STABILITY IMPACT FUND

STIMULATING ENTREPRENEURSHIP IN FRAGILE CONTEXTSCARE. ACT. SHARE. LIKE CORDAID.

value propositioncordaid investments

Morvigor Ltd tea factory, Sierra Leone credits: sascha noé

Laure Wessemius Chibrac, Director Cordaid Investments September 2014

1. OUR PURPOSE

ECONOMIC DEVELOPMENT IS A CRITICAL COMPONENT OF PROMOTING STABILITY

n About 1.4 billion people live in fragile and

conflict-affected countries. These economies

are among the least developed and world‘s

poorest. Lack of economic opportunities

and high unemployment rates are the

most critical determinants triggering civil

conflict.

n When entrepreneurs try to expand and

grow their businesses, they often lack

professional business skills, access to

markets, networks, technology and not the

least access to finance.

n Most foreign investors avoid conflict zones

and local banks are not ready to invest in

small businesses, because of high risk, cost

and low financial return.

n Our purpose is to promote greater resilience

and peaceful development in fragile

contexts through the stimulation of MSME’s

(micro, small & medium enterprises) in their

economic development.

“A 5% negative growth shock increases the likelihood of a civil war the following year by nearly 50%”Edward Miguel, University of California, Berkeley

“Economic Shocks and Civil Conflict:

An Instrumental Variables Approach”

© Cordaid

2. OUR SOLUTION

stability impact fundstimulating entrepreneurship in fragile states

The Stability Impact Fund is an impact-first fund offering investors the opportunity to contribute to job creation, economic development and peace building by supporting the development of MSME’s (Micro, Small & Medium Enterprises) in fragile contexts.

KEY ASPECTS

1. Focus on fragile contexts, where social impact on stability, job creation, economic development and stability is the most significant. Financial return is moderate

2. Access to deals and availability of business support services through local partners

3. Reach the missing middle by combining indirect and direct investments

4. Blend with grants (>EUR15 m) to build capacity of MSMEs, up to 40% in case of direct investments

5. Mitigate risk through currency protection tool6. Committed anchor investors: Cordaid Investments and

a family foundation to invest EUR 10 mln as founders

€€€

STABILITY IMPACT FUND60% 10% 30%

IMPACT

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MFI MFI

stability impact fund September 2014 © Cordaid

3. OUR SOLUTION

fund terms: impact-firstour proposition to investors

© Cordaid

IMPACT FIRST

n SMEs will have access to finance and show economic growth (EBIT) of 10% per year

n New jobs will be created of which 35% will focus on empowering youth

n Micro-entreneurs of which 50% women have enlarged their business

n Leading to greater resilience and peaceful & economic development

FOCUS OF FUND This fund focuses on fragile states. A fragile state

has weaknesses in its governance, security and

justice, economic opportunities for all and a limited

capacity to provide basic services.

GEOGRAPHICAL FOCUS n Direct investments in Sierra Leone, Burundi,

Ethiopia, Philippines (South) and Guatemala.

n Indirect Investments in South Sudan, DRC,

North Kenya, North Uganda, Haiti, Colombia

and Myanmar. CURRENCY PROTECTION n EUR 3-5 mln (10% fund size) convertible loan

offered by philanthropic investors to cover for

first risk on currency losses

n Yearly provision calls based on average currency

exposure of overall portfolio

DISTIBUTION CHANNELS n MFI’s: 60% of capital (indirect)

n SME’s: 10% of capital (direct)

n SME funds: 30% of capital (indirect)

TERM AND FINANCIAL RETURN Term: Open ended

Expected IRR: EUR inflation

ASSET CLASSES n 60% debt senior or subordinated

n 40% equity or quasi-equity

4. OUR SOLUTION

investment targets and bd servicesour proposition to micro, small & medium enterprises

stability impact fund September 2014 © Cordaid

€€€

STABILITY IMPACT FUND60% 10% 30%

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MFI MFI

MICRO INDIRECT THROUGH MFI’S

EUR 250k – 1m

EUR 500 - 10k ACCESS TO FINANCE FOR ENTREPRENEUR

INVESTMENTS SIZE

TA GRANT FOR INVESTEES*

BD SERVICE FOR LOCAL SME*

5 - 10%

EUR 10k - 100k

25 - 40%

EUR 100k – 1m

10 - 20%

SMEs DIRECT

EUR 10k – 100k

SMEs INDIRECTTHROUGH FUNDS

EUR 1m – 5m

* % of investment size

5. OUR PROOF

investment cases MFI: RUFI (South Sudan) SME FUND: WAVF (Sierra Leone/Liberia)

© Cordaid

USD 400 K loan

USD 2.7mln equity

13% return on local currency

20%* return on local currency

1,400 micro entrepreneurs

received a loan

28 sme’s financed

USD 670 average loan

USD 360 K average investment

55% women

1050 jobs created

* ExpectedTea factory personnel, Sierra LeoneEnterpreneur, South Sudan

6. OUR PROOF

funds under management

at 31-12-2013

impact-first investor since 1997

stability impact fund September 2014 © Cordaid

PRINCIPLES & CERTIFICATIONSCUMULATIVE IMPACT INVESTMENTS

Since inception in 1998, Cordaid financed 250 partners and made 466 investments with a mix of equity and debt instruments.

