Microfinance investment opportunity for the broad base of retail investors TBLI CONFERENCE™ ASIA 2010  Satoru Yamamoto Dep...
About Daiwa Securities Group <ul><li>Business structure </li></ul><ul><li>Robust retail customer base </li></ul>
Daiwa’s initiative in TBLI
Microfinance in Japan (2009) <ul><li>No MFI  </li></ul><ul><li>No MIV  </li></ul><ul><li>Growing interests in TBLI among r...
Retail led SRI market Primary sources:  European SRI Study 2008 (as of the end of 2007)
Deep pockets prefer safety Primary sources:  United States: Federal Reserve Statistical Release,  Flow of Funds Accounts, ...
Typical structure of MIV Microfinance Institutions (MFIs) Micro-lenders Donor Foundations IFIs Private Investors Instituti...
IFC Microfinance Bonds <ul><li>First microfinance investment product in Japan* </li></ul><ul><li>$275 million equivalent r...
Investor Forum Daiwa Microfinance Forum 2009 Date:  October 27th, 2009 Venue:  GranTokyo North Tower 18F Conference Room S...
Factors that attract 12,000 investors <ul><li>Social & sustainable impact </li></ul><ul><ul><li>IFC will direct an amount ...
Pros and cons  MFI-issued notes IFC Microfinance Bonds Diversification effect Direct involvement Secondary market Currency...
Moving forward  <ul><li>IFC Microfinance Bonds successfully opened the door  </li></ul><ul><li>Next step is setting up mic...
Voices from customers <ul><li>What kind of involvement in microfinance do you consider ? </li></ul><ul><li>What kind of mi...
Important notice Regarding Fees and Risks Regarding expenses and costs including fees and commissions ・  Only the price va...
Thank you Daiwa Securities Co. Ltd.  |  1-9-1, Marunouchi, Chiyoda-ku, Tokyo, 100-6752, Japan  |  www.daiwa-grp.jp/ir/engl...
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Microfinance Investment Opportunity for the Broad Base of Retail Investors

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Satoru Yamamoto, Deputy General Manager - Daiwa Securities Co. Ltd. - Japan

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Microfinance Investment Opportunity for the Broad Base of Retail Investors

