Rural impulse FUND II overview 2010
1. RIF II key figures*
120
387,626
million eur
(84% women / 16% men)
total fund size
total number of clients served
97
735
.
million EUR
total investment portfolio
9
MFIs in portfolio
EUR
average loan size per client
146 million EUR
total of loans issued by all mfis
Edpyme Alternativa (PERU) Edpyme Nueva Vision (PERU) Edpyme Solidaridad (PERU) Sembrar Sartawi (bolivia) AB Zambia (zambia) Hope (india) Fusion (india) VisionFund (cambodia) Kompanion (Kyrgyzstan)
RIF II Investments 9 MFIs in 6 countries
* figures: 31/12/2010
2. RIF II in short Incofin’s Rural Impulse Fund II (RIF II) is a follow-up fund of Rural Impulse Fund, a USD 38 million fund (EUR 30 million) that was launched in August 2007. RIF I showed rural microfinance to be a solid asset class with good returns. Based on this succesful experience and in order to meet the considerable capital demand of microfinance institutions, RIF II has been conceived as a larger fund with a target size of EUR 120 million. It is a hybrid fund, making both equity and debt investments and is closedended with a lifetime of ten years.
RIF II Main investors
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3. Mission The mission of RIF II is to contribute to the alleviation of poverty in rural areas underserved by the microfinance industry by providing (subordinated) loans and/or equity financing to microfinance institutions and other commercial companies that provide innovative financial services in rural areas.
4. Strategy Rural Impulse Fund II invests in financially sustainable microfinance institutions (and, to a lesser extent, other companies) that: • qualify as “rural” “Rural” MFIs are defined as MFIs, having at least 30% of their clients living in rural areas or being engaged in primary agricultural production, or MFIs having at least invested 30% of their portfolio volume in rural areas or in primary agricultural production. • help create an inclusive financial sector, where the majority of people have access to financial services, in order to provide a sustainable basis for a balanced social and economic development. RIF II makes an annual contribution of 0.05% of the fund’s total assets to a technical assistance trust account, which is being used to finance technical assistance interventions in selected investees.
5. Objectives The fund’s objectives are both financial and social: 1. to improve the outreach and impact of rural MFIs and to assist them in providing opportunities to the rural poor, who represent three quarters of the world’s poor; 2. to strengthen the rural MFIs’ financial structure and capacity; 3. to provide an attractive financial return to investors.
Rural Impulse Funds II has been awarded the LuxFLAG label, which recognizes eligible Microfinance Investment Vehicles (MIV).
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6. Fund Manager: Incofin
Investment Management
Incofin Investment Management manages six funds totalling EUR 274 million.
THE STRENGTHS OF INCOFIN IM Within Incofin Investment Management, an international and multilingual team of 26 experts works to provide tailored financial solutions. Incofin has particularly wide experience with microfinance and international markets and contacts with investors worldwide. Incofin Investment Management’s methods are fully aligned with those of Rural Impulse Fund II. Incofin IM too pursues a “double bottom line” approach, with financial and social performance on an equal footing. These are evaluated using the ECHOS© tool and the CRS risk management tool.
ECHOS©: measuring social performance Investing in MFIs is not sufficient in itself to be recognized as a “social investor”. Incofin IM wants in the first place to invest in MFIs that are able to demonstrate a high social performance. Incofin measures MFIs’ social performance using the ECHOS© tool, which it has developed in-house.
MFIs applying for an investment from Incofin go through a detailed procedure. This includes a field audit, with the ECHOS© questionnaire as a basis. On this basis the social performance score of the MFI in question is scored, in five dimensions: »» Mission and vision »» Treatment of the environment and contribution to society »» Scale and growth prospects »» Human resources »» Level and quality of service The average score of the MFIs that have been screened on the basis of ECHOS© in 2010, was 72%. MFIs that score below 50% are not eligible for Incofin funding. Further analysis has revealed a strong correlation between the financial soundness of an MFI and its social performance. MFIs that score well financially also score well on social parameters.
Incofin Investment Management manages six funds totalling EUR 274 million.
INCOFIN IM 7
THE INCOFIN IM WORKING METHOD Candidate investments are evaluated by Incofin Investment Management according to strict investment criteria. Approval of the general conditions is followed by a detailed study of the microfinance institutions. After this, Incofin Investment Management carries out an in situ audit, which includes completing the ECHOSŠ questionnaire. If the MFI meets all the criteria for social performance and financial sustainability, the Investment Committee can give the green light. Incofin Investment Management closely monitors all investments, performs annual due diligences and reports back to investors. Five dimensions to assess the social performance of MFIs
INCOFIN CVSO
rural impulse fund I
rural impulse fund II
Impulse microfinance investment fund
Mission and vision
Treatment of the environment and contribution to society
Scale and growth prospects
vdk mfi loan portfolio
volksvermogen Human resources
Level and quality of service
7.