€ mln

160

120

80

40

01999

6

1998

0

2003

39

2007

91

2001

20

2005

63

2009

117

2012

143

2000

11

2004

51

2008

105

2011

134

2002

29

2006

78

2010

128

2013

156

Equity

Guarantee

Senior Debt

Sub. Debt

EUR 78 MLN Total assets

EUR 51 MLN Total committed

EUR 39 MLN Total disbursed

450+Investments since 1998

EUR 637,500Average investment

66 %Female clients

-1,3%Return on Investment

TYPE OF INVESTEES

€ mln

70

60

50

40

30

20

10

0

MFI SME Prod. Org.

MFI Fund SME Fund Other

201220112010 2013

INVESTMENTS INSTRUMENTS 2013

2012 2013

€ mnl

30

25

20

15

10

5

0

Africa Latin America Asia

20112010

COMMITMENTS PER REGION

42%

10%

43%

5%

42%

7. OUR OBJECTIVES

the objectives for 2018OBJECTIVES RELATED TO FUND IMPACT

n 65 SME’s financed (25 indirectly through funds and

40 directly in 5 focus countries)

- Yearly 10% increase of EBIT

- 1500 new jobs created (35% youth)

n 40 MFI’s financed and over 50,000 micro

entrepreneurs financed, 50% women

n 50% of SME’s receive BDS training. Minimum of

1200 people will be trained.

n Up to 10 % of investments go directly in small and

very small enterprises.

OBJECTIVES RELATED TO FUND SIZE AND RETURN

n Target EUR 40 mln investments disbursed

n Target IRR: capital preservation / Euro inflation

(estimated 1-2% p.a)

n EUR 15 mln in technical assistance and business

development services

philippines(mindanao)ethiopia

kenya (north)uganda (north)

burundi

south sudan

haiti

guatemala

dem. rep of the congo

© Cordaid

n Direct investments

n Indirect Investments

colombia

sierra leone

myanmar

8. OUR PROCESS

close, disburse, scale and manage

1. FIRST CLOSING & DEALS BY Q1 2015n Fund raising of EUR 25 mln

n Deal flow of 30 potential indirect investments

2. DISBURSEMENT & BDS TO FIRST INVESTEES IN FOCUS COUNTRIES (2014-16)

n MFI and SME funds in 12 countries

n Initiate direct investments in Sierra Leone in 2014,

in Philippines (South), Ethiopia, Guatemala and

Burundi in 2015/2016

n Annual impact and financial performance reporting

3. SECOND CLOSING (YEAR END 2016) & SCALE OF DISBURSEMENTS (2018)

n Additional 25 million raised

n Steady deal flow of direct and indirect investments

n Annual impact and financial performance reporting

4. PORTFOLIO MANAGEMENT (2018 ONWARDS)

n EUR 50 mln under management

n Annual impact and financial performance

reporting

n Continuous fundraising

n Steady deal flow generation

n Continuous investments required to fund patient

capital, equity investments with 10-15 years horizon

€€

€25 MM

2016

# investments

STABILITY IMPACT FUNDPORTFOLIO

€

R.O.I.=%

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2016

# investments

€25 MM

+ €25 MM

end 2016

€€

€25 MM

2016

# investments

STABILITY IMPACT FUNDPORTFOLIO

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2016

# investments

€25 MM

+ €25 MM

end 2016

€€

€25 MM

2016

# investments

STABILITY IMPACT FUNDPORTFOLIO

€

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2016

# investments

€25 MM

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end 2016

€€

€25 MM

2016

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STABILITY IMPACT FUNDPORTFOLIO

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2016

# investments

€25 MM

+ €25 MM

end 2016

fragile contexts require patient capital

stability impact fund September 2014 © Cordaid

9. OUR RESOURCES

fund structure & managementclear separation of capital and grants

© Cordaid

Cordaid Investments

ManagementContract

1 member

Internal External

Investment

InvestmentDecision

100%

Anchor Investors

Stability Impact Fund

Cordaid Foundation

T.A. Manager Fund Manager

Local BDS Trainers

Advisory Board

Investors

Investment Committee

SME’s Family Foundation

10. OUR KEY RESOURCES

FUND MANAGEMENT

BDS MANAGEMENT

Laure Wessemius ChibracDirector InvestmentsFormer functions:- MD Corporate Partner- Director Equity Capital Markets,

