2010 Highlights - PROPARCO

publicationS

PROPARCO’s financing and cofinancing between 2007 and 2009 will contribute to:

All our publications and films can be downloaded at www.proparco.fr, under Publications

GEOGRAPHICAL AND SECTORAL brochures

Connecting 345 000 people

• PROPARCO in Sub-Saharan Africa • PROPARCO in China • Financing access to sustainable energy • Supporting responsible microfinance • FISEA: Getting involved and investing in African businesses

to an electricity supply network

Connecting 43 million people

FINANCIAL BROCHURES

to a telecoms network

• PROPARCO’s financial products in the Middle East • PROPARCO’s financial products in Morocco • PROPARCO’s financial products in Tunisia • PROPARCO’s financial products in West Africa

Securing or creating

PRIVATE SECTOR & DEVELOPMENT MAGAZINE Take out a free subscription to PROPARCO’s bimonthly magazine – a platform for debate on the role the private sector plays in developing countries www.proparco.fr • N ˚ 5: Africa’s financial markets: a real development tool?

• N ˚ 4: W hat are the economic and social impacts of the mobile phone sector in developing countries?

• N ˚ 3: What balance between financial sustainability and social issues in the microfinance sector?

• N ˚ 2: How can the private sector help provide access to drinking water in developing countries?

• N ˚ 1: SME financing in Sub-Saharan Africa

Films Films about projects financed by PROPARCO (5 minutes long) • Teatime in Gachege, Kenya • Sustainable cogeneration in Kenya • Financing private equity investment in Morocco • Financing microfinance in Morocco • South Africa: Supporting “Black Economic Empowerment” • Development and the private sector

WEBSITE Visit our website: www.proparco.fr

1 million jobs

Reducing annual greenhouse gas emissions

by

1.5 million CO2 eq tons

Highlights 151, rue Saint-Honoré - 75001 Paris Tel.: +33 1 53 44 31 08 - Fax: +33 1 53 44 38 38 www.proparco.fr

2010

State revenues v650M every year

Boosting by

SER processes of 8 000 businesses Supporting the

a global network

contacts

PARIS BEIJING TUNIS CASABLANCA CAIRO

Southern Africa and Madagascar

Morocco, Mauritania, Algeria

Ballywoods Office Park Ironwood House, 1st Floor 29 Ballyclare Drive - Bryanston P.O. Box 786555 - Sandton 2146 Johannesburg, South Africa Tel.: (27) 11 540 7100 Fax: (27) 11 540 7117 proparcojohannesbourg@afd.fr

15, avenue Mers-Sultan 20130 Casablanca, Morocco Tel.: (212) 522 29 53 97 Fax: (212) 522 29 53 98 afdcasablanca@afd.fr

Sophie Le Roy

NEW DELHI

West Africa BANGKOK LAGOS ABIDJAN NAIROBI

Boulevard François Mitterrand 01 BP 1814 Abidjan, Côte d’Ivoire Tel.: (225) 22 40 70 40 Fax: (225) 22 44 21 78 proparcoabidjan@proparco.fr

JOHANNESBURG

view point

What role does PROPARCO’s international network play vis-à-vis the Paris headquarters?

B y Flo ren ce Ki mata , I NVE S TMENT O FFICER AT PRO PARCO ’ S N AI ROB I O F F I C E

“Our role in the field is to implement PROPARCO’s financing activity. We identify investments that have high developmental impacts and are, at the same time, viable from a financial, social and environmental perspective.

This requires us to tailor our approach to the local situation.

Tunisia Immeuble Miniar - Bloc B 3e et 4e étages Rue du Lac d’Ourmia 1053 Les Berges du Lac Tunis, Tunisia Tel.: (216) 71 861 799 Fax: (216) 71 761 825 afdtunis@afd.fr

Emmanuel Haye

Julien Lefilleur

Central Africa and Nigeria SÃO PAULO

Amaury Mulliez

PROPARCO’s regional offices need to be strengthened in order to support its growth. This will ensure the company maintains the quality of the projects it finances. Having investment officers in the field is a major advantage for PROPARCO: it allows us to build up close and long-term relations with our clients.”

Melrose Office suites Phoenix House Plot 26E Abdulrahman Okene Close Off Ligali Ayorinde Street Victoria Island Lagos - Nigeria Tel.: (234) 12705740

Charles-André Le Pape

East Africa Royal Ngao House - Hospital Road P.O Box 45995 00100 Nairobi, Kenya Tel.: (254) 20 271 12 34 (254) 20 271 10 58 Fax: (254) 20 271 79 88 afdnairobi@groupe-afd.org

Ghislain de Valon

Southeast Asia Exchange Tower, Unit 3501-02 35th floor 388 Sukhumvit Road, Klongtoey Bangkok 10110, Thaïland Tel.: (66) 02 663 6090 afdbangkok@afd.fr Pierre-Alain Pacaud (sept. 2010)

China 7 Floor, Block C, East Lake Villas 35 Dongzhimenwai Avenue Dongcheng District Beijing 100027, China Tel.: (8610) 84 51 12 00 Fax: (8610) 84 51 13 00 afdpekin@groupe-afd.org

Ariane Ducreux

Southern Asia 1A Janpath New Delhi, 110 001 India Tel.: (91) 11 2379 3747 Fax: (91) 11 2379 3738 afdnewdelhi@afd.fr

