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Presentation Loïc De Cannière
Citation preview
Microfinance
Vlerick Management School
Ghent, November, 6th, 2013
1
Loïc De Cannière, CEO Incofin IM
Content
• Microfinance: what is it?
• Microfinance investment funds
• Short presentation of Incofin IM and funds
→ Microfinance is the provision of a broad range of financial services to micro-entrepreneurs
→ The origin of Microfinance can be traced back to the ‘70s and has since then grown into a socially and economically successful business
What is microfinance ?
Two basic credit methodologies: - Group lending - Individual lending
A tremendous growth
→ From 13 million clients in 1997 to 205 million clients in 2010
→ Total size of the MF industry: 45-60 billion USD
→ Majority of loans are smaller than 1,000 USD
→ 84% women
→ Shift from “poverty alleviation” to “financial inclusion”
Regional differences
Distribution of GLP per Region
Source: calculations based on The Mix (data 2012)
Regional differences
Bank NBFI NGO
Savings
Debt
Equity
Funding Donation Semi-Commercial
Commercial
Lifecycle of a MFI
Microfinance Institutions
Example of a MFI: KWFT (Kenya): a licensed deposit taking MFI
# Clients 600,000
Loan portfolio 11.2 bn KSH
(135 m USD)
# branches 221
# staff 2,300
ROE 15%
Béatrice: a micro-entrepreneur, client of Unguka Bank (Rwanda)
10
Access to
elementary
services
(savings)
Stabilization of
income by
development
of micro-
economic
activities
Diversification
of income by
acquiring
assets. Access
to social
networks
Increasing
propensity to
take risks
Investments in
health and
education
Acces to
formal
economic
activities
Social Impact Microfinance
Evolution of poor households Vulnerability Growth
Content
• Microfinance: what is it?
• Microfinance investment funds
• Short presentation of Incofin IM and funds
Microfinance investment funds
→ Microfinance Investment Vehicles (MIVs) include Mutual Funds, Structured Vehicles, Equity Funds, Co-operatives, ..
→ 100+ MIVs
→ 80% of all MIVs are domicilied in Luxembourg
→ Fund managers concentrated in Switzerland, Netherlands, US, Germany, Belgium (10 fund managers represent 90% of assets).
→ Most MF fund managers will have to comply with AIFM Directive
→ Investors include institutional, HNWI, retail and DFIs
→ Fund volume expected to reach 10 bn USD in 2012
Investment value chain of microfinance
Investment value chain of microfinance
MILLIONS OF MICRO-ENTREPRENEURS
MICROFINANCE INSTITUTIONS
Micro credits
MF INVESTMENT FUNDS Assets under Management
Investments Debts + Equity
SOCIALLY MOTIVATED INVESTORS
Shares / Notes
Finan
cial & so
cial return
Who is investing in MIVs?
What is the ROE of underlying MFIs?
Interest rate components
Cost of Loan
For Client
20-40%
Operating Expenses
MFI
8-20%
30%
25%
20%
15%
10%
5%
0%
Provisions 2-3% Profit
Margin 3-4% Country
Insurance 0.5-1.0%
FX Hedging 1.0-1.5%
Custodian + audit
0.3%
M’gt Fee
1.5-1.75% Return to Investor
3-5%
Microcredit Client Microfinance institution Microfinance fund + investor
Content
• Microfinance: what is it?
• Microfinance investment funds
• Short presentation of Incofin IM and funds
Incofin Investment Management
agRIF
TBD
Volksvermogen (2004,15M USD)
VDK (2007, 100M USD)
BIO (2012, 15M USD)
Incofin Investment Management
~500M USD
Retail funds
50M USD Managed Accounts 130M USD Institutional Funds 320M USD
Incofin cvso
(2001)
50M USD
Rural
Impulse
Fund I
(2007)
38M USD
Rural
Impulse
Fund II
(2010)
160M USD
Fairtrade
Access
Fund
(2012)
25M USD
Impulse
(2004)
60M USD
FPM
(2013)
40M USD
• Leader in rural and agricultural impact investing, strong presence in microfinance and pioneering
initiative in Fairtrade
• Our mission: Our mission is to invest in companies that increase financial inclusion, in order to
generate developmental impact, while generating an attractive return to our investors.
