2nd presentation blue orchard

1. November 2019
Making Investments Work
Kaspars Delins, Head of Origination & Structuring / CEE,
MENA, Central Asia & Caucasus
Dushanbe, November 15, 2019

2. Table of contents
Page
1 Snapshot of BlueOrchard 3
2 Risk assessment and selection criteria by Investors 7
3 Criteria to address Sustainable Development Goals 13

3. 1 Snapshot of BlueOrchard

4. 4
BlueOrchard is a leading global impact investment manager
USD
6bn
invested
Provided access to financial
and related services to over
200mn
people
Invested in
80
countries
475
institutions financed
Source: BlueOrchard
 Founded 2001 by initiative of the UN
 Multi-asset manager: Credit, Private Equity,
Sustainable Infrastructure
 Expert in emerging and frontier markets,
generating market returns
 Manager of largest microfinance fund worldwide
 Strong network with leading development
finance institutions
 Proprietary impact management tool
 Global company with local presence
 Regulated by FINMA and CSSF with
AIFM & UCITS license
 Sophisticated private and public sector clients

5. 5
BlueOrchard’s current investment offering
Source: BlueOrchard
Fund Inception
Asset
class
Open-/
closed-end
First loss
capital Status
BlueOrchard Microfinance Fund (BOMF) 2001 Private Debt Open-end N/A Open
Microfinance Enhancement Facility (MEF) 2009 Private Debt Closed-end  Closed
Microfinance Initiative for Asia (MIFA) – Debt Fund 2013 Private Debt Closed-end  Closed
Regional Education Finance Fund for Africa (REFFA) 2014 Private Debt Closed-end 
Capacity
reserved
InsuResilience Investment Fund (IIF) 2015
Private Debt
Private Equity
Closed-end  Open
Japan ASEAN Women Empowerment Fund (JAWEF) 2016 Private Debt Closed-end  Closed
Enabling Microfinance Fund (EMF) 2017 Private Debt Closed-end N/A N/A
UCITS Emerging Markets SDG Impact Bond Fund (IBF) 2018 Listed Debt Open-end N/A Open
Emerging Markets SDG Infrastructure Debt Fund (EMSID Fund) 2020
Infrastructure
Debt
Closed-end TBD Open

6. 6
Experienced senior investment professionals and local investment expertise
Note: Map indicates investments by country as of Dec. 2018, figures as of 31. August 2019
Source: BlueOrchard
7 years
Executive
Management
Avg. Tenure
19 years
Executive
Management
Avg. Experience
14 years
Investment
Professionals
Avg. Experience
Lima • Nairobi • Singapore • Phnom Penh
Luxembourg • Geneva • Zurich • Tbilisi
100+
Staff
40+
Languages
8
Offices
35+
Nationalities
45%+
Female staff

7. 2
Risk assessment and selection
criteria by Investors

8. Private
Investors
• Individuals
• Solidarity Groups
• Micro- and Small
enterprises
Investors Microfinance Fund Banks/MFIs1) Micro-entrepreneurs/SMEs
• Microfinance
institutions / Banks
• Supervision by local
regulator/central bank
• Credit bureaus to
protect clients
• Funds as efficient
vehicles to pool
investments
• Country and MFI
selection and allocation
• Public Investors: e.g.
sovereign wealth funds
or development banks
• Private Investors: e.g.
PFs, foundations, banks,
insurance companies
The microfinance value chain: Connecting capital markets to Microfinance
$
$
$
$
$
$
$
$
$
$
$+%$+% Credit
Bureaus
mitigate over
indebtedness
risk
Supervision by
local regulator/
central bank
Public
Investors
Investment fund
regulations
$
Investor
protection
regulations
$
$+%
1) Microfinance institution
8

9. 9
MFIs - key concerns about debt financing? Investors - key concerns about providing
financing
 Interest rate?
 Loan tenor and repayment terms?
 Performance requirements?
 Security/collateral?
 Time to process the transaction?
 Repayment?
 Use of loan proceeds?
 Reputational risks?
 Deal structure?
 Price?
Source: BlueOrchard.

10. Portfolio/Fund Level Considerations before making investments
 Investment Type: senior, subordinated, equity.
 Country exposures: internal and external country limits.
 Regional Exposures: defined regional configuration and limits.
 Currency exposures: hedged vs. unhedged and local vs hard currency funds.
 Maturity: product specifications vs. MFI needs.
 Social Performance: MFI social objectives and impact vs. lender’s mandate
10

11. 11
Top-Down
Macro analysis
4-Step Approach:
1. Macroeconomic Analysis
2. Social and Political Risk Analysis
3. Microfinance Industry Specific Issues
4. Regulatory Environment
Output: Country Rating
Output: MFI Ratings
4-Step Approach:
1. Desk research
2. On-site due diligence
3. Qualification of new investments according
to financial & social criteria
4. Risk pricing
Bottom-up
Credit analysis
Definition of the investment structure
Process overview: combining macro and credit analysis

12. Assessment of MFI’s risk profile by investors
 Focus on double bottom-line returns and responsible lending.
 BOF also uses the internally developed MFI ‘s risk rating tool to assess level of all major
risks.
 Evaluation of loan proposals includes assessment of financial and institutional
performance in five categories:
– Corporate governance is rated by assessment of qualification of board and
management, involvement, structure and key person risk.
– Strategy is evaluated based on the growth, infrastructure and risk tolerance.
– Risk positioning looks at both - external risks (regulatory environment, competition
and over-indebtedness, credit bureau and other external risks and the MFI’s
vulnerability to them) and internal risks (quality of internal controls, credit risk
management, human resource management and quality of asset and liability
management).
– Capital adequacy is rated based on the capitalization level and trends.
– Financial performance is evaluated by assessing ROA, ROE, OpEx, NIM, NOM, LLR,
PAR and other trends.
12

13. 3
Criteria to address Sustainable
Development Goals

14. 14
BlueOrchard’s proprietary Social Performance Impact Reporting & Intelligence
Tool (SPIRIT)
 Investment Officers conduct a social
performance due diligence on all
current and potential investments
during on-site due diligence
 SPIRIT is used for assessing inclusive
finance institutions, and tailored to
capture and analyze larger financial
institutions and other types of
companies in the Fund’s investment
universe
 Categories are aligned with the Social
Performance Task Force’s Universal
Standards for Social Performance
Management
 The SPIRIT results in a score between
0 and 100
 The minimum social eligibility score is
50
Source: BlueOrchard
Comments
Social performance analysis
on all existing and potential
investees
Define and
monitor social
goals
Ensure board
management
and employee
commitmentto
social goals
Treat employees
responsibly
Balance social
and financial
performance
Promote
environmental
protection
Treat clients
responsibly
Design products,
services, delivery
models/channels
that meet client’s
needs/preferences

15. The information in this publication was produced by BlueOrchard Finance Ltd (“BOF”) to the best of its present knowledge and belief. However, all data and
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