Bamboo Finance, a private equity firm specializing in investing in business models that benefit low-income communities in growth markets, has closed its second financial inclusion focused fund at $31m.

The Bamboo Financial Inclusion Fund II will make equity investments in the capital of banks and financial services companies targeting micro-enterprises, SMEs, the low and lower middle income segments as well as mobile money operators, correspondent banking businesses in growth markets where there remains significant exclusion from formal financial services globally in Africa, the Middle East, Asia and Latin America.

Xavier Pierluca, CIO of Bamboo Finance, said: “Our investment strategy for Financial Inclusion Fund II will leverage our experience, networks and proprietary pipeline to deliver attractive financial returns to our investors while enabling the low-income segments and MSMEs to access high quality and affordable financial services with a focus on increasing access to savings products.”

Teachers Insurance and Annuity Association of America (TIAA-CREF) and AXA-IM contributed to the final close of the Bamboo Financial Inclusion Fund II.

Rekha Unnithan, Director of Impact Investing within TIAA’s Responsible Investment team, said: “TIAA-CREF is pleased to invest in the Bamboo Financial Inclusion Fund II through our General Account Social Impact Investment portfolio for which financial inclusion is a global focus. Our investment helps provide for a commercially viable and sustainable means of delivering financial products, such as credit and savings vehicles, to low income and underserved populations in emerging markets around the world.”

“Like TIAA-CREF, Bamboo is a signatory to the Principles for Investors in Inclusive Finance, a best practice framework for responsible investment in this sector and an important factor in our investment decisions,” she said.

Vincent Gradt, Head of Impact and Thematic Investing at AXA Investment Managers, added: “AXA Investment Managers is excited to be a cornerstone investor in Bamboo Financial Inclusion II. We believe that Bamboo Finance is a best-in-class financial inclusion investment manager with a demonstrated commitment to achieving financial returns and a positive social impact that is actively measured.”

Microfinance institutions have translated lessons from the past decade into a diversified market of attractive investment opportunities with high quality loan portfolios, low levels of leverage, efficient operations and increasing interest from a variety of buyers including regional and international banks.

Regulation has also accompanied this growth in most markets leading to improved governance.

Jean-Philippe de Schrevel, CEO of Bamboo Finance, said these factors along with mobile technology adoption and new channels such as correspondent banking inspired the creation of the Bamboo Financial Inclusion Fund II.

“Microfinance has developed a lot over the last decade and is ready for the next generation of growth,” he added.

Bamboo Finance is a commercial private equity firm with offices in Luxembourg, Geneva, Bogota, Nairobi and Singapore.

Over the last seven years Bamboo Finance has built one of the largest and most diversified portfolios of financial inclusion private equity investments; representing 31 companies, 22 countries, $195m and a track record of successful exits.