RuRal impulse FuND iioverview 2010

120millioN euR

total FuND size

9.7millioN euR

total iNvestmeNt poRtFolio

9mFis iN poRtFolio

387,626(84% womeN / 16% meN)

total NumbeR oF clieNts seRveD

735euR

aveRage loaN size peR clieNt

146millioN euR

total oF loaNs issueD by all mFis

RIF II key figures*1.

eDpyme alteRNativa (peRu)eDpyme Nueva visioN (peRu)eDpyme soliDaRiDaD (peRu)sembRaR saRtawi (bolivia)

ab zambia (zambia)Hope (iNDia)

FusioN (iNDia)visioNFuND (camboDia)

KompaNioN (KyRgyzstaN)

RiF ii iNvestmeNts 9 MFIs in 6 countries

* FiguRes: 31/12/2010

Incofin’s Rural Impulse Fund II (RIF II) is a follow-up fund of Rural Impulse Fund, a USD 38 million fund (EUR 30 million) that was launched in August 2007. RIF I showed rural microfinance to be a solid asset class with good returns. Based on this succesful experience and in order to meet the consider-able capital demand of microfinance institutions, RIF II has been conceived as a larger fund with a target size of EUR 120 million. It is a hybrid fund, making both equity and debt investments and is closed-ended with a lifetime of ten years.

RIF II in short2.

RiF ii maiN iNvestoRs

3

Strategy

Mission

4.

3.

Rural Impulse Fund II invests in financially sustainable microfinance institutions (and, to a lesser extent, other companies) that:

• qualify as “rural” “Rural” MFIs are defined as MFIs, having at least 30% of their clients living in rural areas or being engaged in primary agricultural production, or MFIs having at least invested 30% of their portfolio volume in rural areas or in primary agricultural production.

• help create an inclusive financial sector, where the majority of people have access to financial services, in order to provide a sustainable basis for a balanced social and economic development.

RIF II makes an annual contribution of 0.05% of the fund’s total assets to a technical assis-tance trust account, which is being used to finance technical assistance interventions in selected investees.

The mission of RIF II is to contribute to the alleviation of poverty in rural areas under-served by the microfinance industry by providing (subordinated) loans and/or equity financing to microfinance institutions and other commercial companies that provide innovative financial services in rural areas.

Objectives5.

Rural Impulse Funds II has been awarded the LuxFLAG label, which recognizes eligible Microfinance Investment Vehicles (MIV).

The fund’s objectives are both financial and social:1. to improve the outreach and impact of

rural MFIs and to assist them in providing opportunities to the rural poor, who represent three quarters of the world’s poor;

2. to strengthen the rural MFIs’ financial structure and capacity;

3. to provide an attractive financial return to investors. 5

Fund Manager: Incofin Investment Management

Incofin Investment Management manages six funds totalling EUR 274 million.

THE STRENGTHS OF INCOFIN IMWithin Incofin Investment Management, an international and multilingual team of 26 experts works to provide tailored financial solutions. Incofin has particularly wide experience with microfinance and interna-tional markets and contacts with investors worldwide. Incofin Investment Management’s methods are fully aligned with those of Rural Impulse Fund II. Incofin IM too pursues a “double bottom line” approach, with financial and social performance on an equal footing. These are evaluated using the ECHOS© tool and the CRS risk management tool.

ECHOS©: MEaSuRING SOCIal pERFORMaNCEInvesting in MFIs is not sufficient in itself to be recognized as a “social investor”. Incofin IM wants in the first place to invest in MFIs that are able to demonstrate a high social perfor-mance. Incofin measures MFIs’ social performance using the ECHOS© tool, which it has developed in-house.

MFIs applying for an investment from Incofin go through a detailed procedure. This includes a field audit, with the ECHOS© questionnaire as a basis. On this basis the social performance score of the MFI in question is scored, in five dimensions: » Mission and vision » Treatment of the environment and

contribution to society » Scale and growth prospects » Human resources » Level and quality of service

The average score of the MFIs that have been screened on the basis of ECHOS© in 2010, was 72%. MFIs that score below 50% are not eligible for Incofin funding. Further analysis has revealed a strong correlation between the financial soundness of an MFI and its social performance. MFIs that score well financially also score well on social parameters.

6.

FIvE dIMENSIONS TO aSSESS THE SOCIal pERFORMaNCE OF MFIS

Mission and vision

Scale and growth prospects

level and quality of serviceHuman resources

Treatment of the environment and

contribution to society

THE INCOFIN IM WORKING METHOdCandidate investments are evaluated by Incofin Investment Management according to strict investment criteria. Approval of the general conditions is followed by a detailed study of the microfinance institutions.After this, Incofin Investment Management carries out an in situ audit, which includes completing the ECHOS© questionnaire. If the MFI meets all the criteria for social perfor-mance and financial sustainability, the Investment Committee can give the green light. Incofin Investment Management closely monitors all investments, performs annual due diligences and reports back to investors.