Brazil Edificio Çiragan Office Alameda Ministro Rocha Azevedo 38 - 11 andar - cj.1104 01410-000 - São Paulo, SP - Brazil Tel.: (55) 11 2532-4751 / 4752 /

4753 / 4750 Fax: (55) 11 3142-9884 afdsaopaulo@groupe-afd.org

Christophe Blanchot

Middle East Middle East 10 Sri Lanka Street Zamalek Cairo, Egypt Tel.: (202) 27 35 17 88 Fax: (202) 27 35 17 90

Thomas Eloy

Paris 151, rue Saint-Honoré 75001 Paris, France Tel.: (33) 1 53 44 31 08 Fax: (33) 1 53 44 38 38

PROPARCO COORDINATION Raphaëlle de Maisonneuve and Benoît Verdeaux

GRAPHIC DESIGN AND CREATION 28, rue du Faubourg Poissonnière 75010 Paris - www.noise.fr Editing and coordination: Lionel Bluteau, Jeanne Sophie Camuset.

Art Direction: Dorothée Thomassin, Marion Pierrelée.

Typographic design: Julien Desperiere, Adrien Ampuy.

Photoengraving: RVB Editions. Printed by: Vision Prod’

PHOTO CREDITS Cover: Getty images / Alexander Nesbitt flaps: Nicolas Fornage. Page 3: Jean-Pierre Barral. Page 6: Nicolas Fornage.

Page 7: Nicolas Fornage. Page 8: Didier Gentilhomme. Page 9: Chantal Régnault.

Page 10: Tim Montorfani. Page 11 : Gregory Scopélitis. Page 12: Diwaco.

Page 13: Emilie-Gang Huang. Page 14: Nicolas Fornage. PAGE 15: Benoît Verdeaux.

PAGE 16: Chantal Régnault. PAGE 17: Jean-Pierre Barral. PAGE 18: Emilie-Gang Huang.

PAGE 19: AFD.

This report has been printed using vegetal and non-mineral ink. Vegetal inks for publishing mainly use soya and colza and have several advantages: they use renewable resources (sunflower, colza, soya and linseed oils), using them reduces carbon dioxide emissions and a comparative analysis between mineral oils and vegetable oils shows that the latter are easily biodegradable.

Legal deposit: June 2010

LONG-TERM INVESTMENT IN THE SOUTH

PROPARCO was created over thirty years ago on the conviction that the private sector plays a key role in the development of South countries.

The private sector is the main engine of growth and job creation and generates precious resources that allow States to fulfil their role as regulators and wealth redistributors. It plays a key role in meeting environmental and social challenges and is a vehicle - sometimes even an operator - for public policy by directly providing certain basic services.

PROPARCO’s mission is to catalyse private investment in emerging and developing countries with the aim of supporting growth, sustainable development and the Millennium Development Goals. It achieves this by supporting projects that promote access to finance for businesses and banks, create access to basic infrastructure and combat climate change.

PROPARCO has extended its business area to all countries eligible for official development assistance (as defined by the OECD), i.e. over a hundred and fifty countries in Africa, the Mediterranean, Asia, Eastern Europe and Latin America.

PROPARCO has continued to play its role as a patient and responsible investor and has once again demonstrated by the impacts of its financing and its financial results that development and profitability go hand in hand.

4 Long-term investment in the South

A North/South platform of public/private investors PROPARCO is a development finance institution with a governance structure that sets it apart from its European partners. It gathers thirty private and public shareholders from both the North and South that all share a common commitment to development.

Capital breakdown: a420M Agence française de développement

59 %

French companies

French financial institutions

Bouygues Bouygues construction Dollfus Mieg & Cie GDF Suez Saga Saur International SES SA Société internationale de plantations d’hévéas Socotec international Somdiaa Veolia

26 %

BPCE BNP Paribas Crédit agricole SA CDC Entreprises élan PME Coface BPCE International et Outremer Natixis Société générale

International financial institutions

11 %

Aga Khan Fund for Economic Development BMCE Bank Banque de Tunisie Bank of Africa West African Development Bank Development Bank of Southern Africa DEG

3 %

Funds and ethical foundations

1 %

Mr. Xavier de Bayser IDEAM Natixis Solidaire

Long-term investment in the South

Sharp rise in results PROPARCO’s results in this period of international crisis have proved that its economic model based on patient and responsible investment works.

1 121

in 2009

62

789

in 2008

598

172

68 42

65

in 2007

370

in 2005

85 285

401

52

263 42

30 35

33 54

314

25

23

in 2006

17 12 488

552

766

12

9 in 2004

commitments (iN €M) afd sub-participation

33

30 24

15

23 21

24

10 in 2006

in 2007

in 2008

in 2009

income (iN €M) french overseas territories fisea

Foreign countries

in 2005

27

net banking income net income income from ordinary activities before tax

53

in 2003

1 984 en 2009

1 629

12.7%

41

in 2004

en 2008

887

950

en 2006

987

en 2007

37

36

in 2005

32

33

in 2006

in 2007

4.5%

4.5%

in 2008

31

in 2009

8.1%

en 2005

5.5%

3.9% 2.6% balance sheet (iN €M)

Non-performing loans in €M

in %

5

MEETING THE CHALLENGES OF EACH REGION

PROPARCO tailors its approach to the regions where it operates. Its business area is now global, but Africa continues to be its first priority.

