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Kajetan Hetzer, Sustainability analyst, SR Investment consultant - SNS Asset Management / SNS REAAL Water Fund - The Netherlands
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Investing in Liquidity
Financing Basic Needs for the Bottom of the Pyramid
Company profile and corporate principles
SNS REAAL is an innovative retail bank-insurer
• Total assets around € 103 billion• More than 6.000 full-time employees• 100% Dutch• Strong sustainable labels are ASN Bank and SNS Asset Management
Department Asset Management organisation of SNS REAAL, focussed on:
institutional investors: pension funds, societal organisations etc.
SNS REAAL: insurance companies and investment funds
Research consultancy for various internal and external funds/clients
Focus “sustainability”. Specialisation: sustainability analysis and Social Responsible
(sustainable) Investment. Market leader in the Netherlands directed on sustainable
institutional asset management Funds directed on development countries: SNS Institutional Microfinance Fund (one of the largest worldwide), SNS REAAL Water Fund
Mission: Using Microfinance for upscaling
Investments in water and sanitation projects via Microfinance, in order to contribute to poverty alleviation and support building-up a sustainable living
in developing and transition countries
Investment policy1. Financial criteria:
• “H2O”-earmarked investments via Micro Finance Institutions (MFIs)• Ø Return about 8%• +/- 7 years payback period
2. Sustainability criteria: • Investments that lower the “water stress” situation and create up-scaling mechanisms for improved livelihood and basic needs
3. Operational criteria• Investments via Microfinance Institutions; • Cooperation with reliable & capable partners; outsourcing
SNS REAAL & Microfinance
SNS REAAL has various successful products and partners with regard
to microfinance
– SNS Institutional Microfinance Fund (EUR 273 mln; one of the largest
microfinance funds worldwide)
– ASN Novib Fund
– Triple Jump, Developing World Markets, Water.Org, UNDP
– Combination with water has potential for upscaling and synergy
advantages with various organisations and local governments
Investment scope and themes related to water & sanitation
Water Supply (generate, tap and/or furnish (transport) sources of clean drinking water, either
for household or business)
Water Treatment (collection, treatment, purification, filtration and/or re-use of water (including
wastewater)
Water Management (collect and/or conserve existing water sources, either by reducing
wastage or making its utilization more efficient and/or environmentally friendly and/or
sustainable)
Water for Agriculture (Irrigation)
Sanitation Access (disposal systems that are public or private and hygienically separate
human excreta from human contact)
Contamination Prevention (of water sources via facilities, systems and/or other
infrastructure)
Maintenance and Repair (of facilities, infrastructure and/or systems used to provide clean
water or access to adequate sanitation)
Hydro Power and Alternative Energy (small hydro & green energy of which a substantial
portion of the power generated is used to provide access to water and/or sanitation
Microfinance-water market matching
Water supply/demand worldwide
Adopted from: www.who.org; www.unicef.org
Water flows, where Money goes
Impact of Micro Finance in Water
- Time saving due to
improved access to water
- Stability due to
sustainable / durable
water access & sanitation
- Affordability
- Reduction of conflits
- Status
- > Property values
- Pollution prevention- Preservation ofhealth and hygiene- Preservation of
waterresources
- Capacity autofinance - Production capacity- Production security- (Cost) Savings- Employment- Resource effectiveness
SOCIAL ECONOMICALENVIRONMENTHEALTH
Integral Approach via Value Chain
Where is the business case?
→ Economical Value Drivers
Based on market reserach South Asia and Sub-Sahara Afrika
Finance gap for sanitation: available US$500 million versus gap
US$8 billion per year
Investment US$1 has leverage effect of US$5-28 due to time savings etc.
Increased productivity, improved health situation
Additional income of US$200-400/annually per household due to
improved water supply
Additional income of US$250-285/annually per household due to
improved irrigation
Market perspectives “Blue” MF-Credits
Annual general demand of Microfinance US$ 135 mrd. (for 70-80
million families); Ø credit < US$ 160,-
Of which potential for “Blue Credits”:
in SE & S.Asia and Sub-Sahara Africa for next decade: US$12 billion for 125 million clients (based on research by Gates Foundation)
in South Asia and Sub-Sahara Africa:
US$ 20-50 billion (depending on segment)
+ other interesting markets in Central and Eastern Europe, Central Asia, Latin America.
