Whatever the latest hip trend in the financial sector, Luxembourg ought to be part of it and amongst the very first.

Following the United Nations' International Year of Microcredit in 2005 and the 2006 Nobel Peace Prize awarded to Muhammad Yunus along with Grameen Bank for "their efforts to create economic and social development from below," it's now the Grand-Duchy's turn to sponsor microfinance... within the fund industry.

Launched on 20th July 2006, the Luxembourg Fund Labelling Agency a.s.b.l. (LuxFLAG) promotes the raising of capital for microfinance projects by awarding its distinctive label to Microfinance Investment Vehicles ("MIVs"). The "...primary objective is to reassure investors that a microfinance investment vehicle actually invests, directly or indirectly, into microfinance," said Kenneth Hay, LuxFlag's Chairman.

On Wednesday 31st January, the first LuxFlag Labels were granted to The Dexia Micro-Credit Fund, the European Fund for Southeast Europe (EFSE) and the responsAbility Global Microfinance Fund, all three domiciled in Luxembourg.

"This proves that a cooperation between the private sector and the Government can work to the benefit of the poorest," Jean-Louis Schiltz said. Along with the Ministry of Finance and the Ministry of Foreign Affairs, the Minister for Development Cooperation and Humanitarian Aid has been among the first supporters of the new agency.

Founded in 1998, the Dexia Micro-Credit Fund is the oldest microfinance fund in Luxembourg. It is promoted by Dexia Bank International, with Dexia group companies acting as fund manager and custodian. With assets of 350 million USD, the fund has provided about 400 micro-loans in 26 countries.

Implemented in 1998 as a post-conflict reconstruction effort in Southeast Europe, the European Fund for Southeast Europe (EFSE), is a donor collaboration under the leadership of KfW, a German government-owned development bank, based in Frankfurt.

The sponsors are The European Union and the Austrian, German, and Swiss Governments along with the Netherlands Development Finance Company. More than 45,000 loans have been granted since 1998, resulting in a total amount of 280 million euros split into micro and small enterprises (52%), housing loans (33%) and rural micro and small enterprises. The fund is managed by Oppenheim Pramerica Asset Management Sàrl, a subsidiary of both Bankhaus Sal. Oppenheim and Prudential Financial.

The responsAbility Global Microfinance Fund is run by the Crédit Suisse Microfinance Fund Management Company, Crédit Suisse (Luxembourg) SA acting as the fund custodian. Specialized in social investments in developing countries and countries in transition, it provides loans to 127,000 clients in 120 countries, with 66% of these "micro-entrepreneurs" being women.

"One of the challenges is to ensure that the investors' money is really being channelled to microfinance," stated Kenneth Hay.