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Annual report on LuxFLAG labelled MIVs

IV Edition – July 2012

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About LuxFLAG - Luxembourg Fund Labelling Agency

LuxFLAG is an independent and neutral, non-for-profit association created in

Luxembourg in 2006. LuxFLAG supports the financing of sustainable development

by providing clarity for investors through awarding Labels. Its objective is to reassure

investors that the labelled MIV/EIV actually invests, directly or indirectly, in the

microfinance/environment sector. The MIV/EIV may be domiciled in any jurisdiction

that is subject to a level of national supervision equivalent to that available in

European Union countries.

LuxFLAG - Luxembourg Fund Labelling Agency

12, Rue Erasme, L-1468 Luxembourg

B.P. 206, L-2010 Luxembourg

Tel: +352 22 30 26 - 1 Fax: +352 22 30 93

E-mail: [email protected] Website: www.luxflag.org

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Preface

LuxFLAG labelled MIVs Performance Report has now reached its fourth edition.

During the past years we have witnessed several changes in the Microfinance

industry. This period has been characterised by substantial growth in terms of

volume and outreach, turmoil due to the public relations issues and more recently a

dose of optimism towards the future. In this context MIVs have played an important

role in terms of standardising their operational processes as well as efficiently

communicating on their business. On the other side LuxFLAG has played an

important role in building confidence among the investor community by promoting

transparency through its LuxFLAG Microfinance Label. Its main objective is to

reassure investors that the labelled MIVs invest directly or indirectly, in the

Microfinance sector. The LuxFLAG Microfinance Label also gives credibility to the

MIVs as it has been annually scrutinised by a panel of independent experts against

internationally recognised standards in the Microfinance sector, and that it

demonstrates an actual commitment to the “double bottom line” approach by

providing financial as well as social returns from the investments. Through this

report, we have tried to encompass the current issues related to the Microfinance

industry, in specific to the 24 LuxFLAG labelled MIVs.

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Table of contents

pageI. Introduction

1. Microfinance 52. Evolution of Microfinance industry 63. Microfinance Investment Vehicles 64. Microfinance crisis in Andhra Pradesh 8

II. Performance of LuxFLAG Labelled MIVs

1. Financial section

1.1 Introduction 101.2 Regional distribution 101.3 Total Assets and Microfinance Portfolio 111.4 Liquidity 141.5 Foreign Exchange Risk 161.6 Portfolio at Risk (PAR) 171.7 Net Asset Value (NAV) 181.8 Conclusion 20

2. Social section

2.1 Importance of Social Performance from the investors’ perspective 212.2 Industry initiatives 222.3 MFIs’ Social Performance 262.4 Initiatives pursued by LuxFLAG 27

III. Conclusion 28IV. Bibliography 31V. Information sources 33VI. Acronyms 34VII. Glossary 35VIII. Appendices

1. Eligibility criteria 372. Luminis press release 383. Funds’ cards 39

4. LuxFAG labelled MIVs overview 63

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I. Introduction

1. Microfinance

Conceived in the initial years as a popular instrument to assist poor people in

developing countries by providing financial services, the Microfinance industry has

seen exponential growth unprecedented for a sector which was seen as a mere

philanthropic activity only a couple of decades ago. The Microfinance sector now

provides a wide range of financial services to millions of people, in particular in the

developing countries.

It has been creating a measurable social impact by helping to democratise access to

financial services to poor people in developing countries, resulting in a promising

step towards the alleviation from poverty. By offering a stable financial return with a

very low correlation to financial markets, in recent years the Microfinance industry

has positioned itself as an alternative asset class for commercial investors.

As of December 2011, the Microfinance Information eXchange (MIX) reports two

thousand Microfinance Institutions (MFIs) with more than 92 m of borrowers and 80

m savers, with a total asset volume of approximately 70 bn USD. These numbers are

growing by 20% per year, even more in some countries.

The Microfinance industry is mainly financed by the commercial Microfinance

Investment Vehicles (MIVs), International Development Finance Institutions (DFIs)

and local commercial banks in several countries.

Nevertheless, in recent years, the Microfinance sector faced severe criticisms due to

its commercialisation, considerably high financial returns, suspicious lending

practices, weak corporate governance and a possible mission drift from the double

bottom line approach in investments. This being said, the Microfinance industry has

reached to a turning point where the action plan for the future of microfinance

business is on a higher priority than tackling the issue of the impact of the global

financial crisis on the Microfinance industry.

Microfinance in figures

‐ Total population living under 2 USD/day: 2.7 bn*

‐ Total estimated potential customers: 1.5 bn*

‐ Total estimated Microfinance loans outstanding: 65 USD bn*

‐ Estimated funding gap: 235 USD bn*

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‐ Total number of Microfinance Institutions (MFIs): approximately 4500

‐ Total number of Microfinance Investment Vehicles (MIVs): approximately 125

*source: IAMFI (2011)

2. Evolution of Microfinance

If on the one side the demand for Microcredit is growing more and more, on the other

side the range of other financial services provided by the Microfinance are

increasing, in order to create a more customised approach.

It is possible to group these services into two main categories:

‐ financial (microcredit, microinsurance, money transfers, savings, remittances,

etc.);

‐ non-financial (skill building trainings, technical assistance for small and

medium enterprises, counselling, education, health services, etc.).

It could be interesting to focus in particular on microinsurance and remittances.

Microinsurance is a quite diversified sector itself. It includes: life insurance, health

insurance, crop insurance, livestock insurance, Islamic insurance (takaful), etc.

which are all in a way, need for an micro-entrepreneur.

Remittances represent a more recent segment for Microfinance actors. Lately, some

MFIs have entered into arrangements with companies specialised in remittances in

order to facilitate the remittance payments in remote areas through their sale points.

Remittances can be an important source of income for poor households, especially

for the most vulnerable ones. While international remittances and domestic money

transfer services are generally accessible to urban clients, they are increasingly

expanding into rural areas. There are still important issues regarding remittances

sent to rural areas, such as the cost, safety and speed of transfer. Nonetheless they

may offer to MFIs a mean to expand their services, source of income and outreach.

3. Microfinance Investment Vehicles

Microfinance Investment Vehicles (MIVs) appeared in the 1990s and since then, by

making the sector accessible to private investors, they have managed to

substantially increase the available funds. However, amounts are still limited and

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financial exclusion consequently remains high: in developing countries a more

democratic access to financial services is still a long way off.

Microfinance Investment Vehicles (MIVs) invest both public and private investors’

money in Microfinance Institutions (MFIs) or in other MIVs. The variety of missions,

structures and investment strategies of MIVs (debt, equity, guarantees) grants a

wide range of investment options, allowing investors to choose depending on their

profile and targets. Moreover, the development of MIVs and their increasing

specialisation are attracting an increasing number of institutional investors.

Since the beginning, MIVs has succeeded to achieve good financial returns due to

the stability of interest rates for loans to MFIs. The repayment rate is close to 100%

also indicates the funds have almost no investment losses. Finally, the absence of a

secondary market ensures that the value of the debt, recorded at its historical cost,

remains stable. These factors make it clear why the SMX (Symbiotics Microfinance

indeX, used to track Microfinance debt) is stable, in particular in 2008, while in the

same period the JP Morgan EMBI (Emerging Markets Bond Index, tracing the yields

of debt instruments exchanged on emerging markets) fell by 11%.

Source: Syminvest Source: ForexBlog

On the other hand, the small decline in yields during the beginning of 2009 shows

that MIVs’ performance was affected by the financial crisis. In the beginning of 2009

the high volatility in exchange rates increased foreign exchange hedging costs and

generated losses for the MIVs which had invested in local currencies. At the same

time, there was a fall in demand for financing from MFIs which had anticipated a

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slowdown in their activities. The resulting rise in liquidities brought down MIVs’

yields.

The following chart shows the trend of MFIs’ Portfolio yields.

Source: Syminvest website

4. Microfinance crisis in Andhra Pradesh

The Microfinance sector in Andhra Pradesh (a state in India) witnessed series of

unfortunate events in fall 2010. After the news of number of micro borrowers

committing suicide due to over indebtedness and bad recovery mechanism used by

the field staff of MFIs, the local government in Andhra Pradesh introduced stringent

regulations for the microfinance sector. This resulted in immediate reaction by

commercial banks in turning off the funding tap for MFIs and by micro borrowers by

abandoning the repayments to MFIs.

Local commercial banks are one of the major sources of funding for MFIs in India.

The Reserve Bank (Central Bank) requires that public and private-sector banks

provide as much as 40% of their net credit to so-called priority sectors, which include

micro-enterprises and excluded sections of society. Of that, 18% must go to

agricultural sectors. This has been hard for banks to deliver on, but pushing their

own loans through microfinance institutions could help them reach those targets.

This approach of local commercial banks encouraged MFIs to exponential growths

leading to over indebtedness in several regions.

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Subsequent to the Andhra Pradesh ordinance, in January 2011 the Reserve Bank of

India (RBI) - Malegam Committee came out with a recommendation list which gave a

positive direction to resolve this issue. In May 2011, RBI issued the much awaited

guidelines1 - based on the Malegam Committee’s recommendations - on the

Microfinance sector. The guidelines have come positively in favour of MFIs and have

given the much needed legitimacy to the MFI sector.