PROPARCO now active on four continents PROPARCO has extended its business area to all developing countries.

The company continues to have an open and multi-sectoral mandate to support growth in its traditional geographical areas: Africa, the Caribbean, the Mediterranean and the Indochinese peninsula. Its business in the other geographical areas - Asia, Latin America, Eastern

Europe and the Balkans - is based on four core sectors which are in line with the areas of activity of France’s official development assistance: climate change, the agribusiness industry, social sectors and microfinance.

SUPPORTING A MICROFINANCE NETWORK A LEADER ON THREE CONTINENTS ProCredit Group has built up one of the leading microfinance networks.

It gathers twenty-two subsidiaries located in Africa, Latin America and Eastern Europe. Its core mission is to provide a range of productive credit and other banking services to micro, small and

medium-sized enterprises, as well as to private clients with low and modest incomes.

ProCredit’s innovative approach is shaped by its business model as a socially responsible local bank seeking to combine transparency, effectiveness and profitability.

Following the extension of

> FIND OUT MORE ABOUT THIS PROJECT AT WWW.PROPARCO.FR

its business area, PROPARCO allocated two successive €10M financings to this key partner, the first in equity, the second in subordinated notes. This investment aims to promote access to credit and savings for those that are excluded from the classic banking system.

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Africa: a priority Africa is highly exposed to the risks of the global economic environment.

This has been underscored by the recent crises. PROPARCO’s priority, more than ever before, is to support growth in Africa.

PROPARCO’s financing in Africa focuses on the main engines of sustainable growth: developing infrastructure, supporting local entrepreneurs, supporting financial intermediation and promoting high social and environmental standards. In 2009, its commitments in Sub-Saharan Africa reached €415M (i.e. a 48% rise compared to 2008). PROPARCO also implements the Investment and Support Fund for Businesses in Africa, one of the main mechanisms of the French Initiative

for Growth and Employment in Africa.

Operations financed by PROPARCO in Africa over the past three years will contribute to hooking up 290 000 people to an electricity network, connecting 26 million others to a telecoms network, securing 225 000 jobs and generating 300 MW of renewable energy.

ENHANCING FINANCIAL INFORMATION IN AFRICA A key criterion - and a security - for an investor is to be able to assess the risk of an investment.

Africa’s financial markets are not very developed. This type of information is consequently essential, yet the continent is neglected by rating agencies.

Global Credit Rating - a subsidiary of the agency Duff & Phelps - initially conquered the South African market, then extended its activities to Zambia, Zimbabwe, Nigeria and Kenya.

Global Credit Rating now aims to develop its activity in West Africa. > F IND OUT MORE ABOUT THIS PROJECT AT WWW.PROPARCO.FR

PROPARCO has taken a 10% stake in the agency’s capital in order to support its growth and give it greater credibility on this new market. PROPARCO is consequently helping both to improve the level of financial information in Africa and the way financial markets operate.

8 Meeting the challenges of each region

Growth and employment in the Mediterranean The Mediterranean is one of PROPARCO’s top priorities and it has scaled up its presence in the field with the opening of an office in Cairo.

The Southern and Eastern Mediterranean region has to face the dual challenge of regional integration with its northern bank and employment needs brought about by its young and swiftly growing population.

PROPARCO is traditionally the most active development finance institution in the Mediterranean. It had previously focused its activity on the Maghreb region and its priority now is to develop in the Middle East via its traditional business activities in the region: private equity investment, the banking sector and mega industrial or infrastructure projects.

It plays an important role in the Union for the Mediterranean by supporting SMEs. The launch of Averroes Finance II - co-managed with CDC Entreprises - underscores once more PROPARCO’s aim to support private equity investment in the region.

SUPPORTING THE AGRIBUSINESS INDUSTRY IN EGYPT Wadi Holdings, an Egyptian company, is one of the biggest producers of chicks and poultry feed in Egypt and Sudan.

It has also diversified its activity towards major export products, such as olives and glass. The company stands out for the way in which it pays particular attention

to sanitary issues. This allowed it to successfully resist the impacts of avian flu in 2006. Wadi aims to pursue its strong growth in the future. PROPARCO has taken a $3M equity stake in the company’s capital in order to support its development. By making this investment, PROPARCO has

> FIND OUT MORE ABOUT THIS PROJECT AT www.proparco.fr

decided to support a player that has model practices in terms of health standards. It is consequently helping to secure the agribusiness industry in Egypt on which 600 000 farmers rely.

The project will also have an impact by supporting export activities and growth.

Meeting the challenges of each region

Green and inclusive growth in Asia, Eastern Europe and Latin America PROPARCO promotes growth that meets both the climate challenge and reduces inequalities in Asia, Eastern Europe and Latin America.

PROPARCO has extended its business area to all developing countries. Its mandate in these geographical areas is to support the private sector by reconciling two key areas: environmental balance and reducing inequalities. PROPARCO has consequently chosen to focus its efforts on four sectors, which already account for almost half of its activity

in its traditional geographical areas: • the fight against climate change; • the agribusiness industry; • social sectors (health and higher education); • microfinance.

