Investing in Liquidity

Financing Basic Needs for the Bottom of the Pyramid

Company profile and corporate principles

SNS REAAL is an innovative retail bank-insurer

• Total assets around € 103 billion• More than 6.000 full-time employees• 100% Dutch• Strong sustainable labels are ASN Bank and SNS Asset Management

Department Asset Management organisation of SNS REAAL, focussed on:

institutional investors: pension funds, societal organisations etc.

SNS REAAL: insurance companies and investment funds

Research consultancy for various internal and external funds/clients

Focus “sustainability”. Specialisation: sustainability analysis and Social Responsible

(sustainable) Investment. Market leader in the Netherlands directed on sustainable

institutional asset management Funds directed on development countries: SNS Institutional Microfinance Fund (one of the largest worldwide), SNS REAAL Water Fund

Mission: Using Microfinance for upscaling

Investments in water and sanitation projects via Microfinance, in order to contribute to poverty alleviation and support building-up a sustainable living

in developing and transition countries

Investment policy1. Financial criteria:

• “H2O”-earmarked investments via Micro Finance Institutions (MFIs)• Ø Return about 8%• +/- 7 years payback period

2. Sustainability criteria: • Investments that lower the “water stress” situation and create up-scaling mechanisms for improved livelihood and basic needs

3. Operational criteria• Investments via Microfinance Institutions; • Cooperation with reliable & capable partners; outsourcing

SNS REAAL & Microfinance

SNS REAAL has various successful products and partners with regard

to microfinance

– SNS Institutional Microfinance Fund (EUR 273 mln; one of the largest

microfinance funds worldwide)

– ASN Novib Fund

– Triple Jump, Developing World Markets, Water.Org, UNDP

– Combination with water has potential for upscaling and synergy

advantages with various organisations and local governments

Investment scope and themes related to water & sanitation

Water Supply (generate, tap and/or furnish (transport) sources of clean drinking water, either

for household or business)

Water Treatment (collection, treatment, purification, filtration and/or re-use of water (including

wastewater)

Water Management (collect and/or conserve existing water sources, either by reducing

wastage or making its utilization more efficient and/or environmentally friendly and/or

sustainable)

Water for Agriculture (Irrigation)

Sanitation Access (disposal systems that are public or private and hygienically separate

human excreta from human contact)

Contamination Prevention (of water sources via facilities, systems and/or other

infrastructure)

Maintenance and Repair (of facilities, infrastructure and/or systems used to provide clean

water or access to adequate sanitation)

Hydro Power and Alternative Energy (small hydro & green energy of which a substantial

portion of the power generated is used to provide access to water and/or sanitation

Microfinance-water market matching

Water supply/demand worldwide

Adopted from: www.who.org; www.unicef.org

Water flows, where Money goes

Impact of Micro Finance in Water

- Time saving due to

improved access to water

- Stability due to

sustainable / durable

water access & sanitation

- Affordability

- Reduction of conflits

- Status

- > Property values

- Pollution prevention- Preservation ofhealth and hygiene- Preservation of

waterresources

- Capacity autofinance - Production capacity- Production security- (Cost) Savings- Employment- Resource effectiveness

SOCIAL ECONOMICALENVIRONMENTHEALTH

Integral Approach via Value Chain

Where is the business case?

→ Economical Value Drivers

Based on market reserach South Asia and Sub-Sahara Afrika

Finance gap for sanitation: available US$500 million versus gap

US$8 billion per year

Investment US$1 has leverage effect of US$5-28 due to time savings etc.

Increased productivity, improved health situation

Additional income of US$200-400/annually per household due to

improved water supply

Additional income of US$250-285/annually per household due to

improved irrigation

Market perspectives “Blue” MF-Credits

Annual general demand of Microfinance US$ 135 mrd. (for 70-80

million families); Ø credit < US$ 160,-

Of which potential for “Blue Credits”:

in SE & S.Asia and Sub-Sahara Africa for next decade: US$12 billion for 125 million clients (based on research by Gates Foundation)

in South Asia and Sub-Sahara Africa:

US$ 20-50 billion (depending on segment)

+ other interesting markets in Central and Eastern Europe, Central Asia, Latin America.