An analysis of the Indian Microfinance industry was conducted by MIX (2011), which

presents data on over 90 Indian MFIs in order to understand the impact of the crisis

on the whole sector.

The overall result is that there was portfolio quality deterioration in the Microfinance

market through March 2011, and a decline for a smaller group of institutions

reporting data through June 2011. Moreover, MIX forecasts that growth in the region

will remain slow or in decline for some time. The impact of the Andhra crisis is clearly

evident as the positive growth, experienced until March 2011 in states outside AP,

turns into a decline during the following quarter.

The following chart shows the LuxFLAG labelled MIVs which do invest in India.

MIV Amount invested As of

Azure Global Microfinance Fund (FoF) Indirectly investing

Dexia Micro‐Credit Fund 12.275.399 Dec 2011

responsAbility Global Microfinance 18.772.174 Dec 2011

responsAbility Microfinance Leaders 10.747.420 Jun 2011

responsAbility Mikrofinanz‐Fonds 4.931.003 Jun 2011

Rural Impulse Fund 1.485.047 Dec 2011

Rural Impulse Fund II 6.499.827 Dec 2011

Triodos Microfinance Fund 2.364.647 Jun 2011 Note: all figures are expressed in USD

Source: LuxFLAG applications + MIX Market

1 All bank loans to MFIs would be treated as priority sector lending, if the requirements to be considered qualifying assets are fulfilled (household income limit, loan amount cap, total indebtedness, loan term, repayment frequency, interest rate cap, margin cap, etc.).

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II. Performance of LuxFLAG labelled MIVs

1. Financial section

1.1 Introduction

The following section of the survey focuses more on LuxFLAG labelled MIVs. Thus

we analyse a total of 24 MIVs through the period December 2008 - December 2011,

considering figures at six-month intervals in order to offer a more detailed insight.

In particular we report the evolution of Total Assets, Microfinance Portfolio, Liquidity

and Net Asset Value.

It is important to notice that, given the lack of standardisation in MIV reporting, cross

comparison of fund figures are difficult. Hence we limit our analysis to the trend of

each fund, without cross evaluation.

1.2 Regional distribution

As it is evident from the following chart, continuing the trend from previous years

Eastern Europe & Central Asia (40%), and Latin America & Caribbean (35%) regions

cover significant part of the Microfinance Portfolio of MIVs.

Compared to our past year survey, there has been no substantial change in the

distribution: Europe & Central Asia (38%), Latin America & Caribbean (35%), East

Asia & Pacific (8%), South Asia (7%), North America (excluding Mexico) & Others

(6%), Sub-Saharan Africa (5%), Middle East & North Africa (1%).

Source: Syminvest website (data as of 2011)

40%

35%

9%

9%

2% 5%

Eastern Europe & Central Asia

Latin America & Caribbean

East Asia & Pacific

South Asia

Middle East and North Africa

Sub‐Saharan Africa

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Whereas, the MFIs’ regional breakdown is shown in the following chart.

Source: Syminvest website (chart as of 2011)

1.3 Total Assets and Microfinance Portfolio

The following chart shows the growth trends in amount of Total Assets and

Microfinance Portfolio for the MIVs domiciled in Luxembourg. As we can observe,

there are some turning points.

‐ The rapid growth of Microfinance investment seen in the past years took a hit

in 2008 as the financial crisis started ramping up and investors became

cautious, questioning the resilience of Microfinance against the global

financial market;

‐ in 2009 there was a new negative trend, that can be explained by two main

factors: MIVs had to build loan loss provisions to cover potential defaults in

distressed markets, and currency volatility increased MIVs’ costs of hedging

foreign exchange risk;

‐ in 2010 another negative event left its mark on the Microfinance sector: the

crisis in Andhra Pradesh (India).

Nonetheless, according to CGAP, this negative tendency has been counteracted

thanks to new investment approaches, such as expanding to new markets (in

particular Africa and Asia), funding in local currency, taking equity positions, reaching

beyond the top tier of MFIs (MicroCapital Monitor, 2001) and improved risk

management processes. Indeed the chart shows a quite stable growth from 2011

onwards.

42%

40%

8%

6%

2% 2%



East Asia & Pacific


South Asia

Middle East and North Africa

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Source: Syminvest website

The two following tables depict the evolution of Total Asset and Microfinance

Portfolio of LuxFLAG labelled MIVs for the period 2008-2011.

MIV Dec

2008Jun

2009Dec

2009Jun

2010 Dec

2010 Jun

2011Dec

2011Access Africa Fund 2,8 6,7Dexia Micro‐Credit Fund 428,6 510,7 524,4 481,3 528,5 516,1 394,4Dual Return - Vision Microfinance 113,7 123,3 119,4 99,3 132,3 119,7 113,1

Dual Return Fund ‐ Vision Microfinance Local Currency 16,0 30,1 32,2Etimos Fund 4,8European Fund for Southeast Europe 790,5 870,8 912,0 748,2 911,2 1.036,2 1.033,7FEFISOL 8,0

Finethic Microfinance 51,3 67,0 68,1 68,0 KCD Mikrofinanzfonds ‐ I 27,9 26,6 47,3 51,0 KCD Mikrofinanzfonds ‐ II 15,6 17,9 22,0 22,3

Luxembourg Microfinance and Development Fund 7,8 8,0 9,0 11,7 12,6

Microfinance Enhancement Facility 56,0 123,6 131,1 134,9 163,3 222,0

Regional MSME Investment Fund 22,4 26,1 60,8

responsAbility Global Microfinance Fund 377,9 423,3 489,4 469,2 498,3 532,9 542,0

responsAbility Microfinance Leaders 200,8 176,2 166,6 145,8 170,8 158,7 147,1

responsAbility Mikrofinanz‐Fonds 74,5 148,6 146,7 141,1 136,6 167,9 165,5

Rural Impulse Fund 33,4 34,0 36,2 38,0 38,3 40,2Rural Impulse Fund II 19,4 53,3Selectum Microfinance 36,3 46,2 Triodos Microfinance Fund 36,9 52,7 56,8 82,4 82,7 117

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Wallberg Global Microfinance Fund 12,0 20,7 40,6 49,6 52,1 40,9 33,4

Sep

2008Mar

2009Sept 2009

Mar 2010

Sept 2010

Mar 2011

Sept 2011

Advans 13,1 13,1 22,4 23,5 31,30 33,3 Azure Global Microfinance Fund 3,1(Oct)

responsAbility Financial Inclusion 42,0Note: all figures are expressed in USD

Source: LuxFLAG applications + Syminvest

MIV Dec

2008Jun

2009Dec

2009Jun

2010 Dec

2010 Jun

2011Dec

2011Access Africa Fund 2,5 5,3Dexia Micro‐Credit Fund 352,9 367,7 384,5 375,4 439,0 464,5 355,5Dual Return - Vision Microfinance 82,4 98,9 101,4 84,1 99,0 86,3 93,7

Dual Return Fund ‐ Vision Microfinance Local Currency 9,6 23,2 25,0Etimos Fund 4,5European Fund for Southeast Europe 403,5 435,7 429,8 336,2 484,3 455,8 568,2FEFISOL 4,4

Finethic Microfinance 61,3 62,3 KCD Mikrofinanzfonds ‐ I 21,8 42,9 46,7 KCD Mikrofinanzfonds ‐ II 15,6 18,1 19,6

Luxembourg Microfinance and Development Fund 1,2 3,1 5,5 5,7 8,7

Microfinance Enhancement Facility 30,3 87,5 85,0 90,2 130,1

Regional MSME Investment Fund 16,2 22,6 43,4

responsAbility Global Microfinance Fund 285,9 317,8 338,5 349,3 385,3 429,8 436,1

responsAbility Microfinance Leaders 157,9 149,7 138,3 115,5 131,9 134,8 121,5

responsAbility Mikrofinanz‐Fonds 62,1 89,6 102,9 106,8 123,3 124,3 122,1

Rural Impulse Fund 32,9 32,7 33,8 34,2 33,3 38,8

Rural Impulse Fund II 13 46,2Selectum Microfinance 42,0 Triodos Microfinance Fund 12,5 31,7 51,2 67,9 83,7 92,1Wallberg Global Microfinance Fund 10,4 17,5 29,8 39,4 44,6 32,6 31,1

Sep

2008Mar

2009Sept 2009

Mar 2010

Sept 2010

Mar 2011

Sept 2011

Advans 8,9 9,6 13,9 19,4 24,4 29,3 Azure Global Microfinance Fund 2,7(Oct)

responsAbility Financial Inclusion 27,7Note: all figures are expressed in USD

Source: LuxFLAG applications + Syminvest

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1.4 Liquidity

“Investors’ earlier concerns with liquidity and funding have eased with the passing of

the crisis”2. Ranked as the second biggest risk in 2010, liquidity risk appears at the

16th rank in 2011 according to the “Microfinance Banana Skins” Two years ago, the

main threat posed by excessive liquidity was that it could push some MIVs into

relaxing lending standards. Fortunately, more MIVs are now increasingly demanding

with the Social Performance of MFIs.

