Peter johnson


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Peter johnson

  1. 1. SMEs: The Missing Middle <br />Peter Johnson, Developing World Markets<br />November 11, 2010<br />
  2. 2. Presentation Outline<br />Developing World Markets (DWM)<br />SMEs: The Missing Middle<br />SME Funding Sources<br />DWM and SME FI Financing<br />Looking Forward: Increasing Financing for SMEs<br />
  3. 3. I. Developing World Markets<br />$850 million* Micro and SME FIs Capital Markets Transactions<br /><ul><li>Structuring
  4. 4. M&A/Strategic Advisory
  5. 5. Corporate Finance Services</li></ul>DWM Finance, LLC <br />Investment Banking<br />DWM Asset Management, LLC <br />Asset Management<br />$650 million Micro and SME Financial Institution (FI) Assets under Management<br /><ul><li>Institutional-scale origination capacity & credit skills
  6. 6. Emerging Markets assetmanager since 1994</li></ul>*includes AUM<br />Experienced team with long careers in emerging markets investment banking & fund management<br /><ul><li>Relationships with 300+ MFIs and SME FIs
  7. 7. Address full sweep of capital needs </li></li></ul><li>I. DWM’s Mission and Business Strategy<br />Linking MFIs and SME FIs in developing countries to international capital markets<br />Foster financial services to the poor in all developing countries <br />Help strengthen & grow MFIs and SME FIs<br />Link MFIs and SME FIs to international capital markets funding<br />Design innovative financial solutions to meet the capital needs of MFIs and SME FIs and help low-income entrepreneurs to grow and prosper<br />DWM<br />Investors <br />Investment Vehicles<br />debt, equity, hybrids & others<br />MFIs and SME FIs<br />Entrepreneurs<br />
  8. 8. II. Defining SMEs <br />Small to Medium Enterprises (SMEs) still remains a catch-all <br />phrase, open to many different business models and subject to<br />many different classifications particular to each respective <br />region.<br />
  9. 9. II. SMEs and Economic Development<br />SMEs can promote economic development in <br />emerging markets through:<br />Increased business productivity<br />Use and promotion of more advanced technologies<br />Economies of scale<br />Employment creation<br />
  10. 10. III. Limited Financing: Obstacle to SME Growth<br />SMEs worldwide named financing constraints as the second biggest obstacle to their growth, while large firms placed financing constraints fourth*<br />Many SMEs do not qualify at commercial banks<br />Weak collateral, unaudited financials, and higher perceived risk and cost<br />SME financing needs surpass MFI lending capabilities <br />Inadequate underwriting methodologies<br />Inexperience with individual-based lending<br />Inexperience with collateral <br />Limited funding sources<br />*World Bank’s “World Business Environment Survey” 2008<br />
  11. 11. III. Current SME Lending Sources<br />Banks: Commercial banks moving down-market <br />ACBA Credit Agricole Bank in Armenia<br />Banco Pichincha in Ecuador (CrediFé)<br />MFIs: MFIs moving up-market<br />Mibanco in Peru<br />XacBank in Mongolia <br />SME FIs<br />ProCredit Bank <br />Capital Markets: Domestic and international structured debt transactions <br />Venture Capital and Angel Investors<br />Debt<br />Equity<br />
  12. 12. IV: DWM and SME Financing<br />For DWM, investing in SME FIsis a natural extension of microfinance investing <br />DWM has provided over $100MM in senior and subordinated debt to SME FIs including: <br />25% Equity stake in leading Bolivian SME FI<br />DWM arranged:<br /> $25MM Bond issuance for AccessBank, Azerbaijan <br />€34MM Private placement for SME Bank Network<br />
  13. 13. V: SMEs: Attractive Investment Space<br />Strong growth potential – less saturated market than microfinance<br />Good credit quality – DWM shows PAR>30 for SME banks ~1.5% less than pure microfinance institutions <br />Impact investment – like microfinance, provides a private-sector approach to emerging markets economic development<br />
  14. 14. V. Moving Forward in the SME Space<br /><ul><li>Public-private partnerships (e.g. multilaterals)
  15. 15. Guarantee programs
  16. 16. Direct investments through domestic and international SME-focused funds
  17. 17. Capital markets transactions
  18. 18. Increase liquidity for SME investment securities
  19. 19. Advisory services
  20. 20. Equity investments in MFIs</li></ul>Promote better business environment for SMEs<br />Lower barriers to entry for small businesses<br />Improve quality of financial information for lenders (e.g. credit bureaus)<br />
  21. 21. Contact Information<br />DWM Asset Management LLC<br />800 Post Road, Darien, Connecticut 06820, USA<br /><br />Tel: 1 203 655 5453 Fax: 1 203 656 9528<br />Peter Johnson Simone Balch Kari Filerman<br /><br />12<br />
  22. 22. Risks and Disclosures<br />Opinion <br />Any statements of opinion constitute only current opinions of DWM Asset Management, LLC, which are subject to change and which DWM Asset Management, LLC does not undertake to update. <br />Unaudited Information Subject to Change<br />Some information in this report is based on unaudited information and is subject to change.<br />Third Party Information<br />Some information contained herein has been obtained from DWM Finance, LLC and other third party sources and has not been independently verified by DWM Asset Management, LLC. DWM Asset Management, LLC makes no representations as to the accuracy or the completeness of any of the information herein.<br />Strategy/Process Risk Disclaimer<br />No investment strategy or risk management technique can guarantee returns or eliminate risk in any market environment.<br />THIS DOCUMENT DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY AN INTEREST IN DWM INVESTMENT PRODUCTS. NO SUCH OFFER OR SOLICITATION WILL BE MADE PRIOR TO THE DELIVERY OF AN OFFERING MEMORANDUM AND OTHER MATERIALS RELATING TO THE MATTERS MENTIONED HEREIN.<br />NO REPRESENTATION OR WARRANTY IS MADE BY DEVELOPING WORLD MARKETS OR ANY OF ITS AFFLIATES (COLLECTIVELY, DWM), INCLUDING ANY OF ITS AGENTS OR OTHER REPRESENTATIVES, AS TO THE ACCURACY OR COMPLETENESS OF THE INFORMATION CONTAINED HEREIN. <br />COPYRIGHT 2010.<br />