MicroFinance

Low Risk Investing with Maximum Impact

TBLI 2005November 3, 2005

Messe Frankfurt

A Global Microfinance Intermediary Linking Microentrepreneurs in the Developing World with Developed

Capital Markets.

MicroVest is…

Dedicated to helping the world’s poor by offering commercial funding to sound microfinance institutions Currently Banking the Bottom Quartile of the Population.

MicroVest One, LP is…

Investment Exposure (By Region)

EECA 36%

LAC 43%

Asia 16%

US 5%

• A Commercial Microfinance Investment Fund Managed by MicroVest Capital Management, LLC

• Created to demonstrate that markets have misperceived the risk of lending to microfinance institutions.

•Offering debt, equity, and retail notes at near commercial rates to Socially Responsible Investors

• $15 million in Equity and over 60 Private Investors• Anticipated Leveraging Above $50 million

• Specializing in Relationship Banking with Transforming MFIs

As of June 30, 2005

SCDFSEED CAPITAL DEVELOPMENT FUND, LTD.

• The World Bank estimates worldwide theoretical microfinance demand at between US$150-250 billion.

– Approximately 400-500 million households are in need of financial services.

Microfinance Demand

• Microfinance Works: success has resulted in huge theoretical demand.

• Current microfinance supply markets (donors) are unable to meet demand.

• A funding gap exists between donor supply and microfinance demand:

• Result: Some microentrepreneurs do not have access to microfinance.

Question: Can commercial markets fill the current funding gap?

The Current Funding Gap

MicroVest is One of Several Funds throughout Europe and North America Using Microfinance Investing to Funnel Capital into the Microfinance Industry.

Bringing Capital to The Creditworthy

Unlike other funds:

• MicroVest operates within a commercial framework - offering near commercial returns to investors - lending to microfinance institutions at market rates.

• MicroVest believes that operating under these terms encourages MFIs to become more efficient at lending to the poor

- Ultimately results in better servicing microentrepreneurs at lower costs.

MicroVest Investment Objectives:• To support self-sustaining financial businesses serving the entrepreneurial

poor• To help build capital markets for the macro-economic systems of the developing world• To finance these social objectives by providing return-driven debt and equity

securities

Of all MFIs globally, MicroVest loans to the middle 200, those that have achieved

profitable operations.

50

8,000 – 9,000 MFIs

150-200 well-run MFIs

Bringing Capital to The Creditworthy

A Low Risk Investment

• MFIs often have a surprisingly low credit risk:

• Loan repayment rates above 95% are now an industry minimum

• In many developing countries, microenterprises can account for up to 60% of employment and anywhere from 10-50% of GDP.

• Profit margins on the loan portfolios of MFIs are as high as 21.8% in Asia (the largest market in the world) and are quickly becoming the industry norm.

Yield 40%Cost of Funds 10%Loan Losses 4%Oprating Exp 20%ROA 6%

Typical Microfinance "Bank"

Market Rate-Adjusted Returns The Fund offers investors low-credit risk and market rate of returnsin global markets.

Professional Due Diligence The financial experience of the management team allows the Fundto identify top investment opportunities in developing countries.

Ability to Tap Underdeveloped Financial Markets The Fund identifies market imbalances and fills significant funding

gaps that meet the commercial needs of the poor.

Uncorrelated Asset Class Microfinance not only offers a low default rate, but moves in a cycle that is not correlated with any traditional asset class, due tothe heavy reliance of microentrepreneurs on micro-loans provide.

Traditional Venture Capital Structure

The flexibility and time horizon inherent in MicroVest’s structureallow the Fund to seek out opportunistic investments in countriesthat are not typically courted by major financial players.

Fund Diversification MicroVest’s portfolio currently includes 15 microfinance institutions in 9 countries and covers three continents.

MicroVest Offers Investors the Following Advantages:

Maximizing Social Impact

For the Industry to Maximize the Social Impact to Microentrepreneurs:

1. Needs to be an Increase in Commercial Funding

2. Increase in Commercial Instrument Diversity

3. Need to Establish a Better System for Rating Social Investment Funds

Industry Question:

Is there room in the industry for gathering and disseminating the statistical behavior of microfinance as an asset class?