A company's liquidity is its ability to meet its near-term obligations, and it is a major

benchmark of financial health. Liquidity can be measured through several ratios, the

most used ones are current and quick ratio. The current ratio is the most commonly

used. It estimates a company's ability to meet its short-term liabilities with its short-

term assets. A current ratio greater than or equal to one signifies that current assets

should be able to satisfy near-term obligations. A current ratio of less than one

means that the firm might have liquidity issues. The quick ratio is a more valid

instrument to test liquidity. It eliminates certain current assets such as inventory and

prepaid expenses that may be more difficult to convert into cash. Like the current

ratio, having a quick ratio above one means that a company should have no or little

problem with liquidity. The higher the ratio, the more liquid it is, and the better able

the company will be to ride out any downturn in its business. It is, nonetheless,

important to underline that excess of liquidity can be tricky as well.

Liquidity is no longer a concern in the Microfinance industry as it used to be in the

wake of the financial crisis. However, even today, availability of liquidity depends on

region and maturity of the financial institutions.

As well, many markets were flooded with high liquidity and availability of funding

which some experts say led into over indebted MFIs resulting in over indebted

clients.

In general current and quick (excluding share capital and retained earnings) ratios

are helpful.

2 CSFI (2011). “Microfinance Banana Skins. The CSFI Survey of Microfinance Risk”.

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Additionally, in LuxFLAG labelled MIVs since 2008 the cash buffer is stable - if not

reduced - over the years. It will also justify the growth in number of investees or

volume of investments.

Liquidity risk is diminishing. There is enough liquidity in the market after the crisis

(capital generating from several sources), not all MFIs have access to this liquidity,

but just the most efficient and mature ones.

In several jurisdictions, the regulatory requirements of cash reserves at the central

bank result in reducing the percentage of Microfinance Portfolio with respect to Total

Assets.

As described in the 2010 report:

‐ liquidity constraints increased drastically in 2009 due to the effects of the

global financial and economic crises on the Microfinance environment.

Indeed, small and medium MFIs were struggling a lot with liquidity issues,

especially those which didn’t mobilize savings;

‐ in 2010 liquidity levels in the Microfinance industry reached new highs. Indeed

most funds increased their provisions to protect themselves against a

potential liquidity risk. Even though this measure was taken on a temporary

basis, it had a real impact on the whole industry.

In 2011 the proportion of liquidity in Total Assets decreases thanks to better

forecasts on the future economic context.

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1.5 Foreign Exchange Risk

“Within the frame of financial risks, particular attention is given to exchange rate

fluctuations and to issues dealing with measurement and analysis of qualitative as

well as quantitative aspects of foreign exchange risks affecting nonfinancial firms

and chiefly those extensively involved in international activities. The focus then shifts

to the assessment of foreign currency risk exposure by the firm as well as to

managing foreign exchange risks and to the instruments and techniques involved”3.

As there is substantial demand from the market, several Microfinance Investment

Vehicles (MIVs) have started offering loans to MFIs in local currencies in many

jurisdictions. This results in creating the so-called foreign exchange risk for them,

defined as the potential loss - or gain - due to exchange rate variations between two

currencies. If not properly managed, this risk can result in losses. In addition to the

risk of rate changing, foreign exchange risk includes also the danger that carrying

the currency transactions becomes unfeasible because of market disruptions or

government interventions.

To overcome the foreign exchange risks, hedging options are available in the

market, however often as an expensive option with limited choice.

It appears to be consensus that foreign exchange risk represents a potential threat to

the sustainability of MIVs. Experiences with foreign exchange crises have highlighted

the vulnerability and potential for disruption in operations in un-hedged local

currency. Foreign exchange risk is an issue that needs to be addressed in order to

guarantee the stability of the Microfinance sector.

3 Mauri, A. & Baicu, C.G. (2007). “General Remarks on the Assessment of Foreign Exchange Risk Exposure of Firms”. Analele Universităţii Spiru Haret, Seria Economie (7).

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1.6 Portfolio at Risk (PAR)

Portfolio at Risk is the most important and popular performance indicator widely used

by Microfinance practitioners. It is “The value of all loans outstanding that have one

or more instalments of principal past due more than a certain number of days. This

item includes the entire unpaid principal balance, including both past-due and future

instalments, but not accrued interest. It also does not include loans that have been

restructured or rescheduled. Portfolio at Risk is usually divided into categories

according to the amount of time passed since the first missing principle”4.

PAR > 30 is a the most commonly used indicator.

As we can see from the chart below, PAR 30 (the portion of the portfolio whose

payments are more than 30 days past due - note that PAR 30 above 5 or 10% is a

sign of trouble in Microfinance) does remain at acceptable levels, and it is most of

the times well below that of classic banks. This means that MFIs remain self-

sufficient from an operational and financial point of view and their profitability

remains positive. Thanks to amelioration in governance systems, they have been

able to face the crisis and adapt their activities. They are tightening their loan

policies, focusing on less risky products and reviewing their business plan in order to

optimise the management of their liquidities.

4 CGAP (2003). “Microfinance Consensus Guidelines. Definitions of Selected Financial Terms, Ratios, and Adjustments for Microfinance”.

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Source: Syminvest website (February 2012)

1.7 Net Asset Value (NAV)

The Net Asset Value (NAV) correspond to the per-share amount of the fund,

calculated by dividing the total value of all the securities in its portfolio, less any

liabilities, by the number of fund shares outstanding.

In the table hereafter we show the NAV evolution of LuxFLAG labelled MIVs. Funds

may have several share classes, depending on the number of sub-funds, minimum

investment amount and currency.

MIV Sub-fund Dec 2008

Jun 2009

Dec 2009

Jun 2010

Dec 2010

Jun 2011

Dec 2011

Access Africa Fund

Advans

Azure Global Microfinance Fund A ($) 1.032

B (CHF) 983

C (€) 1.000

Dexia Micro‐Credit Fund CHF Cap (CHF) 11.926 12.119 12.163 12.188 12.284 12.242 12.235

EUR Cap (€) 12.666 12.923 12.994 13.023 13.161 13.150 13.259

USD Cap ($) 16.450 16.801 16.895 16.936 17.125 17.100 17.182

Dual Return - Vision Microfinance A EUR Dis (€) 100 102

B EUR Dis (€) 100 103

I CHF Cap (€)

I EUR Cap (€) 1.078 1.102 1.121 1.146 1.150 1.155 120

I USD Cap ($) 100

P CHF Cap

P EUR Cap (€) 1100 1114

P USD Cap ($)

Dual Return Fund ‐ Vision A €D (€) 97

Microfinance Local Currency B €D (€)

I $C ($) 104 105

I €C (€) 105 104 103

P €C (€) 106 104 102

P CHF Cap (CHF) 1.043

P EUR Cap (€) 1.093 1.114 1.130 1.151 1.116 116 120

Etimos Fund (€) 1.007 1.027

European Fund for Southeast Europe

Class A (€)

Class B (€)

Class C (€)

100,000 25,000

vv.

100,000 25,000

vv.

FEFISOL (€) 93

Finethic Microfinance C1 ($) 1276 1303

H3 (CHF) 1.349 1.237

S1 ($) 986 984

KCD Mikrofinanzfonds ‐ I (€) 100 102 103 104 103 108

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KCD Mikrofinanzfonds ‐ II ($) 102 104 104 106 105 107

Luxembourg Microfinance and Class A (€) 25 25 24 24

Development Fund Class B (€) 101 101 99 99

Class C (€) 101 101 101 101

Microfinance Enhancement Facility ($) 99.582 100.000 100.000 100.000 100.000 100.000

Regional MSME Investment Fund A Dis

B Dis

C Dis

responsAbility Financial Inclusion

responsAbility Global Microfinance Fund CHF Cap (CHF) 112 112 112 113 114 115 117

EUR Cap (€) 119 120 121 121 122 124 128

USD Cap ($) 127 128 128 129 130 133 136

responsAbility Microfinance Leaders I USD C ($) 101 103 104

S CHF C (CHF) 101 102 102

S EUR C (€) 102 103

responsAbility Mikrofinanz‐Fonds A Dis (€) 106 103 104 101 103 103 103

Rural Impulse Fund ($) 100 106 134 137 144 145 155

Rural Impulse Fund II A Dis (€)

B Dis (€)

Selectum Microfinance B1 (€) 10.037

B2 (€) 1.007

Triodos Microfinance Fund B Cap (€) 25 25 26 26 26 27

B Dis (€) 25 25 25 26 25 26

I Cap (€) 25 25 26 26 27 28

I Dis (€) 25 25 25 26 25 27

KB Cap (€) 24 23 22 25

KB Dis (GBP) 19 20 20 21

KI Cap (GBP) 20 20 21 21 21 22

KI Dis (GBP) 20 20 20 21 19 20

KR Cap (GBP) 20 20 21

KR Dis (GBP) 20 20 20 21 19 20

R Cap (€) 25 25 25 26 26 27

R Dis (€) 25 25 25 26 25 26

Wallberg Global Microfinance Fund I Dis (€) 998 1.024 1.044 1.002 1.026 1.016 1.037

P Cap (€) 100 102 104 104 107 107 110

Source: LuxFLAG applications + Finesti

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1.8 Conclusion

This analysis shows some clear elements:

‐ Eastern Europe & Central Asia together with Latin America & Caribbean

regions cover a significant part of the Microfinance Portfolio of MIVs;

‐ the negative tendency experienced in particular in 2010 has been

counteracted thanks to new investment approaches, funding in local currency,

taking equity positions, reaching beyond the top tier of MFIs, and improved

risk management processes;

‐ liquidity is no longer a concern in Microfinance industry;

‐ foreign exchange risk is an issue that needs to be addressed in order to

guarantee the stability of the Microfinance sector;

‐ MFIs remain self-sufficient from an operational and financial point of view and

their profitability remains positive (as shown by PAR 30);

‐ NAV evolution for LuXFLAG labelled MIVs is quite constant over time.