ABN AMRO Rothschild London/Paris- VP Equity Advisory, BNP Paribas

Sascha NoéInvestment ManagerFormer functions:- Programma manager Microfinance,

Oxfam Novib- Programma manager Estern Europe,

Central Asia, Caucasus, Oxfam Novib

Alain NkurikiyeInvestment ManagerFormer functions:- Consultant, Berenschot- Business development and strategy,

Vlisco Netherlands B.V.- Sales and Communication officer, PSI

Resi JanssenInvestment ManagerFormer functions:- Policy officer, Cordaid- Team leader Africa, Cordaid- Executive Secretary, MicroNed- Investment officer, Oxfam Novib

Peter van PoortvlietDirector EntrepreneurshipFormer functions:- Team manager PSI Africa- Project officer PSOM Mozambique,

Kenya and Indonesia at EVD- Project officer, EGL

stability impact fund September 2014 © Cordaid

how we make it happen

n Cordaid

n Cordaid Investments

peru

haiti

sierra leone

ghana

tanzania

burundirwanda

uganda

ethiopia

philippines

vietnam

india myanmar

kenya

south sudan

bolivia

honduras

nicaragua

dem. rep of the congo

11. CORDAID INVESTMENTS

IF we provide inclusive and affordable financial and business development services for growth to MSMEs in fragile contexts

THEN employment will increase and business opportunities will develop sustainably, securing the income of people in the communities and reducing their vulnerability

BECAUSE we believe that investing in small and medium enterprises in fragile countries will contribute to strengthening the economic development and the peacebuilding process

theory of change

© Cordaid

12. CORDAID INVESTMENTS

stability impact fund September 2014 © Cordaid

being part of cordaid

# of investees (institutions vs SMEs), # of equity stakes, loans, guarantees and grants provided, total volume of each financial

product

We provide equity, loans, guarantees and grants to financial institutions as well as directly to SMEs

Local financial institutions and SMEs often lack the capital to professionalise and grow

# of institutions trained, # of MSMEs trained, # networks established /trained, # of board positions

We directly build capacity of financial institutions and SMEs through board memberships and coaching, as well

as contracting consultants/interim managers

Local financial institutions and SMEs often lack the capacity to formalize and grow

# BDS providers trained, # of BDS providers that received a grant, total grant volume

We build the capacity of BDS providers locallyLack of sufficient and adequate local Business Development

Service providers

# of fund reports, financial and social return of fund, # of investors, total volume of fund, # conference & events

We manage funds (dealflow, ESG, monitoring, reporting, measuring impact, currency protection tools). We demonstrate and share our

experiences and outcomes within the investment sector

Investors perceive the risk to invest in fragile states as high, because of their lack of trust, information, thorough risk

analysis and experience

# of dialoguesWe facilitate constructive dialogues between private sector

stakeholdersPoverty, high risk of natural disasters and poor governance

structures make it difficult to do business

PROBLEM ACTIVITY OUTPUT

CORDAID - BUILDING FLOURISHING COMMUNITIES IN FRAGILE STATESFlourishing communities are the social fabric of a nation, where caring for and taking care of one another are fundamental values.

Cordaid Investments Employment will increase and business opportunities will develop sustainably, securing the income of people in the communities

and reducing their vulnerability, strengthening the local economies and the peacebuilding process.

Increased income and job creation decrease the incentive for people to

engage in negative activities like war and crime. On top of that, less private sector conflicts also lead to improved stability.

Entrepreneurs have improved access to finance and business development support

stimulating businesses and job creation. More successful businesses will increase the confidence to invest in fragile states.

The governance of financial institutions and SMEs improves as well as the professionalism of the Business

Development Service sector.

Entrepreneurs, with emphasis on youth and women, are empowered with skills,

technology, network and capital.

security opportunity governance empowerment

OUTCOME

IMPACT

CORNERSTONES

CARE.ACT.SHARE.LIKE CORDAID.

HEALTH CARE

DIS ASTER RESILIENCE

EN TRE PREN EUR SHIP

WO MEN’S LEAD ER SHIP

CHILD & EDU CA TION

EX TRACT IVES

FOOD SE CUR ITY

SE CUR ITY & JUSTICE

URB AN MAT TERS

IN VEST MENTS

145 MLN spent on fighting poverty annually

324,000 private donors in nl

800

partner organizations

38 countries

INFORMATION

More information see www.cordaid.org/ investments

You can also contactLaure Wessemius-ChibracDirector Investmentslaure.wessemius@cordaid.nl

CONTACT

CordaidP.O. Box 16440 2500 BK The Hague The Netherlands+31 (0) 70-31 36 300

www.cordaid.org

CORDAID FACTS AND FIGURES

source: annual report 2013