Let's recall, or microfinance banks, as most of them are banks these days, after 20 years, as also us as the investor, to look deeply into what can we do to mitigate this potential risk. The risk is out there. When you give a loan to a person who probably never in her or his life had a loan, even if it's a $100 loan, you have a responsibility. You have to make sure that the person understands the concept of the loan is and also can put the money to work to be able to pay back. This is summarized in what we would call technically speaking, lending technology. So the way how an institution works, a microfinance institute, without going to the details there, that's a very big part. Now when we as an asset manager meet them on the ground, so our people, they have to analyse deeply and to understand how is this done? Because it has to be done in the appropriate way to mitigate or avoid that problem. That's one very important part. And can this be done in a way to really try to avoid it nearly completely? Yes. Nevertheless, a single institution is not alone in the market. So there can be other institutions and then the same family might receive a loan from a second or third provider. You might end up in a situation even if you have a very good process in place, that now a the person is in trouble, there's a problem. Then the next question is how do I as an institution, how does the institution deal with the situation? That's very important. And this is for us, these are two important criteria when we decide can we invest in a microfinance institution, the answer to these two questions, what are their lending practices and how do they deal with when people get into problems? And there are better ways and worse ways. So we, we of course want institutions who have the best approach to this to minimize this inherent problem. Yeah, excellent. And how do you see the market in Switzerland now? Because often it's still seen as a niche. And from what we can observe, a lot of wealth managers are actually more hesitant, although microcredits would be an obvious choice, especially in a sustainable market. And there is a huge increase in demand for sustainable products as well. But still a lot of wealth managers don't choose it as a product. Yeah, there are various trends out there. Of course, now when I compare 20 years ago when we started, as a company explaining the concept in the market, it was new. Basically my job, our job for a while was just to explain, educating the market. What is it? What are we talking about? Now we are 20 years later, the industry has grown, very often is positive, that people say, now I'm familiar yes, I understand this. Some critical points came up, which had been there also before, but they are more prominent there. But many investors these days, they know the top and say, but no, but we would like to do something more innovative. And I end up very often in discussions with people and I think I understand where it comes from. This also human nature. Oh, let's do a new thing. We have been doing this, but it's important to understand, the challenge remains. So it's not like now it's gone. So it is still for many people the difference in their life. And investors should keep in mind it's actually positive: we can be highly impactful these days and at the same time we have track records. So we have financially speaking, a much better picture of what we are getting in. So people should even get much more confident in saying, OK, now it's actually the right time to invest into the topics. But yeah, you're right, there's still a long way to go. Yeah, sure. When you look at the most recent economic developments, how does it affect micro credits in general? Oh, look, there are so many economic developments. Yeah, of course people look these days at emerging markets, have many questions on currencies and so, tariffs. I don't even go into that topic. Most of the people, many of the people, through microfinance, which are financed, it's local business activity. And yes, there are micro entrepreneurs who do also exports. That exists, but most of the these tiny companies, it's local economies. So forget about many connections. Yes, on the international scene and all these flows, it impacts these people, but more indirectly, not so directly. It can be times where it's better and where it's worse. But as I said early on, when you ask the question on resilience, that's what people are familiarized with. Yeah. So it impacts people on the ground, but it doesn't change the fundamental investment thesis. The investment thesis continues to be the same when you look at our market right now. Let's look a little bit more into the future. Where do you see some of the market opportunities and also the chances, especially for investors? I want both the financial return as well as proper impact. Yeah. it's very important because you say investors, one has to differentiate. One is that private people like us, we want to invest. The good news is, the opportunity is there, there is the opportunity to invest. There are products available, people can invest in this type of product that that's very good. And the opportunity for the people on the ground has to be created. So it's highly impactful, very good. Then it comes to more institutional investors. So larger investors. Then the opportunity is actually more interesting right now compared to years ago, because of scale. It's very often when you talk to a large pension fund, they say, but we are interested in your topic, but we would like to do at least an investment of let's say 100 million, 200 million, 300 million that can be done these days. Many years ago it, it, it was more difficult because scale was not at the same level as it is today. So we achieved that scale which is very important for institutional investors. And I mentioned earlier, track record. So the data is there. And I would like to add one additional element these days which hasn't been there 10 or 15 years ago. There is also the opportunity for larger investors to even influence a topic even to their needs. I give you an example, there are some people, the say: we really like the topic, but we don't like it just generically, could we focus more on rural institutions? We're at a scale scale right now where this opportunity is there, so you can build portfolios also according to specific needs of institutional investors. So you see, I'm using the word