Main risks of an investment at Alterfin

What are the main risks of an investment at Alterfin?

The mission of Alterfin and the nature of the activities resulting from these objectives bring forth a number of risks. The policy and management of Alterfin is designed to mitigate these risks as much as possible, without of course being able to totally eliminate these risks.

Below you will find an on overview of the main risks. Read the 2022 prospectus for more information on the risks.

Debtor risk

This is the risk associated to defaults on loans provided by Alterfin to organizations in the South (the "Partners"). This risk is inherent to Alterfin’s activity as its mission is to support Partners who offer social added value, but who may be riskier, which is why they are excluded from conventional financing systems. It can therefore not be excluded that the Partners in the South in which Alterfin invests at a certain point could appear insolvent, in which case the investment of Alterfin would be lost.

Currency risk

This is the risk that arises as a result of transactions made in foreign currency in order to finance the organizations in the South. As most of the loans to partner organisations in the South are given in USD, Alterfin uses USD credit facilities to finance its USD loan portfolio. This generally covers the exchange rate risk (USD vs EUR). However, changes in the USD/EUR rate might still affect the net income of the Company since the interest income from the loans is received in USD. As Alterfin is a net U.S. dollar earner, the balance sheet tends to show a U.S. dollar surplus, giving rise to an exchange rate risk that remains limited to the net margin. In order to keep this under control, U.S. dollars surplus are converted into EUR at appropriate times.

Country risk

Country risk refers to the risk of investing or lending in a country, arising from possible changes in the business environment that may adversely affect operating profits or the value of assets in the country. Country risk includes, among other things, the risk of war, corruption, instability, arbitrary government action or transfer problems (such as the inability to repatriate invested funds).

Interest rate risk

If a longer-term credit provided to one of our Partner is financed with shorter-term debt, there is uncertainty and risk related to the impact of interest rate changes. In case of increasing interest rates, the Company might observed an increased cost of funding while the level of income from the portfolio would remain stable. This might affect the financial margin and therefore the net income and the dividend distributed by the Company.

Risks related to the dependence on people in key positions

If people in key positions would leave Alterfin without the Issuer being able to provide for their immediate replacements, it could have on the short and longer term a negative impact on the development of Alterfin and its results.

Risks related to the reputation of the market in which Alterfin operates

The possibility cannot be excluded that a change in the reputation of Alterfin or comparable institutions and the market in which they operate might have a disproportionate impact on Alterfin’s prospects.

Legal and Regulatory Risk

Changes in legislation or regulations may have an impact on the activities of Alterfin. This risk is even greater for Alterfin given that it is governed not only by European and Belgian regulations, but also by the regulations of the different countries in which it operates.