Regional integration in the French Overseas Territories AFD Group has a specific mission to help strengthen the economies of the French Overseas Territories.

PROPARCO finances business start-ups or development and helps build their competitiveness at the regional level.

From 2010, PROPARCO’s activities will be based on three cornerstones: the regional integration of private players; the support for local banks; the development of innovative and structuring projects in the infrastructure sector.

9

FOUR PRIORITY SECTORS

PROPARCO focuses its activities on four priority sectors. It finances basic infrastructure, supports business development, promotes widespread access to credit and helps combat climate change.

Promoting access to credit PROPARCO supports banks and financial systems in developing countries, thus giving banking and financial players the means to boost their countries’ economic fabric themselves.

PROPARCO has fully played its countercyclical role during the specific context of the financial crisis. Indeed, in 2009 PROPARCO committed €445M for financial institutions in the form of loans and equity investments.

Its equity investment activity reached an alltime high in order to shore up the solvency of banks. PROPARCO’s aim in this sector is to consolidate its presence in Africa, continue to have a multi-product approach and strengthen its capacities to operate in the microfinance sector.

Viewpoint

Why are banks reluctant to lend to SMEs? B y Paul d e rr em aux Cha ir man and Chief Executi ve O fficer of Ban k of Afr ic a Group

“Banks, for their part, have at least three significant shortcomings. The first is their weakness in supervising their portfolios. The second shortcoming stems from the fact that banking teams lack a specific reference framework based on in-depth experience of SME financing. Finally, the third shortcoming is related to the institutional environment where deficiencies penalize banking activities.”

Extract from the article “The difficulties banks face in financing SMEs in Sub-Saharan Africa: who is to blame?» in the magazine Private Sector & Development, May 2009. > Download the magazine at www.proparco.fr

11

Supporting businesses In order to promote growth in South countries, PROPARCO supports business development by directly allocating long-term resources.

PROPARCO supports: • major industrial groups seeking to set up in business in difficult areas; • major regional groups seeking to scale up the development of their activity; • medium and large local enterprises that contribute to transferring skills, creating jobs and complying with environmental and social standards.

In 2009, the corporate finance activity reached €154M. The main beneficiaries were the sectors of agribusiness, construction materials, health and higher education.

Projects supported in this activity aim to promote the development of market-oriented agricultural production, profitable farms and production diversification.

DEVELOPING RICE PRODUCTION: REUNION ISLAND AND CAMBODIA REAP THE BENEFITS With 90% of cultivated land used for rice growing, Cambodia is one of the world’s largest rice producers.

Although the country exports its domestic consumption surplus, it only gains a very low added value because the bulk of Cambodian paddy rice is exported in neighbouring countries. At the same time,there has been heavy pressure on rice

prices since 2008 which has led to serious difficulties for importing countries to be supplied.

This was the case for Reunion Island which experienced a serious food crisis in 2008.

Soresum, a major player in Reunion Island’s mass marketing industry, wanted to invest in the Cambodian Golden Rice company in order to secure its supplies.

> FIND OUT MORE ABOUT THIS PROJECT AT WWW.PROPARCO.FR

The project, which is supported by $7M of PROPARCO financing, involves building and operating a new production and processing unit. The project consequently has a dual impact: it is helping to create an organised industry in Cambodia. It is also securing Reunion Island’s rice supply and preserving jobs in the industry.

12

Four priority sectors

Financing infrastructure Ineffective infrastructure is often seen as a stumbling block to the development of South countries.

One of PROPARCO’s core missions is to upgrade the quality of infrastructure and make it widely accessible. PROPARCO finances infrastructure projects in the sectors of transport, telecoms and energy. During the 2009 financial crisis, PROPARCO received an enormous amount of financing requests due to the

squeeze on banking sector resources and the subsequent need to complete finance plans for mega projects. Its business consequently more than doubled with commitments in this sector rising from €150M in 2008 to some €400M in 2009, including a €100M participation in the crisis-response initiative for infrastructure.

FINANCING WATER SUPPLY IN THE CITY OF AMMAN IN JORDAN Jordan is one of the ten cities to be the most affected by a water shortage.

Cities are the first victims, particularly Amman whose inhabitants only have access to water twice a week. The best medium-term alternative for raising the amount of available water in the capital is to use water from the Disi aquifer.

In order to allow this water supply project to come into being, PROPARCO and AFD

allocated two $100M loans for a project to convey water from Disi to Amman (320km away) thanks to the construction and operation of a drinking water supply system. 100 million m3 of water reserves will be withdrawn from the Disi fossil aquifer over the next 50 years.

Amman’s 2.5 million inhabitants will consequently have access to water. Some water resources which are currently overexploited will be preserved.

> FIND OUT MORE ABOUT THIS PROJECT AT WWW.PROPARCO.FR

Four priority sectors 13

Combating climate change PROPARCO has been dedicating a large part of its activities to combating climate change for several years now.

PROPARCO enjoys technical expertise and references in each of the renewable energies.

PROPARCO finances for instance wind farms, hydropower plants, photovoltaic industry, bagasse cogeneration unit and biogas projects.

PROPARCO makes every effort to ensure that

these skills are transferred to our partner banks in the South and develops standard product of special climate lines of credit to banks. Roughly a quarter of its commitments for the year has been dedicating to climate change mitigation projects, i.e €275M.