  1. 1. Microfinance investment opportunity for the broad base of retail investors TBLI CONFERENCE™ ASIA 2010 Satoru Yamamoto Deputy General Manager Head of Planning Section Product Planning Dept. Daiwa Securities Co. Ltd. Workshop 10 - Microfinance May 28th 2010
  2. 2. About Daiwa Securities Group <ul><li>Business structure </li></ul><ul><li>Robust retail customer base </li></ul>
  3. 3. Daiwa’s initiative in TBLI
  4. 4. Microfinance in Japan (2009) <ul><li>No MFI </li></ul><ul><li>No MIV </li></ul><ul><li>Growing interests in TBLI among retail investors </li></ul><ul><ul><li>IFFIm Vaccine Bonds (March 2008, February 2009, March 2010) </li></ul></ul><ul><ul><li>World CO2L TM Bond (June 2008) </li></ul></ul><ul><ul><li>World Bank Green Bonds (January 2010) </li></ul></ul><ul><ul><li>ADB Water Finance Bonds (April 2010) </li></ul></ul><ul><ul><li>EIB Climate Awareness Bonds (June 2010) </li></ul></ul><ul><ul><li>Others </li></ul></ul><ul><li>Household financial asset of $15.5 trillion can be an important source of </li></ul>funds for MFIs in developing countries
  5. 5. Retail led SRI market Primary sources: European SRI Study 2008 (as of the end of 2007)
  6. 6. Deep pockets prefer safety Primary sources: United States: Federal Reserve Statistical Release, Flow of Funds Accounts, December 10, 2009 . United Kingdom: Office for National Statistics, Financial Statistics No 572, December 2009 . Germany: Deutsche Bundesbank, Financial Accounts for Germany 1991 to 2008 . France: Banque de France, Financial Accounts and Financial Balance Sheets, October 1, 2009 . Japan: Bank of Japan, Flow of Funds Accounts , September 17, 2009    * converted into US dollars based on the year-end exchange rates of GBPUSD=1.46, EURUSD=1.40, USDJPY=90.60 Japan United Kingdom Germany France United States Currency and deposits Currency & deposits Insurance& Pension Shares Mutual funds Others Financial Assets and Liabilities of Households
  7. 7. Typical structure of MIV Microfinance Institutions (MFIs) Micro-lenders Donor Foundations IFIs Private Investors Institutional Investors Mezzanine Junior Equity Senior debt Microfinance Investment Vehicle (MIV) Micro-depositors Local banks Commercial / Private Social / Public
  8. 8. IFC Microfinance Bonds <ul><li>First microfinance investment product in Japan* </li></ul><ul><li>$275 million equivalent raised (fully subscribed) </li></ul><ul><li>Distributed to 12,000 retail investors in 10 business days </li></ul><ul><li>Average investment amount of $18,000 equivalent </li></ul><ul><li>Received great public responses </li></ul>*settlement date basis Japanese investors IFC MFIs Entrepreneurial poor in developing countries MFIs MIVs <ul><li>  Cash flow </li></ul><ul><li>  Summary terms </li></ul>
  9. 9. Investor Forum Daiwa Microfinance Forum 2009 Date: October 27th, 2009 Venue: GranTokyo North Tower 18F Conference Room Speaker: Sir Fazle Hasan Abed, Founder and Chairperson of BRAC Mr. Masahiro Kan, Former Professor of Hokkaido University Public Policy School Mr. Mark Berryman, Investment Officer/Microfinance Specialist, International Finance Corporation Mr. Morihiko Hiramatsu, Goodwill Ambassador of One Village One Product Movement No. of Audience: 196
  10. 10. Factors that attract 12,000 investors <ul><li>Social & sustainable impact </li></ul><ul><ul><li>IFC will direct an amount equal to the net proceeds of the bonds to MFIs and MIVs </li></ul></ul><ul><li>Simple scheme </li></ul><ul><ul><li>Plain vanilla issue under known issuance program </li></ul></ul><ul><li>Triple-A credit quality </li></ul><ul><li>Sound return </li></ul><ul><ul><li>5.1% p.a. fixed coupon paid semiannually in Australian dollars </li></ul></ul><ul><li>Low maintenance cost </li></ul><ul><ul><li>Outsourcing of administration to IFC </li></ul></ul><ul><ul><ul><ul><li>screening and monitoring of MIVs and MFIs </li></ul></ul></ul></ul><ul><ul><ul><ul><li>annual reporting of IFC’s microfinance activities </li></ul></ul></ul></ul>
  11. 11. Pros and cons MFI-issued notes IFC Microfinance Bonds Diversification effect Direct involvement Secondary market Currency hedging Funding capacity Documentation Credit rating
  12. 12. Moving forward <ul><li>IFC Microfinance Bonds successfully opened the door </li></ul><ul><li>Next step is setting up microfinance mutual funds in order to </li></ul><ul><ul><li> achieve more direct involvement (social return aspect) </li></ul></ul><ul><ul><li> gain portfolio diversification effect (financial return aspect) </li></ul></ul><ul><li>Challenges </li></ul><ul><ul><li> Liquidity </li></ul></ul><ul><ul><li> NAV calculation </li></ul></ul><ul><ul><li> Maintenance </li></ul></ul><ul><ul><li> Optimal fund size </li></ul></ul>
  13. 13. Voices from customers <ul><li>What kind of involvement in microfinance do you consider ? </li></ul><ul><li>What kind of microfinance products are you interested in ? </li></ul>Source: Questionnaire at Daiwa Microfinance Forum 2009, October 27 th *multiple answers allowed *multiple answers allowed
  14. 14. Important notice Regarding Fees and Risks Regarding expenses and costs including fees and commissions ・ Only the price value is to be paid to purchase bond ・ Trading foreign currency securities requires submission of application document for opening a foreign securities trading account and charges a maximum of ¥3,150 (including tax) of custody fee other than the purchase price Regarding risks in investment ・ Sale price of bond may fall below the par value in case of the sale before maturity date, as the price of bond fluctuates due to the change in interest rate and other factors. ・ Investment in foreign currency-denominated bond may fall below the par value of   investment as the yen value of the bond fluctuates due to the change in yen value of coupon   and proceed from redemption against the foreign currency. ・ Investment in bond may fall below the par value of investment due to the change in the bond issuer’s management and financial status and the change in the third party’s   evaluation on those factors Regarding other notices in investment ・ Risks and expenses and costs including fees and commissions differ in each product, so please be sure to carefully read the document provided prior to the execution of agreement, prospectus and other documents. Corporate name: Financial instruments firm: Memberships: Daiwa Securities Co. Ltd. chief of Kanto Local Finance Bureau (Kin-sho) No.108 Japan Securities Dealers Association Japan Securities Investment Advisors Association The Financial Futures Association of Japan
  15. 15. Thank you Daiwa Securities Co. Ltd. | 1-9-1, Marunouchi, Chiyoda-ku, Tokyo, 100-6752, Japan | www.daiwa-grp.jp/ir/english/index.cfm

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