Risk Policy

When making investments consider risks that may not be explicitly covered by the policy. If there are risks that seem material that the risk policy doesn't capture, evaluate if the risk policy needs should be improved.

Ideas:

• Liquidity
  • How much of total fund should be liquid?
• Stress tests
  • ??
• Currency limits
  • Limit: greatest of $25m or 10% of fund
• Partner limits (e.g. Chancen)
  • Limit: greatest of $100m or 25% of fund
  • Limit: % of total loan book size - BEF represents no more than 40% of total loan book
  • Rationale: initial investments are going to be focussed on two key providers
• Provider limits (e.g. Chancen Kenya)
  • Limit: % of fund
  • Limit: % of loan book size
• Country limits (e.g. Kenya)
  • Limit: % of fund
• Region limits (e.g. Africa, LATAM, etc)
  • Limit: % of fund
  • Don't want 90% in Africa and 10% elsewhere
• Loan maturity (e.g. are we skewed to younger or older loans)
  • Limits:
    • avg age > 3 years (expressed as % of loan duration in case of variation in loan terms)
    • median age > ?? years
• Default rate limits (stop loss)
  • Limits: 10% default rate for any given provider
  • Rationale: if default rates start increasing, new investments should be halted for a minimum of 12 months with that provider. Mitigation plan must be approved by risk committee before investments can resume.