iNcoFiN iNvestmeNt maNagemeNt maNages six FuNDs totalliNgeuR 274 millioN.

iNcoFiN cvso

RuRal impulse FuND ii

vDK mFi loaN poRtFolio

RuRal impulse FuND i

impulse micRoFiNaNce iNvestmeNt FuND

volKsveRmogeN

iNcoFiN im7

visioNFuND camboDiaVisionFund Cambodia (VFC) can be described as a highly social MFI which provides both financial and non-financial services to improve the livelihood of less fortunate people. VFC targets essentially rural communities spread in most populated parts of Cambodia and is currently present in 14 out of 24 provinces. Its two main strengths lie in its excellent credit risk focused methodologies – sustained by skilled staff members, strict procedures and good monitoring –, and in a new top management which has enforced several improvements with regard to efficiency and liquidity management. With over 100,000 borrowers, the institution is well positioned in the market to further increase its coverage in the

coming years. In this respect it will benefit from its mobile payment platform.

www.visioNFuND.com.KH

KompaNioNKompanion Financial Group was established in 2004 and defines itself as a community development institution. In other words, it strives to support the strengthening and growth of communities in the Kyrgyz Republic. It is the largest MFI in Kyrgyzstan owned by Mercy Corps, with 90 outlets and high rural outreach covering more than 90% of the entire country. The outlets are mostly located in rural areas leading to a very high rural outreach (94%) and guaranteeing a high proportion of agricultural loans in the portfolio. Its strong loan book growth and excellent credit system are clear signs of its

Investment portfolio7.

KyRgyzstaNDebt

31,010,000poRtFolio (euR)

119,393clieNts

260aveRage loaN (euR)

at tHe eND oF 2010 - just six moNtHs aFteR beiNg lauNcHeD iN juNe 2010 - RiF ii Has iNvesteD iN 9 micRoFiNaNce iNstitutioNsacRoss 6 couNtRies. tHe total poRtFolio oF iNvestmeNts amouNts to 9.772.214 euR (7.113.831 iN loaNs, 2.658.383 iN equity).some examples oF RiF ii iNvestmeNts:

camboDiaDebt

22,370,000poRtFolio (euR)

108,047clieNts

207aveRage loaN (euR)

profitability. Because of its strong focus on social and environmental aspects and the support of a strongly committed management team, Kompanion has proved to be an outstanding performer in the Kyrgyz micro-finance market.

www.KompaNioN.asia

FusioNFusion is a start-up company which has ventured into the world of microfinancing in January 2010. It serves the rural areas of North-Central India, where the opportunity for growth is still very high. Fusion plans to work with clients both in rural areas (80%) and in urban areas (20%). They prefer households who have more than one income source, ownership of their house and are residents of the same area for at least three years. The dynamic team behind this company

iNDiaequity

1,920,000poRtFolio (euR)

17,642clieNts

124aveRage loaN (euR)

9

is highly experienced, having worked previously at BSA Group, Development Credit Bank (a leading private bank in India) and General Electric (commercial finance opera-tions). Equally important is their understanding of the local language and culture, having worked in the region for most of their professional life. Their main goal is to provide superior quality in terms of business practice, customer servicing and product offerings. In its first year, the MFI focused on offering basic loan and credit insurance products - with a target asset book of Rs 200 million. The company plans to offer non-financial products and services such as money transfer as well.

www.FusioNmicRoFiNaNce.com

HopeHope Microcredit Finance Limited (HMFL) was established in December 2005. Its main area of activity is situated in Kerala and Western Tamil Nadu, where it undertakes various developmental programmes such as natural resources management, community health and education. Hope’s actions are strongly founded on their goal to empower the weaker sections of society by facilitating them in increasing their income level. In March 2006, after receiving its first bank financing of EUR 2,500 from Canara Bank, the foundation started forming groups and later provided loans to around 100 groups. Hope extends loans according to the Grameen lending model: a group, consisting of 5 members, acts as a guarantee for the borrowed loan amount. Its clientele typically exists of rural women who are part of the financially marginalised sections of society. Hope’s core strength lies in its highly experienced team of promoters and senior management and its exceptional relationship with more than 20 banks and financial institutions.

www.HopemicRocReDit.com

iNDiaequity

4,290,000poRtFolio (euR)

71,467clieNts

60aveRage loaN (euR)

“Incofin Investment Management prioritizes

rural microfinance as people in rural areas are the most excluded from

financial services. Financial inclusion

means also giving them the opportunity to take

the future into their own hands.”

Loïc De cannière,

Managing Director incofin iM

ouR oFFices

belgiumSneeuwbeslaan 202610 AntwerpenT: +32 (0)3 829 25 36F: +32 (0)3 740 78 28E-mail: info.incofin@incofin.be

COlOMbIaCarrera 14 No.93B - 45 Oficina 202BogotáT: +57 1 742 59 33E-mail: david.dewez@incofin.com

INdIaIndia Representative officeTamil NaduChennaiT: +91 9 940 65 82 76E-mail: aditya.bhandari@incofin.be