Microfinance in water
Micro credits for water and sanitation facilities to individuals,
communities (CBOs) or local small entrepreneurs in
development countries
Examples improved water supply to increase productivity &
sanitation to reduce health costs
– Direct (example local farmers)
– Indirect (example as result of improved hygiene)
H2O-investment via Microfinance
MFI
Local Bank
Borrower,e.g.
- Entrepreneur - Community - Individuals
Loan MF Loan
Repayment Repayment
Blending with subsidies / seed money
eventually
(partial) Guarantee
eventually
Example: NGO-MFI “BISWA”, India
5 year Loan of USD 2 million to BISWA
Biswa on-lends funds to clients for
sanitation construction
Cost sanitation circa US$ 100
Finances 20,000 sanitation loans every 6
months
59,000 sanitation loans Oct.08-Apr.09
People below poverty line subsidised by
Total Sanitation Campaign
Sanitation in Orissa and Chattisgarh (from biswa.org)Copyright © 2009 BISWA: Bharat Integrated Social Welfare Agency. All Rights Reserved
Added Value of Micro Finance in Water
Water Micro Credit = Credit + sustainable change:
Social mobilisation, including the poor(est)
Development of community institutions
Community based planning & monitoring
Improved participatory techniques (incl. hygiene and
sanitation)
Change in attitudes & values, value chain approach
Improved market access
MF beyond money only
Organizational and operational aspects
Networking and information gathering
Community and kinship development
Skill and vocational development
Leadership development
Trust building
Small enterprise management
Education and health
1. Financial Criteria
2. Sustainability Criteria on MFIs and projects
3. Specific Water Criteria
General Assessment Criteria on Micro Finance Institutions (MFIs)
Financial Criteria on Borrowers
Loan type / purpose
Income via generating activities or cost savings
Characteristics expenditures (individuals or household level)
Affordability & willingness to pay
(alternative) Collaterals
Social cohesion / social pressure to repay
Appropriate sanctions
Financial Criteria on MFIs
Capital adequacy (sufficient capital)
Portfolio at Risk (PAR; delayed repayment)
Write-offs (default repayment)
Operating expenses/loans
Profitability:
– Return on Equity (ROE)
– Return on Assets (ROA)
Sustainability Criteria
1. Financial criteria → Profitability, operational costs, default/Portfolio at risk
2. Legal framework, Governance, Capacity → Ensuring compliance, reporting & monitoring
3. Social criteria → Stakeholder Approach, accountability, affordability, equality,
gender
4. Environmental criteria→ Sustaining water- and ecosystems and livelihoods
5. Technology, management, service & financial conditions→ Appropriate solutions; Fits well into specific situation
Summary:Mutual interest Microfinance & Water
Creation and protection of stability, health and productivity.
Strengthening current MF investments, reducing risks, create
enabling environment for new client base
Improving outreach, and financial and social performance.
Improving viability by having larger loans portfolio without losing
focus on the poor and better meet social performances
Example “Tulip” Filter of Basic Water Needs Foundation
- Very affordable (EUR 7,= ) and high quality ceramic filter
- Local Production Facility in India (Auroville)
- Promising order portfolio (40.000)
- Clean Water to > 200.000 Indian people
- Easy to use: simple and robust
- Spare parts available: EUR 3,=
- Durable: > 3 yrs
Example: BoP Product Development
Critical Succes Criteria:
“Bushproof” (robust, repairable)
Awareness
Availability
Affordability
Acceptability
Stakeholder Engagement
Investment types Project suppliers
Loans Renewable promoters
Construction, engineering and
consultancy
Local government, communities
NGOs
Local banks, MFIs
Equipment manufacturers and
suppliers
Equity
Private equity (VC)
Bonds
Guarantees
Mezzanine finance
Philantrophic
Innovative (micro, ecosystem service)
Innovative support via: mix soft&hard finance, guarantees, fiscal, control,…
Public & quasi-public
Enabling environment!
Research
Smart AlliancesQuasi public
Private
EntrepreneursFinance: - subsidies
- investments
PublicGvmt.’s
Micro Water Facility
DGIS
Join our partnership
The Sustainable Investor
Contact: www.snsam.nl; tel.: 0031 73 683 3355
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