Presentation Loïc De Cannière

1. Microfinance
Vlerick Management School
Ghent, November, 6th, 2013
Loïc De Cannière, CEO Incofin IM

2. Content
•
Microfinance: what is it?
•
Microfinance investment funds
•
Short presentation of Incofin IM and funds

3. What is microfinance ?
→ Microfinance is the provision of a broad range of financial services to microentrepreneurs
→ The origin of Microfinance can be traced back to the ‘70s and has since then
grown into a socially and economically successful business
Two basic credit methodologies:
- Group lending
- Individual lending

4. A tremendous growth
→
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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”

5. Regional differences
Distribution of GLP per Region
Source: calculations based on The Mix (data 2012)

6. Regional differences

7. Lifecycle of a MFI
NGO
NBFI
Bank
Donation
SemiCommercial
Commercial
Savings
Debt
Equity
Funding

8. Microfinance Institutions

9. 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%

10. Béatrice: a micro-entrepreneur,
client of Unguka Bank (Rwanda)
10

11. Social Impact Microfinance
Vulnerability
Access to
elementary
services
(savings)
Growth
Evolution of poor households
Stabilization of
income by
development
of microeconomic
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

13. Content
•
Microfinance: what is it?
•
Microfinance investment funds
•
Short presentation of Incofin IM and funds

14. Microfinance investment funds
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→
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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

15. Investment value chain of microfinance

16. Investment value chain of microfinance
SOCIALLY MOTIVATED INVESTORS
Shares / Notes
Investments
Debts + Equity
MICROFINANCE INSTITUTIONS
Micro credits
MILLIONS OF MICRO-ENTREPRENEURS
Financial & social return
MF INVESTMENT FUNDS
Assets under Management

17. Who is investing in MIVs?

18. What is the ROE of underlying MFIs?

19. Interest rate components
30%
25%
20%
15%
Cost
of Loan
For
Client
Operating
Expenses
MFI
20-40%
8-20%
Provisions
2-3%
Profit
Margin
3-4%
10%
Country
FX
Insurance
0.5-1.0% Hedging Custodian
1.0-1.5% + audit
0.3%
M’gt
Fee
1.5-1.75% Return to
Investor
3-5%
5%
0%
Microcredit Client
Microfinance institution
Microfinance fund + investor

20. Content
•
Microfinance: what is it?
•
Microfinance investment funds
•
Short presentation of Incofin IM and funds

21. Incofin Investment Management
•
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
~500M USD
Retail funds
50M USD
Institutional Funds 320M USD
Managed Accounts 130M USD
Volksvermogen (2004,15M USD)
Impulse
Rural
Impulse
Fund I
Rural
Impulse
Fund II
Fairtrade
Access
Fund
FPM
agRIF
Incofin cvso
(2004)
60M USD
(2007)
38M USD
(2010)
160M USD
(2012)
25M USD
(2013)
40M USD
TBD
(2001)
50M USD
VDK (2007, 100M USD)
BIO (2012, 15M USD)

22. 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%

23. Wide geographic coverage
Incofin has investments in 43 countries worldwide
NORWAY
UNITED
KINGDOM
EST.
LAT.
LIT.
HOL.
POLAND
BEL. GERMANY
AUS.
HUN.
SWI.
FRANCE
SPAIN
RUSSIA
FINLAND
SWEDEN
DENMARK
BELARUS
UKRAINE
M.
ROMANIA
S
BUL.
.
BOS.
ITALY
BELIZEA
HAITI
CUBA
JAM.
GUATEMALA HONDURAS
DOM.
MAURITANIA MALI
SENE
GAL
G.B.
NICARAGUA
SALVADOR
COSTA RICA
BURKINA
FASO
GUINEA
VENEZUELA
PANAMA
COLOMBIA
GUYANA
SIERRA LIBERIA
L.
FRENCHGUIANA
SURINAME
IRAQ
ISRAEL JORDAN
KUWAIT
ALGERIA
WESTERN
SAHARA
BAHAMAS
LIBYA
NIGER
EGYPT
CHAD
BRAZIL
NIGERIA
ETHIOPIA
CENTRAL
AFRICAN
REPUBLIC
CAMEROON
IRAN
INDIA
NAMIBIA
MYANMAR
TAIWAN
LAOS
THAILAND
CAMB.
VIETNAM
SOMALIA
KENYA
BOLIVIA
BHUT
AN
BANGLADESH
OMAN
YEMEN
RW.
BU.
ZAMBIA
S.KOREA
PAKISTAN
UAE
TANZANIA
JAPAN
CHINA
AFGHANISTAN
QATAR
UGANDA
DEMOCRATIC
REPUBLIC
OF CONGO
ANGOLA
PARAGUAY
ERITREA
BENIN
TOGO
LVORY
COAST
CONOGO
PERU
SAUDI
ARABIA
SUDAN
CABON
ECUADOR
SYRIA
CYP.
N.KOREA
TURKMENISTAN
TURKEY
GREECE
MEXICO
MONGOLIA
UZBEKISTAN
A.
TUNISIA
MOROCCO
KAZAKHSTAN
M.
SRI LANKA
MALAYSIA
BR.
INDONESIA
MALAWI
PAPUA
NEW-GUINEA
MOZAMBIQUE
ZIMBABWE
MADAGASCAR
BOTSWANA
SWA.
URUGUAY
SOUTH
LES.
AFRICA
CHILE
ARGENTINA
Region
%
Latin
America and 35%
Caribbean
Central/East
ern
35%
Europe/NIS
Countries
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
Note: Portfolio July 2013
Argentina - Bolivia - Colombia - Ecuador - El Salvador - Guatemala - Haití - Honduras - México Nicaragua - Panamá - Paraguay - Perú
Armenia - Azerbaijan - Belarus - Bosnia and Herzegovina - Georgia - Kazakhstan - Kyrgyzstan Mongolia - Russia – Tajikistan - Uzbekistan

24. Investments in debt and in equity
Breakdown current portfolio per instrument
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
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25. 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
1
Financial
Risk Analysis
•
•
•
•
•
•
•
•
Country risk
Ownership and governance
Products and services
Operations and control
Loan portfolio
Financial performance
Asset/liability management
Future development prospects
2
Social / Environmental
Risk Analysis
•
•
•
•
•
Social mission management
Outreach and access
Quality of customer services
and respect of Client Protection
Principles
Human resources
Environment, corporate social
responsibility and impact
True double bottom line approach
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26. Impulse fund
Incofin CVSO fund
Strong financial track record
2008
2009
2010
2011 2012
Dividends distributed
2006 2007
2008 2009 2010 2011 2012
1,0%
1,5%
2,0%
2,5%
2,5% 2,5%
Impulse
3,0% 3,0%
3,0% 0,0%
IRR to
date:
14,5%
RIF II
2007
Incofin CVSO
RIF I
Dividends distributed
2,5%
3,0%
3,0%
NAV increase
since 12/10:
22,4%
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27. International set investors, both DFIs and
Institutional investors
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28. Questions?
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