PROMOTING SUSTAINABLE FOREST EXPLOITATION IN AMAZONIA Brazil is home to 60% of the Amazonian Rainforest and has been suffering from serious deforestation for several decades.

17.5% of its initial forest surface area has now disappeared. Cikel Brasil Verde Madeiras is one of the main integrated forest groups in Brazil. In addition to exploiting three native Amazonian forests covering an area of 400 500 ha, Cikel stands out because it produces FSC ecocertified wood and as such is one of

the few players in Brazil to exploit forests in a sustainable manner.

PROPARCO has decided to encourage Cikel’s model approach by financing its forest and industrial investment program for the next two years via a $20M senior loan.

The project will reduce emissions by 550 000 tons of CO2 eq every year and will support an industry that creates jobs and added value while at the same time maintaining forest cover.

> FIND OUT MORE ABOUT THIS PROJECT AT www.proparco.fr

SELECTING PROJECTs

FOR THEIR IMPACTS PROPARCO’s day-to-day business combines three skill areas which together shape its activity: measuring and managing the impact of the projects it finances, its commitment to SER and risk management for its operations.

Enhancing impact measurement PROPARCO’s first impact measurement tool supports the financing decision prior to the investment. It is used by most European development finance institutions.

In order to have a more comprehensive understanding of the impact of all its operations, PROPARCO creates and publishes a series of sectoral indicators in common with AFD. This process is in line with PROPARCO’s commitment to be accountable for its contribution to the overall efforts made under France’s official development assistance policy and allows it to measure the effectiveness of its projects. PROPARCO’s financing over the past three years will contribute to connecting 345 000 people to an electricity supply network, connecting 43 million others to

a telecoms network, securing 1 million jobs, supporting the SER processes of 8 000 businesses and reducing annual greenhouse gas emissions by 1.5 million CO2 eq tons.

Finally, capitalisation studies are conducted on certain projects financed by PROPARCO or certain sectors of activity. The magazine published

by PROPARCO - Private Sector & Development gathers and compares the opinions of specialists, experts and practitioners with one topic per issue. It is a platform for exchanges and reflection where ideas can be compared and headway can be made on these topics.

15

Promoting social and environmental responsibility (SER) PROPARCO’s operations are subject to an assessment of the environmental and social risks they are likely to cause. The aim of this process is to help its partners improve the environmental and social

quality of their projects. AFD Group has set up a special team. Through its financing, PROPARCO aims to disseminate SER practices and raise its clients’ awareness of them, particularly banks.

Compliance and risk management PROPARCO is a financial institution and as such is • AFD’s Permanent and Compliance Control subject to banking regulations.

Department coordinates and supervises the inThe Company has implemented a series of mechaternal control and makes a second-level control nisms that allow it to manage its operations and on the risk of non-compliance; the inherent risks: • PROPARCO is also audited by AFD’s Inspectorate General Department.

• applications for financing are examined by three different committees and by different independent departments;

Meeting the need for business upgrading Businesses in developing countries sometimes lack capacities which can lead to poor performance. Their need for financing may be widely recognised, but it is also necessary to meet their needs in terms of technical assistance. In the framework of FISEA, AFD has decided to earmark €5M to finance consultant missions (to improve information systems, marketing, human resources, etc.) in order to support the businesses in which the fund will be investing. In 2009, €150 000 were allocated to the AfricInvest Financial Sector Fund for technical assistance provided to the financial institutions in its portfolio.

MEETING

INVESTORS’ FINANCIAL NEEDS PROPARCO provides a full range of financial products tailored to the specific needs of investors in South countries.

Investing in equity PROPARCO promotes the development of businesses and banks by directly investing in their capital.

PROPARCO always acquires minority stakes which are destined to be transferred after a five to eight year period. PROPARCO uses a wide range of equity tools: equity, preference shares, convertible bonds and participation loans.

In 2009, PROPARCO made twenty-one equity investments totalling €74M, mainly in the banking sector. In addition to its investments in other funds, FISEA also makes direct equity investments in businesses.

FISEA: a new equity financing solution in sub-saharan Africa FISEA is an investment fund that takes equity participations in businesses, banks, microfinance institutions and investment funds operating in Sub-Saharan Africa.

It is one of the key mechanisms of the French Initiative for Growth and Employment in Africa

launched by the French President in February 2008.

FISEA’s capital endowment was provided by AFD. Project appraisal and management have been entrusted to PROPARCO. FISEA aims to be complementary to traditional private funds and focuses on investments that carry

a higher risk in unstable or post-crisis regions. It makes small investments in sectors that are traditionally neglected. The fund has a €50M annual investment target over a five-year period. In 2009, 13 projects were approved totalling €62.3M.

17

Supporting private equity investment PROPARCO is a forerunner in private equity investment in some regions.

It provides long-term support to independent local fund management teams.

PROPARCO’s private equity investment activity allows it to scale up the impact of its action to boost employment and wealth creation in the economies it supports.

In 2009, it invested €100M in funds, which in turn invested €1.2bn in 242 businesses. These investments mainly benefit Sub-Saharan Africa and sup-

port SMEs, the agribusiness industry, basic infrastructure and microfinance.

