MicrofinanceFocus on Demand:

What do Investors Really Want?

MIV Roundtable on Responsible FinanceMeeting Investor Demand for Improvement Social Performance MeasurementParis, 19th of June 2008

Focus on Demand: What do Investors really want?

Seite 2

Who are the Investors in Microfinance?

Retail

Institutional

Public

Semi-Institutional

Focus on Demand: What do Investors really want?

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Who are the Investors in Microfinance?

Public

Retail

Semi-InstitutionalClients

InstitutionalClients

30%

13 %

19%

38%

Focus on Demand: What do Investors really want?

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Focus on DemandWhat do Investors really want?

Financial Return or/ before Social Return?

Focus on Demand: What do Investors really want?

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Financial or Social Performance?

Focus on DemandWhat do Investors really want?

Financial Social

RetailSemi-InstitutionalInstitutional

Focus on Demand: What do Investors really want?

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Who are the Investors in Microfinance?

Retail Clients

Men/ Women

Men

Women

70 %

30 %Age 20-40

Age 40-60

Age above 60

20 % 20 %

60%

Age

Focus on Demand: What do Investors really want?

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Who are the Investors in Microfinance?

Retail Clients (cont‘d)

Why do they invest?

Social responsible investment

•To invest responsibly

•Risk averse

•To salve one‘s conscience

What questions are they asking?

•Does the money reach the target group?

•Interest rates for the loans

•Gender

•Type of loans

•Political situation in the countries

•Outreach

•What kind of a return is possible?

Focus on Demand: What do Investors really want?

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Who are the Investors in Microfinance?

Retail Clients (cont‘d)

How could they invest?

Regulated Mutual Funds

Structured Finance Vehicles

Private Equity Funds

Holding Companies

Commercial Investment Companies

Social Investment Companies

Barriers

Not registered for public distribution

Access to the products

Information about the products

Investment size

No access via the banks/ distribution

Focus on Demand: What do Investors really want?

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Who are the Investors in Microfinance?

Semi – Institutional Investors

Private Wealth/ Family offices

Diversification of the portfolio

Low correlation

Low volatility

Stable performance

Transparency

Security

Why do they invest? What are they looking for?

The concept of microfinance

Social responsible investment

Risk averse investments/ securities

Reputation

Focus on Demand: What do Investors really want?

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Who are the Investors in Microfinance?

Institutional Investors

Pension funds, Trustees, Corporates, Clerical Institutions

Why do they invest? What are they looking for?

Risk-adjusted return

Portfolio diversification

Low correlation

Low volatility

Fee strucutre

Market size

The concept of microfinance

Alternative investment

Social responsible investment

Reputation

Focus on Demand: What do Investors really want?

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What are they looking for?

Transparency

• About the market

• About different products

• About comparable information

• About the underlyings

• About the investment process

•About the MFIs

Quelle: Symbiotics

SMX EUR1,0%0,9%0,8%0,7%0,6%0,5%0,4%0,3%0,2%0,1%

0%

118,0116,0114,0112,0110,0108,0106,0104,0102,0100,0 98,0

Mrz

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Jun.

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p.04

Dez.0

4Mrz

.05

Jun.

05Se

p.05

Dez.0

5Mrz

.06

Jun.

06Se

p.06

Dez.0

6Mrz

.07

Jun.

07Se

p.07

Dez.0

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.08

Institutional Investors (cont‘d)

Focus on Demand: What do Investors really want?

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What are they looking for?

Information

• Regular information

• Actual information about the market

• Historical information

• About the products

•About the MFIs

1,50% 1,38%

1,89%

1,25%0,88%

1,90%

0,0%

0,5%

1,0%

1,5%

2,0%

OstasienSüdasien LateinAmerika

EECA MENA Afrika

Ø 341 MFI

worldwide

1,43%

Institutional Investors (cont‘d)

Focus on Demand: What do Investors really want?

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What are they looking for?

Standardisation

• Definition of microfinance

• Definition of social performance

• Statistics/ track record

• Indicies

• Ratings

14%

12%

10%

8%

6%

4%

2%

0%0 1 2 3 4 5 6 7 8 9 10

Systematic Risk (Standard Deviation)R

etu

rn

Quelle: Bloomberg / eigene Berechnung* SMX = Symbiotics Microfinance Index

Institutional Investors (cont‘d)

Focus on Demand: What do Investors really want?

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Social Performance

What are they looking for?

• Coporate governance of the MFIs

• Quality of the management

• Education

• Target group of clients/gender

• Types of lending

• Portfolio quality

• Profitability

• Interest Rates for the loans

• Outreach

Institutional Investors (cont‘d)

Invest in Visions GmbH

Invest in Visions GmbHKennedyallee 119aD-60596 Frankfurt am MainFon +49 (0) 69 / 69 76 72 31Fax +49 (0) 69 / 69 76 72 44info@investinvisions.comwww.investinvisions.com

Focus on Demand: What do Investors really want?

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Key take-aways for discussion

•Strong common interest in

• transparency

• good information/data

• standardization

• Microfinance is considered in comparison to other asset classes

•Investors are a diverse group

• What is the best fit for microfinance?