opportunity, opportunity, opportunity. Yes, there is now a very broad range of opportunities for investors out there, which I think is a good is a good situation. I'm curious when you look at your past career, what has been one of the biggest challenges you've faced and how did you overcome it? Oh, there are many, there are many, there are many. And I sometimes say, we should do a webinar just on failures or something. There are many really challenges, in growing your company, being at first the head of private equity, then I took over 9 years ago as CEO. It's people, you have to build teams and, and that's ongoing, it's also a beautiful thing, but of course it also has its challenges there. And no, there's no specific answer to how to overcome, I think it is a continuous process there. This industry now is more mature, that's another challenge, coming from a more start up and relatively immature industry, into a set up, much more formalized. So I had to learn how important certain parts of the formalizations are. Regulation, we are financial intermediaries of course, regulation plays a big role, we had as an organization also to adjust to this. So these are I think typical challenges which not only for us, but for many people out there. When you think about one thing that you actually started like, hey, that was a huge success of my career, something you're especially proud of. Oh, what we really, you know, we dared over the years to launch some products that are really innovative. And we found the right investors for doing this. So there are a couple of points yeah in the company history. I say wow, we are, we are, I personally, but as a team at the company. So we are, very proud of this. Overall, of course nobody would have, when we started, thought about that we would make it to multi-billion dollars assets under management. It was not in our mindset, for reason we thought, no, this is out of reach. Now looking back, that we also have been contributing to an industry development as a company. I think that's something which makes a company very proud, in demonstrating scale is feasible. You can be there, for the long run, you can develop a product range, all of that. And if you could give one tip, from the bottom of your heart right now to the next investor, somebody who wants to get involved in micro credits and financial inclusion and sustainable finance, what tip would you give to that potential investor? I think generally when you do investments, I think it's important to understand the core, what does a certain product do? How does the money flow? What does it mean? And try to understand it, from the perspective also of in this case, the people who we want to open up a new opportunity, that makes the biggest difference. This is such a good tip, because just talking to a person, I think my first time was probably, I was 18 or so, and the first stories I heard, absolutely insane. The impact it doesn't just have on the person, but also their family, often the community as well, because if they're more stable, they pass it on basically, they help others and then also for the future generations, of course. Yeah, completely. No, I can just if, if one has an opportunity to speak to somebody and there are plenty of people these days who have experience on the ground. And so that is I would recommend always the very first step. And a little fun question for you, if you have not become CEO of responsAbility, if you have not gone into impact investing in general, what other career track would you have taken? Oh, I like mathematics a lot. If I would be more talented, I probably could have been in mathematics. But I, I found out when I started that, I may have some talent, but I think it's not good enough for, for really being in this. But I, I like the topic very much. So I could see myself there. There are other topics. When I was younger, I was very, very strongly involved and open for art. I like many, many things in that area. And philosophy is also a topic, so there could be many things. It's always interesting how you end up in a certain area. So in my case, it was, there were certain opportunities available. And I said, I'm curious, and I said, OK, let's have a look. And so I went step by step and here I am. And my last question to you, if you could give just some words to the next generation of investors also here at responsAbility, but also in general, what would you say? There are these challenges out there, I think investors, I can only say, which we said over many, many years, investment cannot fully tackle it, the world is more complex. So one should not be naive on that. It's not like we with our investments solve all of it. That's not the right statement. But investment can contribute positively to these developments and can make a difference for many people in this countries. And I think investors should really even in light of trouble and problems and challenges out there, keep that focus and say, OK, here in my overall allocation, if investors think about that. Of course, this is not the only thing I'm doing. But these days there are these opportunities. I think investors too should keep this in mind and should also do this very consciously because I think that makes a big difference for us as a global society. What's next for you now? Actually, yes, as we have announced, so I'm going into retirement at the end of this year. And I intentionally decided, I do not think about it too much right now. Yeah. So when people here, my colleagues ask me, but what are you going to do? Is actually, I'm very happy not to know. I like sometimes in life, the situation where you, it's a luxury, you know, it's clear, when you can allow yourself to say, hey, here I am. But I just don't know what comes next. For a certain time period, my experience is, to do that Typically something will come up and then I have of course to make up my mind. Do I want, yes, no, but I'm really looking forward for a certain time frame where I say, oh, I just don't know. I hang around! That sounds like a perfect plan, or non planning. Exactly. Well, Rochus, thank you so much for having been here. It's been absolutely insightful talking to one of the pioneers of impact investing. Thank you. Thank you so much and have a wonderful day. As a leading impact asset manager, responsAbility specializes in private

market investments across 3 core themes: 25:58

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