Investment portfolio At the end of 2010 - just six months after being launched in June 2010 - RIF II has invested in 9 microfinance institutions across 6 countries. The total portfolio of investments amounts to 9.772.214 EUR (7.113.831 in loans, 2.658.383 in equity). Some examples of RIF II investments:
visionfund cambodia cambodia debt
22,370,000 portfolio (eur)
108,047 clients
207
average loan (eur)
VisionFund Cambodia (VFC) can be described as a highly social MFI which provides both financial and non-financial services to improve the livelihood of less fortunate people. VFC targets essentially rural communities spread in most populated parts of Cambodia and is currently present in 14 out of 24 provinces. Its two main strengths lie in its excellent credit risk focused methodologies – sustained by skilled staff members, strict procedures and good monitoring –, and in a new top management which has enforced several improvements with regard to efficiency and liquidity management. With over 100,000 borrowers, the institution is well positioned in the market to further increase its coverage in the
coming years. In this respect it will benefit from its mobile payment platform. www.visionfund.com.kh
kompanion Kompanion Financial Group was established in 2004 and defines itself as a community development institution. In other words, it strives to support the strengthening and growth of communities in the Kyrgyz Republic. It is the largest MFI in Kyrgyzstan owned by Mercy Corps, with 90 outlets and high rural outreach covering more than 90% of the entire country. The outlets are mostly located in rural areas leading to a very high rural outreach (94%) and guaranteeing a high proportion of agricultural loans in the portfolio. Its strong loan book growth and excellent credit system are clear signs of its
Kyrgyzstan debt
31,010,000 portfolio (eur)
119,393 clients
260
average loan (eur)
profitability. Because of its strong focus on social and environmental aspects and the support of a strongly committed management team, Kompanion has proved to be an outstanding performer in the Kyrgyz micro-finance market. www.kompanion.asia
Fusion india equity
1,920,000 portfolio (eur)
17,642 clients
124
average loan (eur)
Fusion is a start-up company which has ventured into the world of microfinancing in January 2010. It serves the rural areas of NorthCentral India, where the opportunity for growth is still very high. Fusion plans to work with clients both in rural areas (80%) and in urban areas (20%). They prefer households who have more than one income source, ownership of their house and are residents of the same area for at least three years. The dynamic team behind this company
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is highly experienced, having worked previously at BSA Group, Development Credit Bank (a leading private bank in India) and General Electric (commercial finance operations). Equally important is their understanding of the local language and culture, having worked in the region for most of their professional life. Their main goal is to provide superior quality in terms of business practice, customer servicing and product offerings. In its first year, the MFI focused on offering basic loan and credit insurance products - with a target asset book of Rs 200 million. The company plans to offer nonfinancial products and services such as money transfer as well. www.fusionmicrofinance.com
hope Hope Microcredit Finance Limited (HMFL) was established in December 2005. Its main area of activity is situated in Kerala and Western Tamil Nadu, where it undertakes various developmental programmes such as natural resources management, community health and education. Hope’s actions are strongly founded on their goal to empower the weaker sections of society by facilitating them in increasing their income level. In March 2006, after receiving its first bank financing of EUR 2,500 from Canara Bank, the foundation started forming groups and later provided loans to around 100 groups. Hope extends loans according to the Grameen lending model: a group, consisting of 5 members, acts as a guarantee for the borrowed loan amount. Its clientele typically exists of rural women who are part of the financially marginalised sections of society. Hope’s core strength lies in its highly experienced team of promoters and senior management and its exceptional relationship with more than 20 banks and financial institutions. www.hopemicrocredit.com
india equity
4,290,000 portfolio (eur)
71,467 clients
60
average loan (eur)
“Incofin Investment Management prioritizes rural microfinance as people in rural areas are the most excluded from financial services. Financial inclusion means also giving them the opportunity to take the future into their own hands.” Loïc De Cannière, Managing Director Incofin IM
our offices BelgiUM Sneeuwbeslaan 20 2610 Antwerpen T: +32 (0)3 829 25 36 F: +32 (0)3 740 78 28 E-mail: info.incofin@incofin.be
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India India Representative office Tamil Nadu Chennai T: +91 9 940 65 82 76 E-mail: aditya.bhandari@incofin.be