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2. Social section

2.1 Importance of Social Performance from the investors’ perspective

While Microfinance Institutions (MFIs) continue their crusade for more accessible

and affordable financing, little information is freely available to the public regarding

the due diligence required when evaluating Microfinance Investment Vehicles

(MIVs).

The main challenge in this sense is to design a common model allowing all types of

investors (institutional, private, other MIVs, etc.) to standardise the level of due

diligence, thus being able to make informed investment decisions in meeting both

social and financial goals while achieving rational and sustainable industry growth.

When examining an MIV from an investor’s perspective, the main issues are:

‐ management and ownership structure

‐ investment strategy, philosophy and process

‐ risk management process and controls

‐ operations

‐ investment returns

‐ structural issues

Thus, the first investigation has to do with the people who are involved in the MIV.

Essentially, this means looking at all the key actors: general partners, owners (with

their backing and reputation), fund managers (with their experience in the sector and

track record within the asset class), investment committee members.

Afterwards, it is important to consider the investment strategy, philosophy and

process in order to assess whether the MIV’s due diligence process is solid and

extensive. In particular, the things which matter are the portfolio (structure,

management and goals), the geographic diversification and the due diligence

process - as mentioned above.

As well, risk management processes and controls, credit evaluation process, country

risk, regulatory risk, Foreign Exchange Risk management and liquidity management

are all of fundamental importance.

Moreover, it is substantial to look at the operations of an MIV, at the kind of back

office support it has, at the accounting and reporting procedures, at who is

22

responsible for valuing the portfolio, by what method they are valuing the portfolio,

the regularity of reports sent to investors (and their contents).

Doubtlessly, potential investors consider returns, the historical performance of the

MIV and the robustness of the return model behind the fund. It is important to

underline that they do not take return forecasts at face value, but at the fair value.

Of course, there are also structural issues that come up with an MIV: namely

conflicts of interest, fee structures and other related aspects.

2.2 Industry initiatives

There are several initiatives encouraging responsible practices in Microfinance. The

main ones can be listed as it follows.

‐ Smart Campaign Client Protection Principles: appropriate product design and

delivery, prevention of over-indebtedness, transparency, responsible pricing,

fair and respectful treatment of clients, privacy of client data, mechanisms for

complaint resolution

‐ Social Performance Task Force: engaged with microfinance stakeholders to

develop, disseminate and promote standards and good practices for social

performance management and reporting

‐ GIIN Impact Reporting and Investment Standards: it developed a standard set

of performance measures for describing social and environmental

performance that facilitates comparisons of impact data across investments.

‐ Principles for Investors in Inclusive Finance: to ensure that financial access is

provided in a healthy and responsible manner (range of services, client

protection, fair treatment, responsible investment, transparency, balanced

returns, standards)

‐ CERISE Social Performance Indicator: to target the poor and the excluded,

adapt services and products to the target clientele, improving clients’ social

and political capital, maximizing the MFI’s social responsibility

This kind of initiatives also makes it possible to implement rating systems which

assess the social performance of MFIs. It is, therefore, possible to make an

investment choice based on social criteria as well.

23

In this context, it is worth to underline that the majority of LuxFLAG labelled MIVs

have developed their own Due Diligence Tools, based on the recommendations

provided by the initiatives mentioned above. The most interesting ones are listed

here below.

‐ Access Africa Fund: CARE'S Consumer Protection Code of Conduct in

Microfinance, meant to protect the rights of clients and partners, ensuring that

they are treated with dignity and respect, and that they are provided with the

best quality products and services. The principles are: to promote

empowerment, to work with partners, to ensure accountability and promote

responsibility, to address discrimination, to promote the nonviolent resolution

of conflicts, to seek sustainable results.

‐ Dexia Micro-Credit Fund: SPIRIT (Social Performance, Impact Reporting &

Intelligence Tool). It differentiates between SP and Social Impact, and SP

management at the MIV and MFI level. It measures MFIs’ Social Performance

along 5 dimensions (look at the box below). Using the information collected

through it, the staff also conducts some econometric analysis to explore the

relationship between financial and social performance.

‐ Dual Return - Vision Microfinance (both funds): Symbiotics’ MFI Social

Responsibility Report. It shows the extent to which an MFI contributes to

sustainable socio-economic development and acts responsibly towards all its

various stakeholders. It considers 7 dimensions (social governance, labour

climate, financial inclusion, client protection, product quality, community

engagement, environmental policy).

‐ Finethic Microfinance: Symbiotics’ MFI Social Responsibility Report (see

above).

‐ Fonds Européen de Financement Solidaire: Social and Environmental

Management System (SEMS), which includes 4 approaches (transparent

reporting to governance bodies and to microfinance networks, and being

signatory to leading microfinance consumer protection and S&E initiatives;

monitoring the company’s strategic objectives; target entities S&E risk

assessment; target entities S&E monitoring).

‐ Microfinance Enhancement Facility: SPIRIT (see above).

24

‐ Regional MSME Investment Fund for Sub-Saharan Africa: Symbiotics’ MFI

Social Responsibility Report (see above).

‐ responsAbility (all funds): responsAbility Development Effectiveness Rating

(rADER), enabling the development-related aspects of their activities to be

evaluated, monitored and managed at the portfolio level. It takes into account

5 dimensions (empowerment, efficiency, financial inclusion, poverty and

outreach).

‐ Rural Impulse Fund (both funds): Incofin’s ECHOS, a methodology not

depending on the input of third parties (such as the MFI itself), since applied

directly via an investment officer.

‐ Triodos Microfinance Fund: Sustainability Management System to apply a

Triple Bottom Line approach (people, planet and profit). It considers: number

of clients with loans or savings, average loan amount, percentage of female

clients and percentage of rural clients.

‐ Wallberg Global Microfinance Fund: Symbiotics’ MFI Social Responsibility

Report (see above).

Dexia Micro-Credit Fund’s social scorecard

25

All of this represents a priceless contribution to the development of Microfinance as a

socially responsible asset that judiciously combines financial and social objectives.

Social Performance matrix

26

2.3 MFIs’ Social Performance

Social performance can be defined as the way in which the social objectives of an

institution are put into practice, following commonly-shared social values. Especially

in Microfinance, the social values concern the process of enhancing the lives of the

clients and their families, as well broadening the spectrum of opportunities for

communities through financial services.

To create these values, the social objectives of a Microfinance Institution (MFI)

should incorporate:

‐ offering financial services to an increasing number of traditionally-non-

marketable people in an on-going and sustainable way, both by broadening

and by deepening outreach;

‐ bettering the quality and adequacy of these services in order to target clients

through the systematic assessment of their specific needs;

‐ creating benefits for microfinance clients, their families and communities that

are related to social capital and social links, assets, reduced vulnerability,

income, access to services and the fulfilment of basic needs;

‐ ensuring the social responsibility of the MFI towards its employees, clients

and the community it serves.

Social Performance is not simply focusing on the estimation of objectives and

outcomes, but also - and mainly - on the actions and corrective measures

undertaken by an MFI to generate such outcomes. Social Performance concerns the

extent of their success in meeting these goals, but it cannot only concentrate on the

ultimate result: it also provides a framework to analyse the process by which social

objectives are achieved. The aim is to state if the institution has the necessary tools

to accomplish its mission, by giving a constant close look to the improvements made

in that direction and seizing how to use the information collected in order to take a

step forward in the activities.

There is a wide range of methods that can be used to address various Social

Performance issues. They differ from each other because of the kind of information

they provide. The main categories are:

27

‐ quantitative information on individuals, generally obtained via surveys. These

produce data points to be analysed using a statistical approach, in order to

assess the outreach and the impact performance of the activity;

‐ qualitative information on individuals, generally extracted via in-depth

interviews or case studies. Such techniques generate descriptive information,

that offers an accurate overview about the way clients use the services and

how different dimensions of impact may be occurring;

‐ information on groups, generally collected via Participatory Rapid Appraisal

(involving participants to generate information, but not to analyse and use it)

or Participatory Learning and Action (meant to expand skills and ownership

among participants and increase their ability of planning, implementing,

monitoring and evaluating their own initiatives).

2.4 Initiatives pursued by LuxFLAG

In this context, LuxFLAG would like to emphasise the importance of monitoring the

social impact from Microfinance investments. It is important to consider the social

impact on clients’ life on two levels: first at the level of the micro entrepreneur’s

business and second at the level of the clients personal well-being and that of his

family.

LuxFLAG believes that the prime objective of Microfinance programmes should be to

improve the lives of the rural poor by facilitating sustainable access to a variety of

financial services (e.g. credit, savings, insurance, remittances). In this framework,

assessing the social performance of Microfinance programmes is a key priority for

LuxFLAG. With this idea in mind, LuxFLAG integrated a social criterion to its

Microfinance Label eligibility criteria. The objective is to be sure that LuxFLAG

labelled MIVs pursue a double bottom line approach by achieving both financial as

well as social returns.