Two new funds have recently been launched: the Investment and Support Fund for Businesses in Africa (FISEA) and Averroes Finance II, which aims to support private equity investment in the Mediterranean region.

view point

What approach does the Fanisi Fund take to private equity investment?

B y Ay i si Makatian i , venture c apit al f und manager

“SMEs have limited access to the financing they need. This is the main stumbling block to the development of the sector in East Africa. Unlike micro-enterprises and major corporates, SMEs very often have to resort to investors or financial institutions that are not specialists in this sector. SME managers also lack knowledge of the business world and financial markets.

Fanisi Capital combines an SME financing activity with a capacity building activity for managers. The aim is to turn East African SMEs into competitive players in the region”.

In 2009, FISEA participated in Fanisi’s first close for an amount totalling $10M, alongside its Norwegian and Finnish counterparts. > FIND OUT MORE ABOUT THE FANISI PROJECT AT WWW.PROPARCO.FR

18

Metting investors’ financial needs

Medium and long term lending PROPARCO’s products are complementary to those of local or international private banks.

Its strategy for its lending activity is to be a long-term investor.

In addition to its cofinancing and risk-sharing mechanisms with other European development agencies, PROPARCO benefits from a sub-participation agreement with AFD, which allows it to increase its lending capacity. PROPARCO consequently offers loans ranging between €5M and €100M with maturities of between five and twenty years. In order to support a client over

such a long period, PROPARCO needs to be able to adapt its range of products which includes mechanisms to reduce or extend maturities depending on exogenous parameters. PROPARCO also offers a wide range of loan products: senior, subordinated or participation loans and an increasing number of junior products.

PROMOTING FINANCING FOR MODEL ENVIRONMENTAL PROJECTS IN BRAZIL Banco Fibra is a young Brazilian bank whose core activity is to finance SMEs. It now has some 1 100 clients. PROPARCO has supported this young and budding bank by allocating it a $30M senior loan, including $10M of AFD sub-participation. This line of credit is earmarked to finance investments in model environmental projects: clean energy, green transport (ethanol), reducing greenhouse gas emissions and protecting the Amazon Rainforest. This is the first line of credit that PROPARCO has directly allocated in Brazil. It will also allow the bank to calculate the carbon balance of its investments. > FIND OUT MORE ABOUT THIS PROJECT AT www.proparco.fr

Metting investors’ financial needs 19

Developing products in local currency A great many projects require financing in local currency.

Without such financing, clients have to face a foreign exchange risk sometimes simply cannot manage.

PROPARCO works in partnership with other donors to develop local currency markets by offering guarantees, direct loans in local currency and swaps in exotic currencies. PROPARCO also directly seeks resources in local currency from commercial banks. In 2009, PROPARCO was consequently able to offer its clients CFA francs, South African rand, Indian rupees and Tunisian dinars.

LONG-TERM FINANCING FOR A SENEGALESE BANK IN LOCAL CURRENCY Senegal has the second largest banking system in West Africa after Côte d’Ivoire.

It is also highly competitive yet the rate of access to banking services remains low (under 10%). The Banque Internationale pour le Commerce et l’Industrie au Sénégal (BICIS), the country’s third largest bank with 17% of the market, is BNP Paribas’ subsidiary in Senegal.

The bank is specialised in the private customer, institutional and corporate segments and seeks long-term resources

in order to shore up its balance sheet and back the maturity of its resources to that of its loans. In 2009, PROPARCO granted BICIS an FCFA6.7bn line of credit with a seven year maturity.

By providing long-term financing in local currency, PROPARCO has helped the bank avoid a foreign exchange risk and is giving Senegalese businesses the resources they need to invest in their growth.

> FIND OUT MORE ABOUT THIS PROJECT AT www.proparco.fr

OPERATIONAL AND FINANCIAL

Results

In FY 2009, PROPARCO’s total commitments in loans and equity investments reached €1 121M, up 42% on 2008 (€789M).

This extremely good result can be explained by a combination of several factors. First, there was a sharp rise in sub-participation investments with AFD as a result of closer partnerships being forged (€262M of commitments in 2009) and cofinancing with the other European and multilateral development institutions (€100M of commitments). Second, the geographical expansion of PROPARCO’s activities led to an increase in

operations in Asia and Latin America. Finally, the 2009 international financial crisis created a number of investment opportunities in the financial sector, particularly in the major emerging countries.

It is also worth noting that PROPARCO made a €62M equity investment on behalf of the FISEA fund (Investment and Support Fund for Businesses in Africa launched in April 2009).

Equity activity • 22 equity investments were approved in 2009 for a total of €111M • Sub-Saharan Africa remains the main area for PROPARCO’s activities (26%), followed by • At 31.12.2009, the gross value of PROPARCO’s equity portfolio and other shareholdings the Mediterranean / Middle East (21%) and stood at €269M for 92 shareholdings, inAsia (21%) cluding 46 investment funds, 19 financial es- • The FISEA fund authorised 13 projects for a totablishments and insurance companies, 10 intal of €62M, exclusively in Sub-Saharan Africa dustrial and commercial companies, 3 hotels and 5 infrastructure and mining companies

Lending activity • 47 loans were approved in 2009 totalling • Sub-Saharan Africa is the main area to benefit €947M in gross approvals (47%), followed by the Mediterranean (30%), Asia (17%) and Latin America (7%) • At 31.1 2.2009, gross outstanding loans totalled €1 386M and break down between banking establishments (56%) and loans to non-financial institutions (44%)

