How Could Trump’s Trade Moves Affect Your Lendahand Investments?

Recently, Donald Trump’s talk about raising trade tariffs has shaken up global markets. But what does that mean for your investments on Lendahand, which focuses on lending to small businesses in developing countries? Let’s break it down into three key areas: international trade, the economy, and currency exchange rates.
 

1. International Trade: Can Higher U.S. Trade Tariffs Impact Your Portfolio?

They are unlikely to, and here’s why. Most of the loans you invest in on Lendahand go to microfinance institutions (MFIs). These local organizations lend money to small entrepreneurs like farmers, shopkeepers, and market vendors who usually sell their goods and services within their own community or country. They don’t rely on exports and are unlikely to be directly affected by U.S. trade tariffs.
That said, a few organizations in our portfolio do sell to international buyers – especially coffee cooperatives in Latin America. The U.S. is a major buyer of Latin American coffee, so tariffs could have an impact here. However, coffee is a product people are unlikely to cut back on, and the U.S. imports around 80% of its coffee from Latin America. So, any negative impact on the sector is expected to be limited.
At the moment, we don’t have outstanding loans to coffee cooperatives directly and we haven’t added new loans to any in the last two years. We are currently analyzing a number of investment opportunities for coffee exporters and naturally we’ll carefully evaluate the current situation before moving forward.
 

2. Economic Impact: What If There’s a Slowdown?

If a full-blown trade war breaks out, it could slow down global economies – including those in emerging markets where we operate. That might affect people’s jobs and incomes, which could in turn slow down the MFIs’ ability to repay their loans.
However, the microfinance sector has shown strong resilience in past crises. The social nature of MFIs makes them highly motivated to keep going because their customers rely on them not only for loans but sometimes for savings too. And, their borrowers want to maintain access to credit. Through our ongoing monitoring and regular contact with our borrowing financial institutions, we’re staying on top of things to make sure they remain financially healthy.
 

3. Exchange Rates: Why Currency Matters

Currency changes may be the most important factor for you as an investor. Let’s look at this in two ways:

a) Repayments: Local Currencies vs. the U.S. Dollar (USD)

Many MFIs borrow in USD or euros. When the USD gets stronger, it becomes more expensive for them to repay their loans in local currency. When the USD weakens, repayment becomes cheaper.
After the tariff announcements, many local currencies in Latin America, Africa, and Central Asia dropped in value against the USD. However, in key countries where we operate — like Kenya, Indonesia, and Mexico — the expected currency changes over the next few years are modest. So we don’t expect a major impact on our borrower’s ability to repay their loans because of this.

b) Returns: The U.S. Dollar vs. the Euro

Since 2020, we’ve offered loans in USD because many financial institutions prefer borrowing in dollars. These USD loans are “unhedged,” which means there’s no protection against changes in exchange rates. So if the USD drops in value after you invest, your return in euros will be lower. If it rises, your return could be higher.

Why don’t we hedge (protect) this risk? The cost is too high — often over 3% — which would lower the return on your investment. From previous investor surveys, we’ve learned that most of you prefer the chance of a higher return, even with some currency risk.

Trump has said he prefers a weaker dollar to boost U.S. exports. A weaker dollar could hurt the euro value of your existing USD investments. But for new loans, a weaker dollar now could mean better conditions to start from. Spreading your investments over time can help smooth out the effects of currency fluctuations. Times when the dollar is weaker may be balanced by times when it's stronger. Still, currency movements are very hard to predict. 

We continue to explore affordable ways to protect investors from currency swings while keeping returns attractive.
 

How to Plan Your Next Move

It’s too soon to say exactly how Trump’s actions will play out. Overall, we believe the direct effects on your investments will be limited. History shows that microfinance is a resilient sector, and we’re monitoring developments closely.

As always, diversification across different borrowers remains key to avoid negative returns. The same goes for spreading your investments across different currencies and maturities. Planning your investments over time can help manage uncertainty. By investing regularly, you reduce the risk of trying to time the market, and currency fluctuations may balance out. If the dollar strengthens again in the future, starting from a weaker position today may help offset previous currency losses.

We’re actively looking into ways to better protect you from currency risk, and we’d love your input. Please take a minute to fill out this short survey to help us understand how much risk you’re comfortable with and what kind of return you’re looking for.

As the support towards entrepreneurs around the world through USAID programs is being terminated by Trump's office, your investment is more vital than ever for small businesses that are at risk of being left behind. Thanks for investing with us!