Moreover LuxFLAG - together with the US based MFI rating agency MicroRate -

launched Luminis in May 2010. It is a web-based analytical service that provides

professional investors and researchers with the necessary tools to identify, assess

and monitor MIVs that meet their individual requirements. The vision of Luminis is to

promote the flow of funds from capital markets to Microfinance by increasing

28

transparency and growth in the global Microfinance community. Nowadays Luminis

is perfectly operating, providing access to more than 80 Microfinance fund profiles,

making side-by-side comparisons of key fund data, and offering a preview of PRSM

fund profiles on Performance, Risk, Social and Management. Subscribers can

benefit from additional services.

To learn more about Luminis, visit www.luminismicrofinance.com or contact

[email protected].

III. Conclusion

Even though the financial and economic crisis left its sign worldwide, in 2011 the

total assets of the 10 largest MIVs increased, reaching 4 USD bn (showing a growth

rate of 7.2%). This figure is encouraging if compared to the 4.1% of 2010, but it is

still below pre-crisis levels (31% in 2008 and 23% in 2009). This increase in growth

rates is primarily due to the increased demand for capital - in particular for local

currency loans - coming from MFIs.

Throughout the year, MIVs continued to face several challenges, including a grown

credit risk in some countries and lower returns. Nonetheless, the overall investment

market was more active than in the previous year, showing a renewed capital

appetite from Microfinance services providers and a bigger focus on underserved

markets.

New microfinance funds were created in 2011, including four which were granted the

LuxFLAG Microfinance Label: Azure, Etimos, FEFISOL, responsAbility Financial

Inclusion.

Most of the new funds are managed by existing Microfinance investment managers.

They are invested mainly in debt instruments, even if the interest in equity

investments is growing.

MIVs are focusing more and more on underserved regions, such as Sub-Saharan

Africa, Asia and rural markets. Usually these efforts are supported by Development

Finance Institutions (DFIs). LuxFLAG labelled MIVs viz. FEFISOL and Rural Impulse

II, were created specifically with a purpose to focus on financial access in rural

markets.

29

On the other hand, fund managers are increasing their focus on Social Performance

and end-client issues, to ensure more responsible placement of their capital. The

industry is putting effort in order to promote transparency and accountability, and to

avoid contributing to overheated markets. This is witnessed by the increasing

number of MIVs which joined the several initiatives encouraging responsible

practices in Microfinance, some of them have developed their own Social

Performance measurement tools- and by the constantly growing amount of

institutions publically sharing transparent information (e.g. through MIX, Syminvest,

Luminis, etc.).

Just to mention one example, in 2011, 162 institutions provided confidential

information to Micro Banking Bulletin compared to 28 in 1997. For over 2000 MFIs

basic profiles and data is now available on the MIX Market’s website.

30

Disclaimer

This document was prepared with the greatest possible care. Neither the author nor

LuxFLAG offers any guarantee with regard to content and completeness and does

not accept any liability for losses which might arise from the use of this information.

The opinions expressed in this document are those held at the time of writing and

may be changed at any time without notice. This document is for information

purposes only. No part of this document constitutes either an offer or a

recommendation to acquire or sell financial instruments or banking services, nor

does it relieve the recipient from the responsibility of making his or her own

assessment. No reliance should be placed on this document for the purpose of

subscribing to any MIVs described herein. In particular, the recipient is advised to

assess the information in respect of its compatibility with his or her own

circumstances as well as its legal, regulatory, tax and other implications. The present

document may not be reproduced in whole or in part without the written consent of

LuxFLAG.

Acknowledgements

LuxFLAG would like to express its gratitude towards the labelled MIVs for their

assistance in providing the data and for their valuable inputs.

Contributors

Chiara Cariddi, Intern - LuxFLAG

Sachin Vankalas, Operations Officer- LuxFLAG

31

IV. Bibliography

Arunachalam, R.S. (2011). “Journey of Indian Micro-Finance”.

CGAP - El-Zoghbi, M. & Gahwiler, B. & Lauer, K. (2011). “Cross-border

Funding of Microfinance”.

CGAP - El-Zoghbi, M. & Martinez, M. (2011). “Measuring Changes in Client

Lives through Microfinance: Contributions of Different Approaches”.

CGAP - Glisovic, J. & González, H. & Saltuk, Y. & Rozeira de Mariz, F.

(2012). “Volume Growth and Valuation Contraction. Global Microfinance

Equity Valuation Survey”.

CGAP - Glisovic, J. and Moretto, L. (2012). “How Have Market Challenges

Affected Microfinance Investment Funds? Highlights from the CGAP Market

Scan”

CGAP - Hashemi, S.M. & de Montesquiou, A. (2011). “Reaching the Poorest:

Lessons from the Graduation Model”.

CGAP - Reille, X. & Forster, S. & Rozas, D. (2011). “Foreign Capital

Investment in Microfinance: Reassessing Financial and Social Returns”.

CGAP (2003). “Microfinance Consensus Guidelines. Definitions of Selected

Financial Terms, Ratios, and Adjustments for Microfinance”.

CGAP (2010). “Do MIVs need a new investment strategy?”.

CGAP (2010). “Microfinance Investment Vehicle Disclosure Guidelines”.

CSFI (2011). “Microfinance Banana Skins. The CSFI Survey of Microfinance

Risk”.

Governance Across Borders (2011). “Andra Pradesh Microfinance Crisis”.

IAMFI - Trant, J. (2011). “Microfinance Investment: Dual Diligence for

Financial and Social Returns”.

IFAD (2006). “Assessing and Managing Social Performance in Microfinance”.

IMF (2011). “World Economic Outlook. Tensions from the Two-Speed

Recovery”.

Mauri, A. & Baicu, C.G. (2007). “General Remarks on the Assessment of

Foreign Exchange Risk Exposure of Firms”. Analele Universităţii Spiru Haret,

Seria Economie (7).

32

MicroCapital - Stanisljevic, Z. (2009). “Successful Due Diligence When

Evaluating Microfinance Investment Vehicles”.

MicroRate - von Stauffenberg, D. & Rozas, D. (2011). “Role Reversal

Revisited. Are Public Development Institutions Still Crowing Out Private

Investment in Microfinance?”.

MicroRate (2011). “The State of Microfinance Investment. 6th Annual Survey

& Analysis of MIVs”.

MIX MicroBanking Bulletin - Gaul, S. (2012). “Diamonds no Longer Forever”.

MIX MicroBanking Bulletin - González, A. (2011). “Defining Responsible

Financial Performance: How to Think About Social Performance?”.

MIX MicroBanking Bulletin - González, A. (2011). “Sacrificing Microcredit for

Unrealistic Goals”.

MIX MicroBanking Bulletin - Krell, M.W. & Pistelli, M. (2012). “Field Staff

Compensation at Indian MFIs: a New Perspective on the Crisis in Andhra

Pradesh”.

MIX MicroBanking Bulletin - Tulchin, D. & Sassman, R. & Wolkomir, E.

(2009). “New Financial Ratios for Microfinance Reporting”.

MIX MicroBanking Bulletin - Viada, L.A. & Gaul, S. (2012). “The Tipping Point:

Over-indebtedness and Investment in Microfinance”.

MIX Microfinance World - Gaul, S. (2010). “How Has the Growth of Indian

Microfinance Been Funded?”.

MIX Microfinance World - Shyamsukha, R. (2011). “India: Post-crisis Results”.

Symbiotics - Audran, J. & Berthouzoz (2009). “Microfinance, an Opportunity

for Socially Responsible Investment”. What Balance Between Financial

Sustainability and Social Issues in the Microfinance Sector? (3).

Symbiotics (2011). “MIV Survey Report”.

Vision Microfinance (2011). “Situation der Microfinanz in Indien”.

Women’s World Banking (2004). “Foreign Exchange Risk in Microfinance”.

World Bank (2011). “Global Economic Prospects”.

33

V. Information sources

Centre for Study of Financial Innovation: a forum for well-informed debate and

research about the future of the financial services sector. Its main activities

are: written research, live discussion groups and networks, all focused on the

latest developments in international finance.

Consultative Group to Assist the Poor: an independent policy and research

centre dedicated to advancing financial access for the world's poor. CGAP

provides market intelligence, promotes standards, develops innovative

solutions and offers advisory services to governments, financial service

providers, donors, and investors.

Finesti: a subsidiary of the Luxembourg Stock Exchange and a global hub for

the collection, management and dissemination of investment fund data and

documents.

International Association of Microfinance Investors: it helps commercially

oriented Microfinance investors achieve their goals by collecting and

disseminating data, establishing industry best practices, and working with

stakeholders to promote sustainable investment.

International Fund for Agricultural Development: an international financial

institution and specialised UN agency, working with poor rural people to

enable them to grow and sell more food, increase their incomes and

determine the direction of their own lives.

International Monetary Fund: an organisation of 188 countries, working to

foster global monetary cooperation, secure financial stability, facilitate

international trade, promote high employment and sustainable economic

growth, and reduce poverty around the world.