21

Simplified balance sheet in net values at 31 December 2009 (in thousands of euros)

breakdown of commitments by product (iN â‚ŹM)

1 121

Assets

in 2009

789

in 2008

62

Receivables from financial institutions

780

263

Receivables from companies

637

Equity investments

264

Short and long-term investments

296

32

598 68

65

Other

7

42

94

total

1 985

in 2007

370

in 2005

216

in 2004

85 33

401

in 2006

30

140

111

78

33 54

LIABILITIES

60

Equity capital

525

Incl. subscribed capital

420

5 18 193

252

254

410

458

655

Incl. share premium and legal reserve

81

Incl. result

24

Debts proparco equity investments loans on behalf of third parties french overseas territories

loans and guarantees afd-sub-participation fisea

geographical breakdown of total portfolio (loans and equity investments) in foreign countries (as % of total portfolio)

44% 13%

13% North Africa

Third-party sub-participation

35

Non fully-paid up investments

84

Provisions for collective risk

33

Other

12

total

1 985

Simplified income statement (in thousands of euros)

44% Sub-Saharan Africa

29% Mediterranean and Middle East

57% Africa

Net banking income Overheads Cost of risk Gains/losses on asset sales Corporate income tax

17% Asia 6%

Latin America and Caribbean 4%

Multi-country

1 296

Net income

51.6 - 22.7 -3.6 7.4 -8.8 23.6

OUR TEAMS

Marie SENNEQUIER

Hélène TEMPLIER Ass : Emmanuelle DROUIN Ass : Anita PEREZ

Ass : Catherine MURE

finance and administration department

credit and portfolio department

organisation and it support Marie-Paule SIMONNET

Ass : Flora TOTA

Philippe BASSERY

Marianne SIVIGNON-LECOURT Ass: Chrystelle GUERIN Ass : Isabelle GILLET Technical assistance: Cyril RENAULT Emerging countries and carbon finance: Paul de la GUERIVIERE Environmental Officer: Odile CONCHOU

Dov ZERAH

Marie-Hélène LOISON Ass : Isabelle NIANGANE

private equity

Jérôme BERTRAND-HARDY Ass : Emmanuelle MATZ Ass : Elisabeth NGUYEN

Infrastructure and mining

Ass : Flora TOTA

Laurent DEMEY

Stéphanie LANFRANCHI Ass : Catherine BAL

corporates

deputy chief executive officer

Michel JACQUIER

VICE PReSIDENT

president

INTERNATIONAL NETWORK

Amélie JULY Ass : Marie-Thérèse ROCHE

banks and cross-functional financial markets positions

Communication

Benoît VERDEAUX

Ass : Ia GEBAROWSKI

Luc RIGOUZZO

chief executive officer

legal department

deputy chief executive officer

PROPARCO’s headcount has more than doubled in five years.

The company benefits from the expertise of skilled and dedicated teams.

a global network

contacts

PARIS BEIJING TUNIS CASABLANCA CAIRO

Southern Africa and Madagascar

Morocco, Mauritania, Algeria

Ballywoods Office Park Ironwood House, 1st Floor 29 Ballyclare Drive - Bryanston P.O. Box 786555 - Sandton 2146 Johannesburg, South Africa Tel.: (27) 11 540 7100 Fax: (27) 11 540 7117 proparcojohannesbourg@afd.fr

15, avenue Mers-Sultan 20130 Casablanca, Morocco Tel.: (212) 522 29 53 97 Fax: (212) 522 29 53 98 afdcasablanca@afd.fr

Sophie Le Roy

NEW DELHI

West Africa BANGKOK LAGOS ABIDJAN NAIROBI

Boulevard François Mitterrand 01 BP 1814 Abidjan, Côte d’Ivoire Tel.: (225) 22 40 70 40 Fax: (225) 22 44 21 78 proparcoabidjan@proparco.fr

JOHANNESBURG

view point

What role does PROPARCO’s international network play vis-à-vis the Paris headquarters?

B y Flo ren ce Ki mata , I NVE S TMENT O FFICER AT PRO PARCO ’ S N AI ROB I O F F I C E

“Our role in the field is to implement PROPARCO’s financing activity. We identify investments that have high developmental impacts and are, at the same time, viable from a financial, social and environmental perspective.

This requires us to tailor our approach to the local situation.

Tunisia Immeuble Miniar - Bloc B 3e et 4e étages Rue du Lac d’Ourmia 1053 Les Berges du Lac Tunis, Tunisia Tel.: (216) 71 861 799 Fax: (216) 71 761 825 afdtunis@afd.fr

Emmanuel Haye

Julien Lefilleur

Central Africa and Nigeria SÃO PAULO

Amaury Mulliez

PROPARCO’s regional offices need to be strengthened in order to support its growth. This will ensure the company maintains the quality of the projects it finances. Having investment officers in the field is a major advantage for PROPARCO: it allows us to build up close and long-term relations with our clients.”