• Head Office located in Antwerp, Belgium; four regional offices based in Bogota, Colombia; Chennai,
India; Nairobi, Kenya and Phnom Penh, Cambodia
Incofin Investment Management
Parameter Number
# MFIs in portfolio 112
# Equity stakes in MFIs 28
# Ultimate MFI clients 10.5 million
% of women 63%
% of farmers 24%
Wide geographic coverage
Incofin has investments in 43 countries worldwide
Region % Countries
Latin America and Caribbean
35% Argentina - Bolivia - Colombia - Ecuador - El Salvador - Guatemala - Haití - Honduras - México - Nicaragua - Panamá - Paraguay - Perú
Central/Eastern Europe/NIS
35% Armenia - Azerbaijan - Belarus - Bosnia and Herzegovina - Georgia - Kazakhstan - Kyrgyzstan - Mongolia - Russia – Tajikistan - Uzbekistan
Asia 18% Cambodia – East Timor - India - Indonesia - Jordan – Pakistan - Philippines
Africa 12% Angola - Burkina Faso - Congo, DRC - Ghana - Kenya - Morocco - Namibia - Nigeria - Rwanda – Uganda - Tanzania - Zambia
MEXICO
UNITED
KINGDOM
FRANCE
VENEZUELA CENTRAL
AFRICAN
REPUBLIC
DEMOCRATIC
REPUBLIC
OF CONGO
ALGERIA LIBYA EGYPT
NIGER MALI
CHAD
SUDAN
ERITREA
SOMALIA
TUNISIA
MAURITANIA
WESTERN
SAHARA
SENE
GAL
GUINEA
LIBERIA
NAMIBIA
ZIMBABWE
ANGOLA
ZAMBIA
BOTSWANA
SOUTH AFRICA
UGANDA
KENYA
TANZANIA
CONOGO
CABON
CAMEROON
NIGERIA
BURKINA
FASO
SAUDI
ARABIA
YEMEN
OMAN
IRAQ IRAN
SYRIA
TURKEY
PAKISTAN
AFGHANISTAN
INDIA
TURKMENISTAN
UZBEKISTAN
KAZAKHSTAN
C H I N A
MONGOLIA
I N D O N E S I A
BHUT
AN
BANGLADESH
MYANMAR
SRI LANKA COLOMBIA
GUYANA
SURINAME
FRENCHGUIANA
ECUADOR
PERU
BOLIVIA
BRAZIL
PARAGUAY
ARGENTINA CHILE
URUGUAY
BELIZEA
HONDURAS
NICARAGUA
GUATEMALA
SALVADOR
COSTA RICA
PANAMA
JAM.
HAITI
DOM. CUBA
BAHAMAS
G.B.
SIERRA L. LVORY
COAST
TOGO
BENIN
LES.
SWA.
MADAGASCAR
MOZAMBIQUE
MALAWI
RW.
BU.
JORDAN ISRAEL
CYP.
GREECE
ITALY
A.
M.
BUL.
S
. BOS.
ROMANIA
HUN.
AUS.
SWI. M.
UKRAINE
POLAND
BELARUS
GERMANY BEL.
HOL.
LIT.
LAT.
EST.
FINLAND SWEDEN
NORWAY
DENMARK
RUSSIA
N.KOREA
S.KOREA
JAPAN
TAIWAN
LAOS
THAILAND
CAMB.
VIETNAM
MALAYSIA BR.
PAPUA
NEW-GUINEA
KUWAIT
ETHIOPIA
QATAR
UAE
MOROCCO
SPAIN
Note: Portfolio July 2013
Investments in debt and in equity
Breakdown current portfolio per instrument
24
78% of transaction value in loans;
22% in (quasi)equity
Equity/loan balance varies by funds; some
funds more equity or debt focused
Fund % loans % (quasi) equity
Incofin CVSO 63% 37%
Volksvermogen 66% 34%
Impulse 67% 33%
VDK 100% 0%
RIF I 73% 27%
RIF II 55%* 45%*
* Target investment fund
A double bottom line investment strategy
• Incofin IM developed and is using proprietary investment analysis tools
Counterparty Risk Score Tool, CRS
Social and Environmental Performance Measurement Tool, ECHOS©
• Social score being an equally important factor in the investment decision as financial score
25
Financial Risk Analysis
Social / Environmental Risk Analysis
• Country risk
• Ownership and governance
• Products and services
• Operations and control
• Loan portfolio
• Financial performance
• Asset/liability management
• Future development prospects
• Social mission management
• Outreach and access
• Quality of customer services and respect of Client Protection Principles
• Human resources
• Environment, corporate social responsibility and impact
1 2
True double bottom line approach
Strong financial track record In
co
fin
CV
SO
fu
nd
Imp
uls
e f
un
d
Dividends distributed 2006 2007 2008 2009 2010 2011 2012
Impulse 3,0% 3,0% 3,0% 0,0% 2,5% 3,0% 3,0%
Dividends distributed 2007 2008 2009 2010 2011 2012
Incofin CVSO 1,0% 1,5% 2,0% 2,5% 2,5% 2,5%
RIF I
I
RIF I
IRR to
date:
14,5%
NAV increase
since 12/10:
22,4%
26
International set investors, both DFIs and Institutional investors
27
Questions?
28
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