Luminis: a web-based analytical service of MicroRate and LuxFLAG that

provides professional investors and researchers with the necessary tools to

identify, assess and monitor MIVs that meet their individual requirements (see

page 38: Luminis press release - May 10, 2012”).

Microfinance Information Exchange: a source for objective, qualified and

relevant Microfinance performance data and analysis. Committed to

34

strengthening financial inclusion and the Microfinance sector by promoting

transparency, it provides performance information on MFIs, funders, networks

and service providers dedicated to serving the financial sector needs for low-

income clients. MIX fulfils its mission through its online platform (MIX Market)

and its publications (MicroBanking Bulletin and MIX Microfinance World).

Syminvest: Symbiotics’ online platform for Microfinance and small enterprise

impact investments. At the moment the biggest online research and

brokerage platform in the whole Microfinance industry.

World Bank Institute: a global connector of knowledge, learning and

innovation for poverty reduction. It connects practitioners and institutions to

help them find suitable solutions to their development challenges. With a

focus on the "how" of reform, it links knowledge from around the world and

scale up innovations.

VI.Acronyms

CGAP: Consultative Group to Assist the Poor

CSFI: Centre for Study of Financial Innovation

EMBI: Emerging Markets Bond Index

IAMFI: International Association of MicroFinance Investors

IFAD: International Fund for Agricultural Development

IMF: International Monetary Fund

MFI: Microfinance Institution

MFPF: MicroFinance PortFolio

MIV: Microfinance Investment Vehicle

MIX: Microfinance Information eXchange

NAV: Net Asset Value

PAR: Portfolio At Risk

SICAR: Société d’Investissement en CApital à Risque

SICAV: Société d’Investissement à CApital Variable

SIF: Specialised Investment Fund

SMX: Symbiotics Microfinance indeX

35

SP: Social Performance

TA: Total Assets

WBI: World Bank Institute

VII.Glossary

Direct microfinance portfolio: direct investments into MFIs or loans to non-

specialised financial intermediaries, specifically used to fund microloans

directly.

Double bottom line: contrary to the traditional bottom line, the double bottom

line considers both financial and social consequences before reaching a

business decision.

Indirect microfinance portfolio: investments in other MIVs or loans to non-

specialised financial intermediaries, specifically used to fund MFIs.

Microfinance institutions: an MFI is an organisation that provides financial

services to the poor. This very broad definition includes a wide range of

providers that vary in legal structure, mission and methodology. However, all

share the common characteristic of providing financial services to clients who

are excluded from the traditional credit market.

Microfinance investment vehicles: an MIV is an independent investment entity

specialised in microfinance with at least 50% of its portfolio invested in

microfinance. It intermediates capital from private and public investors to

microfinance providers operating in emerging markets and/or to other MIVs.

Microfinance portfolio: it corresponds to the amount of the portfolio invested in

microfinance. A microfinance portfolio can be invested directly or indirectly

Net asset value: it is the statement of the value of the MIV’s assets, minus the

value of its liabilities.

Social performance: it measures how well an institution has translated its

social goals into practice. A solid SP is the first step towards achieving a

positive social impact. It includes an appropriate answer to client needs and

ensured responsibility toward the employees and the community.

36

Société d’investissement à capital variable: a SICAV is an open-ended

collective investment scheme, common in Western Europe. The investor is

entitled at all times to request the redemption of his units and payment of the

redemption amount in cash.

Société d’investissement en capital à risqué: a SICAR is a regulated, fiscally

efficient structure designed for private equity and venture capital investments.

There are neither investment diversification rules, nor lending or leverage

restrictions.

Specialised investment fund: a SIF is a regulated, operationally flexible and

fiscally efficient multipurpose investment fund regime for an international,

institutional and qualified investor base. The SIF is characterized by greater

flexibility with regard to the investment policy, broadening of the sphere of

investors and a more relaxed regulatory regime.

Total assets: they represent the total amount of money which a fund

manages.

37

VIII. Appendices

1. Eligibility criteria

38

2.Luminis press release

39

3. Funds’ cards (LOGO???)

Access Africa Fund, LLC

GENERAL INFORMATION

ISIN

Domicile USA

Date of incorporation July 2010

Legal form Limited Liability Company

Address 151, Ellis St. NE Atlanta GA 30303

End of financial year 30 June

Types of investors Single-owner entity leveraged with government-funded debt (OPIC)

Minimum investment Class A: Class B:

INVESTMENT OBJECTIVE AND POLICY

To invest in and acquire securities of microfinance institutions located in developing countries in Africa that extend financial services to small and micro-sized enterprises and banking services to un-banked and poorly banked individuals located in their respective country of operation.

THIRD PARTIES

Promoter CARE International

Asset Manager MicroVest Capital Management, LLC

Auditor Grant Thornton LLP REGIONAL BREAKDOWN ASSET ALLOCATION


40

Advans SA

GENERAL INFORMATION

ISIN

Domicile Luxembourg

Date of incorporation August 2005

Legal form SICAR (fund with unlimited duration)

Address 69, route d'Esch L-1470 Luxembourg

End of financial year 31 March

Types of investors Institutional, professional, well-informed

Minimum investment Class A/M: 1,000 EUR


The Company’s focus is to invest in the creation of new MFIs in Eligible Countries, especially in Africa and Asia. The Company will also invest in existing MFIs which either need further funding and assistance to become sustainable or are already sustainable but seek a strong lead shareholder to support them in their development. The Company’s objective is to achieve a total return on its investments that meets or exceeds historical returns achieved in the microfinance industry in Eligible Countries. The Company will take long term view on its investments. It has no intention of seeking a quick exit for its equity investments. The Company will remain the lead shareholder for as long as it is necessary to turn start-ups into profitable, sound and lasting operations. Once this goal is achieved exit may be considered either through selling top institutional investors, such as banks (local or international), or, if possible, through listing the MFI on a publicly regulated stock-exchange.

THIRD PARTIES

Promoter Horus Development Finance

Asset Manager Horus Development Finance

Auditor PricewaterhouseCoopers S.à r.l.

REGIONAL BREAKDOWN ASSET ALLOCATION


East Asia & Pacific

Equity

Cash

41

Azure Global Microfinance Fund

GENERAL INFORMATION

ISIN Class A-USD: LU0668571820 Class B-CHF: LU0668573857 Class C-EUR: LU0668575144

Domicile Luxembourg


Legal form SICAV - SIF (sub-fund with unlimited duration)

Address 5, rue Jean Monnet L-2180 Luxembourg

End of financial year 31 December

Types of investors Institutional, qualified, well-informed

Minimum investment


The Sub-fund seeks as its investment objective to provide Shareholders with an attractive risk adjusted return through exposure to a diversified portfolio of Target Microfinance Funds investing in MFIs and other microfinance investments. In particular, the Sub-fund aims at providing its Investors with: (a) a diversified and, to the extent possible, safe exposure to MFIs and microfinance investments through investments in Target Funds investing in MFIs (Target Microfinance Funds) located in emerging countries; (b) exposure to the best Target Microfinance Funds; (c) exposure to the best special purpose vehicles containing packages of first rate loans and sub-loans to MFIs without enhancement by derivatives; (d) a meaningful social return in addition to credible financial returns.

THIRD PARTIES

Promoter Azure Partners S.A.

Asset Manager Board of the fund



Latin America &Caribbean

Europe & CentralAsia

Others

East Asia & Pacific

Africa

South Asia

Debt

Equity

42

Dexia Micro-Credit Fund: BlueOrchard Debt Sub-Fund

GENERAL INFORMATION

ISIN Class USD: LU0091117944 Class CHF: LU0136928586 Class EUR: LU0164081316

Domicile Luxembourg

Date of incorporation September 1998

Legal form SICAV - Part II (sub-fund with unlimited duration)


End of financial year 30 June

Types of investors Institutional, retail

Minimum investment Class USD/EUR: 10,000 USD/EUR Class CHF: 15,000 CHF


The Company aims principally at offering to investors a higher return compared to money market rates whilst contributing to the refinancing of small entities involved in the financing of micro-companies in emerging country economies. Latin America, Asia, Africa, the Middle East and Europe shall constitute the main investee geographic areas of the Company. The principal objective of the Sub-Fund is to invest in debt instruments issued by micro-banks designed to ensure a maximum safety in the legal framework and soundness in the financial background. The portfolio of the Sub-Fund consists of 2 different parts: micro-banks’ debt and liquid assets.

THIRD PARTIES

Promoter Banque Internationale à Luxembourg

Asset Manager BlueOrchard Finance S.A. Dexia Asset Management Luxembourg SA





East Asia & Pacific

North America

South Asia


Middle East & NorthAfrica

Debt

Others

43

Dual Return Fund (SICAV) - Vision Microfinance

GENERAL INFORMATION

ISIN

Class A-EUR: LU0563441798 Class B-EUR: LU0563441954 Class I-CHF: LU0306116830 Class I-EUR: LU0306115196 Class I-USD: LU0306116160 Class P-CHF: LU0236783907 Class P-EUR: LU0236782842 Class P-USD: LU0646936202

Domicile Luxembourg

Date of incorporation April 2006


Address 1/B, rue Gabriel Lippmann L-5365 Munsbach



Minimum investment

Class A-EUR: 1,000 EUR Class B-EUR: 125,000 EUR Class I-EUR/USD: 125,000 EUR/USD Class I-CHF: 150,000 CHF Class P-EUR/CHF/USD: 1,000 EUR/CHF/USD


The principal objective of the Company is to enable investors to have an involvement in the microfinance industry. This comparatively new sector is distinguished by its strong growth and holds great promise for the development of emerging capital markets in the next few years. The essential objective of "Vision Microfinance" is to conclude loan transactions. This is done directly by holding bonds of carefully selected MFIs in the areas described above or indirectly through collateral debt obligations (CDOs). The Sub-fund can contribute to refinancing MFIs, by directly holding bonds, or indirectly through CDO structures which are issued by such credit institutions and which potentially encompass warrant rights concerning a stake in the capital of the credit institutions, or by loans being granted directly to those credit institutions which specialise in refinancing MFIs.