Melrose Office suites Phoenix House Plot 26E Abdulrahman Okene Close Off Ligali Ayorinde Street Victoria Island Lagos - Nigeria Tel.: (234) 12705740

Charles-André Le Pape

East Africa Royal Ngao House - Hospital Road P.O Box 45995 00100 Nairobi, Kenya Tel.: (254) 20 271 12 34 (254) 20 271 10 58 Fax: (254) 20 271 79 88 afdnairobi@groupe-afd.org

Ghislain de Valon

Southeast Asia Exchange Tower, Unit 3501-02 35th floor 388 Sukhumvit Road, Klongtoey Bangkok 10110, Thaïland Tel.: (66) 02 663 6090 afdbangkok@afd.fr Pierre-Alain Pacaud (sept. 2010)

China 7 Floor, Block C, East Lake Villas 35 Dongzhimenwai Avenue Dongcheng District Beijing 100027, China Tel.: (8610) 84 51 12 00 Fax: (8610) 84 51 13 00 afdpekin@groupe-afd.org

Ariane Ducreux

Southern Asia 1A Janpath New Delhi, 110 001 India Tel.: (91) 11 2379 3747 Fax: (91) 11 2379 3738 afdnewdelhi@afd.fr

Brazil Edificio Çiragan Office Alameda Ministro Rocha Azevedo 38 - 11 andar - cj.1104 01410-000 - São Paulo, SP - Brazil Tel.: (55) 11 2532-4751 / 4752 /

4753 / 4750 Fax: (55) 11 3142-9884 afdsaopaulo@groupe-afd.org

Christophe Blanchot

Middle East Middle East 10 Sri Lanka Street Zamalek Cairo, Egypt Tel.: (202) 27 35 17 88 Fax: (202) 27 35 17 90

Thomas Eloy

Paris 151, rue Saint-Honoré 75001 Paris, France Tel.: (33) 1 53 44 31 08 Fax: (33) 1 53 44 38 38

PROPARCO COORDINATION Raphaëlle de Maisonneuve and Benoît Verdeaux

GRAPHIC DESIGN AND CREATION 28, rue du Faubourg Poissonnière 75010 Paris - www.noise.fr Editing and coordination: Lionel Bluteau, Jeanne Sophie Camuset.

Art Direction: Dorothée Thomassin, Marion Pierrelée.

Typographic design: Julien Desperiere, Adrien Ampuy.

Photoengraving: RVB Editions. Printed by: Vision Prod’

PHOTO CREDITS Cover: Getty images / Alexander Nesbitt flaps: Nicolas Fornage. Page 3: Jean-Pierre Barral. Page 6: Nicolas Fornage.

Page 7: Nicolas Fornage. Page 8: Didier Gentilhomme. Page 9: Chantal Régnault.

Page 10: Tim Montorfani. Page 11 : Gregory Scopélitis. Page 12: Diwaco.

Page 13: Emilie-Gang Huang. Page 14: Nicolas Fornage. PAGE 15: Benoît Verdeaux.

PAGE 16: Chantal Régnault. PAGE 17: Jean-Pierre Barral. PAGE 18: Emilie-Gang Huang.

PAGE 19: AFD.

This report has been printed using vegetal and non-mineral ink. Vegetal inks for publishing mainly use soya and colza and have several advantages: they use renewable resources (sunflower, colza, soya and linseed oils), using them reduces carbon dioxide emissions and a comparative analysis between mineral oils and vegetable oils shows that the latter are easily biodegradable.

Legal deposit: June 2010

publicationS

PROPARCO’s financing and cofinancing between 2007 and 2009 will contribute to:

All our publications and films can be downloaded at www.proparco.fr, under Publications

GEOGRAPHICAL AND SECTORAL brochures

Connecting 345 000 people

• PROPARCO in Sub-Saharan Africa • PROPARCO in China • Financing access to sustainable energy • Supporting responsible microfinance • FISEA: Getting involved and investing in African businesses

to an electricity supply network

Connecting 43 million people

FINANCIAL BROCHURES

to a telecoms network

• PROPARCO’s financial products in the Middle East • PROPARCO’s financial products in Morocco • PROPARCO’s financial products in Tunisia • PROPARCO’s financial products in West Africa

Securing or creating

PRIVATE SECTOR & DEVELOPMENT MAGAZINE Take out a free subscription to PROPARCO’s bimonthly magazine – a platform for debate on the role the private sector plays in developing countries www.proparco.fr • N ˚ 5: Africa’s financial markets: a real development tool?

• N ˚ 4: W hat are the economic and social impacts of the mobile phone sector in developing countries?

• N ˚ 3: What balance between financial sustainability and social issues in the microfinance sector?

• N ˚ 2: How can the private sector help provide access to drinking water in developing countries?

• N ˚ 1: SME financing in Sub-Saharan Africa

Films Films about projects financed by PROPARCO (5 minutes long) • Teatime in Gachege, Kenya • Sustainable cogeneration in Kenya • Financing private equity investment in Morocco • Financing microfinance in Morocco • South Africa: Supporting “Black Economic Empowerment” • Development and the private sector

WEBSITE Visit our website: www.proparco.fr

1 million jobs

Reducing annual greenhouse gas emissions

by

1.5 million CO2 eq tons

Highlights 151, rue Saint-Honoré - 75001 Paris Tel.: +33 1 53 44 31 08 - Fax: +33 1 53 44 38 38 www.proparco.fr

2010

State revenues v650M every year

Boosting by

SER processes of 8 000 businesses Supporting the