Microfinance in water

Micro credits for water and sanitation facilities to individuals,

communities (CBOs) or local small entrepreneurs in

development countries

Examples improved water supply to increase productivity &

sanitation to reduce health costs

– Direct (example local farmers)

– Indirect (example as result of improved hygiene)

H2O-investment via Microfinance

MFI

Local Bank

Borrower,e.g.

- Entrepreneur - Community - Individuals

Loan MF Loan

Repayment Repayment

Blending with subsidies / seed money

eventually

(partial) Guarantee

eventually

Example: NGO-MFI “BISWA”, India

5 year Loan of USD 2 million to BISWA

Biswa on-lends funds to clients for

sanitation construction

Cost sanitation circa US$ 100

Finances 20,000 sanitation loans every 6

months

59,000 sanitation loans Oct.08-Apr.09

People below poverty line subsidised by

Total Sanitation Campaign

Sanitation in Orissa and Chattisgarh (from biswa.org)Copyright © 2009 BISWA: Bharat Integrated Social Welfare Agency. All Rights Reserved

Added Value of Micro Finance in Water

Water Micro Credit = Credit + sustainable change:

Social mobilisation, including the poor(est)

Development of community institutions

Community based planning & monitoring

Improved participatory techniques (incl. hygiene and

sanitation)

Change in attitudes & values, value chain approach

Improved market access

MF beyond money only

Organizational and operational aspects

Networking and information gathering

Community and kinship development

Skill and vocational development

Leadership development

Trust building

Small enterprise management

Education and health

1. Financial Criteria

2. Sustainability Criteria on MFIs and projects

3. Specific Water Criteria

General Assessment Criteria on Micro Finance Institutions (MFIs)

Financial Criteria on Borrowers

Loan type / purpose

Income via generating activities or cost savings

Characteristics expenditures (individuals or household level)

Affordability & willingness to pay

(alternative) Collaterals

Social cohesion / social pressure to repay

Appropriate sanctions

Financial Criteria on MFIs

Capital adequacy (sufficient capital)

Portfolio at Risk (PAR; delayed repayment)

Write-offs (default repayment)

Operating expenses/loans

Profitability:

– Return on Equity (ROE)

– Return on Assets (ROA)

Sustainability Criteria

1. Financial criteria → Profitability, operational costs, default/Portfolio at risk

2. Legal framework, Governance, Capacity → Ensuring compliance, reporting & monitoring

3. Social criteria → Stakeholder Approach, accountability, affordability, equality,

gender

4. Environmental criteria→ Sustaining water- and ecosystems and livelihoods

5. Technology, management, service & financial conditions→ Appropriate solutions; Fits well into specific situation

Summary:Mutual interest Microfinance & Water

Creation and protection of stability, health and productivity.

Strengthening current MF investments, reducing risks, create

enabling environment for new client base

Improving outreach, and financial and social performance.

Improving viability by having larger loans portfolio without losing

focus on the poor and better meet social performances

Example “Tulip” Filter of Basic Water Needs Foundation

- Very affordable (EUR 7,= ) and high quality ceramic filter

- Local Production Facility in India (Auroville)

- Promising order portfolio (40.000)

- Clean Water to > 200.000 Indian people

- Easy to use: simple and robust

- Spare parts available: EUR 3,=

- Durable: > 3 yrs

Example: BoP Product Development

Critical Succes Criteria:

“Bushproof” (robust, repairable)

Awareness

Availability

Affordability

Acceptability

Stakeholder Engagement

Investment types Project suppliers

Loans Renewable promoters

Construction, engineering and

consultancy

Local government, communities

NGOs

Local banks, MFIs

Equipment manufacturers and

suppliers

Equity

Private equity (VC)

Bonds

Guarantees

Mezzanine finance

Philantrophic

Innovative (micro, ecosystem service)

Innovative support via: mix soft&hard finance, guarantees, fiscal, control,…

Public & quasi-public

Enabling environment!

Research

Smart AlliancesQuasi public

Private

EntrepreneursFinance: - subsidies

- investments

PublicGvmt.’s

Micro Water Facility

DGIS

Join our partnership

The Sustainable Investor

Contact: www.snsam.nl; tel.: 0031 73 683 3355