THIRD PARTIES

Promoter Bank im Bistum Essen eG

Asset Manager Absolute Portfolio Management GmbH

Auditor KPMG Audit S.à r.l.


Europe & CentralAsiaLatin America &CaribbeanEast Asia & Pacific

South Asia

Others

Debt

Cash

44

Dual Return Fund (SICAV) - Vision Microfinance Local Currency

GENERAL INFORMATION

ISIN

Class A-EUR: LU0591909972 Class B-EUR: LU0591910129 Class 1-EUR: LU0533938022 Class 1-USD: LU0548652287 Class P-EUR: LU0533937727 Class P-USD: LU0646936384

Domicile Luxembourg

Date of incorporation September 2010


Address 1/B, rue Gabriel Lippmann L-5365 Munsbach



Minimum investment

Class A-EUR: 1,000 EUR Class B-EUR: 125,000 EUR Class I-EUR/USD: 125,000 EUR/USD Class P-EUR/ USD: 1,000 EUR/ USD


The principal objective of the Company is to enable investors to have an involvement in the microfinance industry. This comparatively new sector is distinguished by its strong growth and holds great promise for the development of emerging capital markets in the next few years. The essential objective of "Vision Microfinance Local Currency" is to conclude loan transactions in local currency. This is done directly by holding bonds of carefully selected MFIs in the areas described above or indirectly through collateral debt obligations (CDOs). The Sub-fund can contribute to refinancing MFIs, by directly holding bonds, or indirectly through CDO structures which potentially encompass warrant rights concerning a stake in the capital of the credit institutions, or by loans being granted directly to those credit institutions which specialise in refinancing MFIs.

THIRD PARTIES


Asset Manager Absolute Portfolio Management GmbH



Europe & Central Asia


East Asia & Pacific


Debt

Cash

45

Etimos Fund Global Microfinance Debt

GENERAL INFORMATION

ISIN LU0605440857

Domicile Luxembourg

Date of incorporation January 2011


Address 12, rue Eugène Ruppert L-2453 Luxembourg


Types of investors Qualified

Minimum investment 125,000 EUR per investor


ETIMOS FUND is a socially responsible fund and the sub-fund has its specific investment objective, strategy, policy and structure. The overall objective of the Sub-Fund is to offer to socially responsible investors financially and socially sound investments to contribute to the sustainable development of emerging market economies by facilitating investments in micro and small enterprises and producers. The Sub-Fund seeks to achieve this purpose investing in microfinance institutions providing financial services to low-income people and boosting micro, small and medium enterprises, and in producers’ cooperatives fair trade oriented and/or organic oriented. The Sub-Fund has the aim to combine an attractive and competitive financial return while delivering an effective social impact in developing and transition countries through the encouragement of the entrepreneurial spirit.

THIRD PARTIES

Promoter Consorzio Etimos S.c.

Asset Manager Consorzio Etimos S.c.




East Asia & Pacific



Debt

Cash

46

Finethic Microfinance S.C.A., SICAR

GENERAL INFORMATION

ISIN LU0262965956

Domicile Luxembourg


Legal form SICAR (fund with unlimited duration)

Address 24, boulevard Royal L-2449 Luxembourg


Types of investors Institutional, qualified

Minimum investment All classes: 5,000 USD/EUR/CHF


The investment objective is primarily to finance unlisted microfinance institutions (MFI), located especially in emerging countries and developing countries, either directly or by means of other investment vehicles or UCIs; secondarily to invest in listed investment vehicles. The investment policy is to finance targeted MFIs directly (by providing debt financing) or indirectly (by investing in investment vehicles active in the field of microfinance).

THIRD PARTIES

Promoter Finethic S.à r.l.

Asset Manager Fundo S.A.

Auditor Ernst & Young S.A.


Europe & Central Asia


South East Asia

Others

Middle East

Africa

47

Fonds Européen de Financiament Solidaire (FEFISOL), S.A. SICAV-SIF

GENERAL INFORMATION

ISIN

Domicile Luxembourg


Legal form SICAV - SIF (closed-end fund with limited duration: 10 years)




Minimum investment 125,000 EUR


The Company's investment objective is to provide loans and guarantees and carry out a limited number of equity investments to a diverse group of African MFIs and, to a lesser extent, to APEX and Pos. Financing will be provided in particular to rural Target Entities and will focus on medium to long term financing in local currency, reflecting the present financial needs of the Target Entities. 100% of FEFISOL’s Investment portfolio will be invested in Africa and at least 75% in Sub-Saharan Africa. The Company’s strategy is to support organisations with high added value in rural areas.

THIRD PARTIES

Promoter

Alterfin S.c.r.l. Consorzio Etimos S.c. Solidarité Internationale pour le Développement et l’Investissement (SIDI) S.A.

Asset Manager SIDI

Auditor Mazars LLP



North Africa

Debt

Equity

Others

48

KCD Mikrofinanzfonds (FIS) - I

GENERAL INFORMATION

ISIN LU0412316290

Domicile Luxembourg

Date of incorporation February 2009


Address 4, rue Thomas Edison L-1445 Luxembourg-Strassen


Types of investors Institutional



The Fund invests in assets that are associated with microfinance institutions or other companies offering financial services to the poor. The investment objective of KCD is to achieve a reasonable return on invested capital while the social objective is to promote poverty alleviation.

THIRD PARTIES


Asset Manager Bank im Bistum Essen eG

Auditor PricewaterhouseCoopers S.á.r.l.



Others


East Asia & Pacific

Debt

Cash

Equity

Others

49

KCD Mikrofinanzfonds (FIS) - II

GENERAL INFORMATION

ISIN LU0412316373

Domicile Luxembourg


Legal form SICAV- SIF (sub-fund with unlimited duration)






The Fund invests in assets that are associated with microfinance institutions or other companies offering financial services to the poor. The investment objective of KCD is to achieve a reasonable return on invested capital while the social objective is to promote poverty alleviation.

THIRD PARTIES


Asset Manager Bank im Bistum Essen eG

Auditor PricewaterhouseCoopers S.á.r.l.



Debt

Cash

Others

50

Luxembourg Microfinance and

Development Fund SICAV - Social Venture Capital Sub-Fund

GENERAL INFORMATION

ISIN Class A: LU0456965887 Class B: LU0456966935 Class C: LU0456967404

Domicile Luxembourg

Date of incorporation October 2009


Address 2, place de Metz L-1930 Luxembourg


Types of investors Retail, institutional, public (according to the class)

Minimum investment Class A: 25 EUR (price per share, conditions applied)Class B/C: 100 EUR (price per share, conditions applied)


The Fund aims at contributing to the alleviation of poverty in developing countries through the provision of permanent and adapted financial services to marginalised communities and individuals. Its objective is to help promising microfinance institutions ("MFIs") that have a positive social impact towards achieving financial autonomy. In pursuance of its objective, the Fund may invest in MFIs, in networks or associations of MFIs, in regional funds, in microfinance investment vehicles ("MIVs") and in other microfinance-related products. The Fund has two principal objectives, social and financial: help socially-oriented MFIs to become long term viable enterprises that reach more poor people and offer better services, and generate sufficient income to sustain its own operations and give its Shareholders a financial return that at least compensates for inflation. The Fund will strive to provide tailor-made and innovative solutions to needy MFIs, coupling its own financial assistance with technical support from external consultants. It will deliberately focus on niche activities, activities where potential needs of MFIs are large, but current supply is scarce.

THIRD PARTIES

Promoter ADA a.s.b.l. Ministère de Finances (Luxemoburg)

Asset Manager Self-managed

Auditor BDO Audit S.A.




East Asia & Pacific

North America

Others

Debt

Cash

Equity

51

Microfinance Enhancement Facility S.A., SICAV-SIF

GENERAL INFORMATION

ISIN

Domicile Luxembourg


Legal form SICAV - SIF (fund with unlimited duration)



Types of investors Development banks

Minimum investment Class A/B/C: 125,000 EUR


The Fund aims to support economic development and prosperity globally through the provision of additional development finance to micro-enterprises, via qualified financial institutions. In pursuing its development goal the Fund will observe principles of sustainability and additionality, combining development and market orientations. The Fund aims principally at contributing to the debt financing of microfinance institutions ("MFIs") which are institutions that provides microfinance services, including (without limitation) credit, savings deposits, insurance, remittances, and housing loans, to the working poor in developing countries. Such institutions may offer other financial services in addition to microfinance services, and these other services might represent a greater percentage of the institution’s overall business than the microfinance services. Microfinance should represent over the next years an important area of development for the capital markets of emerging economies. At the same time, it offers numerous investment opportunities.

THIRD PARTIES

Promoter KfW Bankengruppe International Finance Corporation

Asset Manager BlueOrchard Finance S.A. responsAbility Social Investments AG Cyrano Management

Auditor Ernst & Young S.A. REGIONAL BREAKDOWN ASSET A OCATION



East Asia & Pacific

52

Regional MSME Investment Fund

for Sub-Saharan Africa SA, SICAV-SIF (REGMIFA)

GENERAL INFORMATION

ISIN

Domicile Luxembourg

Date of incorporation December 2009

Legal form SICAV - SIF (fund with unlimited duration)



Types of investors Public sector, institutional and private

Minimum investment Class A/B/C: 500,000 USD


The Fund will seek to invest in a balanced portfolio of MFIs and local commercial banks or other financial institutions, established in Sub Saharan countries providing funding to MSMEs. The fund aims to increase over time the percentage of investments in smaller and less developed PLIs which are not commonly served by existing microfinance funders. The Fund will target exclusively regulated and/or non-regulated micro finance institutions and/or local commercial banks and/or other financial institutions, established in Sub-Saharan African countries providing funding to MSMEs, (each a partner lending institution - “PLI”). The Fund aims to increase over time the percentage of investments in smaller and less developed PLIs which are not commonly served by existing microfinance funders.

THIRD PARTIES

Promoter KfW Bankengruppe

Asset Manager Symbiotics Asset Management S.A.




Debt

Equity

53

responsAbility

Global Microfinance Fund

GENERAL INFORMATION

ISIN Class USD: LU0180189770 Class CHF: LU0180190604 Class EUR: LU0180190273

Domicile Luxembourg

Date of incorporation November 2003

Legal form FCP - Part II (unincorporated fund with unlimited duration)



Types of investors Retail, institutional

Minimum investment Class CHF/EUR/USD: 1,000 CHF/EUR/USD


The amounts entrusted to the Fund aim at achieving a real increase in value over the long term; at the same time, by promoting entrepreneurial activity they seek to contribute to reducing poverty in developing and transition countries. For this purpose the Fund invests its money so that local, successful and promising financial service providers – so-called microfinance institutions (MFIs) – can provide specific financial services for the designated target group over the long term and, depending on demand, are in a position to achieve meaningful growth.

THIRD PARTIES

Promoter Credit Suisse Group AG

Asset Manager Credit Suisse Microfinance Fund Management Co





East Asia & Pacific



Debt

Cash

Equity

54

responsAbility SICAV (Lux)

Financial Inclusion Fund

GENERAL INFORMATION

ISIN LU0656658084

Domicile Luxembourg






Minimum investment



THIRD PARTIES


Asset Manager responsAbility SICAV (Lux)

Auditor KPMG Audit S.à r.l. REGIONAL BREAKDOWN ASSET ALLOCATION


Central‐western Asia

Africa

Others

South‐east Asia

55

responsAbility SICAV (Lux)

Microfinance Leaders (Subfund)

GENERAL INFORMATION

ISIN Class I-USD: LU0520962514 Class S-CHF: LU0520962605 Class S-EUR: LU0520963082

Domicile Luxembourg

Date of incorporation November 2006





Minimum investment Class USD/CHF/EUR: 1,000,000 USD/CHF/EUR



THIRD PARTIES







East Asia & Pacific



Debt

Cash

Equity

Others

56

responsAbility SICAV (Lux) Mikrofinaz-Fonds (Subfund)

GENERAL INFORMATION

ISIN LU0302153209

Domicile Luxembourg

Date of incorporation May 2007




Types of investors Retail, institutional




THIRD PARTIES







East Asia & Pacific


Debt

Cash

57

Rural Impulse Fund II SICAV-SIF

GENERAL INFORMATION

ISIN LU0530331726

Domicile Luxembourg

Date of incorporation May 2010

Legal form SICAV - FIS (fund with limited duration: 10 years)



Types of investors Qualified private sector, development finance

Minimum investment Class A: 125,000 EUR Class B:


The Fund is a microfinance investment fund that targets commercial microfinance institutions (MFIs) providing financial services to the rural poor. The Fund’s objectives are both financial and social: 1. providing an attractive financial return to Investors; 2. strengthening the rural MFIs’ financial structure and capacity; 3. improving the outreach and impact of rural MFIs and providing opportunities to the rural poor, who represent three quarters of the world’s poor.

THIRD PARTIES

Promoter Incofin scbs

Asset Manager Incofin Investment Management Comm. VA




South Asia

East Asia & Pacific



Others

Cash

58

Rural Impulse Fund S.A. Sicav-SIF

GENERAL INFORMATION

ISIN Class A: LU0320358681 Class B: LU0320358848

Domicile Luxembourg


Legal form SICAV - FIS (fund with limited duration: 10 years)

Address 11, rue Aldringen L-1118 Luxembourg


Types of investors Qualified private sector, development finance

Minimum investment Class A: 250,000 USD Class B: 500,000 USD


The Fund aims at contributing to the alleviation of poverty in rural areas undeserved by the microfinance industry by making debt and equity investments in MFIs which provide financial services to the rural excluded. The Fund focuses on the essential goal of microfinance, which is the financial inclusion of the poor.

THIRD PARTIES

Promoter Incofin scbs

Asset Manager Incofin Investment Management Comm. VA

Auditor Deloitte & Touche LLP





South Asia

East Asia & Pacific

Others

Cash

59


South‐east Asia

Caucasus

Selectum SICAV SIF - BL Microfinance

GENERAL INFORMATION

ISIN Class B1: LU0558146782 Class B2: LU0558149455

Domicile Luxembourg


Legal form SICAV - SIF (sub-fund with limited duration: December 2013)

Address 14, boulevard Royal L-2449 Luxembourg



Minimum investment Class B1/B2: 125,000 EUR


The SICAV-SIF’s objective is to offer shareholders the opportunity to participate in a professionally managed portfolio of securities and/or other financial assets as defined in the investment policy for each Sub-Fund. The investment objective of the Sub-Fund is to achieve regular income. The fund invests principally in short-term secured and unsecured debt instruments issued by microfinance institutions. The fund may also invest in debt securities issued by governments and corporations in emerging markets throughout the world.

THIRD PARTIES

Promoter Banque de Luxembourg

Asset Manager BLI - Banque de Luxembourg Investments S.A.

Auditor Mazars LPP REGIONAL BREAKDOWN ASSET A OCATION

60

The European Fund for Southeast Europe

GENERAL INFORMATION

ISIN vv.

Date of incorporation December 2005

Legal form SICAV - SIF (closed-ended fund with unlimited duration)

Domicile Luxembourg

Address 31, z.a. Bourmicht L-8070 Bertrange





The Fund aims to foster economic development and prosperity in the Southeast Europe region and in the European Eastern Neighbourhood region through the sustainable provision of additional development finance, notably to micro and small enterprises ("MSEs") and to private households, via qualified financial institutions. In pursuing its development goal the Fund will observe principles of sustainability and additionality, combining development and market orientations.

THIRD PARTIES

Promoter KfW Bankengruppe

Asset Manager Oppenheim Asset Management Services S.à r.l.



Europe &Central Asia

Debt

Cash

Equity

61

Triodos Sicav II - Triodos Microfinance Fund

GENERAL INFORMATION

ISIN vv.

Domicile Luxembourg

Date of incorporation March 2009




Types of investors Institutional, HNWI, qualified, retail (DK & LU)

Minimum investment Class Cap: 100,000 EUR Class Dis: 500 EUR


The Company is a socially responsible investment fund, the objective of which is to invest the funds available to it in risk-bearing assets (equity and quasi-equity, and/or other assets permitted by law) and senior debt instruments, in line with the general objective of Triodos Group to finance companies, projects and financial institutions, that benefit people and the environment, to encourage the development of socially responsible, ecologically sustainable and innovative business, while affording its Shareholders a fair return from the management of its assets. The overall objective of the Sub-fund is to offer investors a financially sound investment in the microfinance sector mainly through investments in MFIs. The Sub-Fund has the project of an attractive financial return combined with the opportunity for the investors to make a pro-active, measurable and sustainable contribution to the development of the microfinance sector into an inclusive financial sector in which the majority of people have access to financial services.

THIRD PARTIES

Promoter Triodos Bank N.V.

Asset Manager Triodos Investment Management B.V.




East Asia & Pacific

South Asia



Debt

Cash

Equity

Others

62

Wallberg Global Microfinance Fund

GENERAL INFORMATION

ISIN Class I: LU0375612404 Class P: LU0375612230

Domicile Luxembourg


Legal form FCP - Part II


End of financial year December 31st

Types of investors Institutional, retail Minimum investment Class I/P: 1,000 EUR


The objective of the Fund's investment policy is to provide poor, economically active sections of the population in developing countries and emerging markets with access to the financial and credit markets and to enable both institutional and private investors. These investments are made either directly or indirectly after careful assessment of the MFIs concerned.

THIRD PARTIES

Promoter Wallberg Invest S.A.

Asset Manager Symbiotics Asset Management S.A.





East Asia & Pacific


South Asia


Debt

Others

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