APM Microfinance Webinar

Transcription

1 APM Microfinance Webinar Microfinance Investment Insights Arman Vardanyan, Fund Manager

2 Microfinance works 80 % of all businesses in developing countries owe their existence to microcredits In the last 40 years approx. half a billion people have used microcredits Source: 2

3 Overview Microfinance market update Behind the scenes - microfinance investment insights Social impact news 3

4 The Market: Loan portfolio growth Steady growth of MFIs 4 Source: SYM50, Symbiotics

5 The Market: Portfolio quality Stabilizing PAR>30 days 5 Source: SYM50, Symbiotics

6 The Market: Leverage Low, stable financial leverage 6 Source: SYM50, Symbiotics

7 The Market: Profitability Stable ROE 7 Source: SYM50, Symbiotics

8 Microfinance Market Rates Senior Debt (global Investment grade (>BBB-), USD, all maturities) 8 Source: Symbiotics

9 Current challenges Over-indebtedness - a multi-stakeholder problem: MFIs may be responsible for lax lending policies and procedures MIVs and other lending partners may be pushing MFIs to grow too fast Micro-clients may underestimate their capacity to acquire debt and honor payments Governments may have regulations that contribute to the problem rather than mitigate it 9

10 Consensus on best practices Responsible MFI practices, careful analysis of client repayment capacity Reasonable MFI growth targets, responsible investing by MIVs Information sharing on outstanding loans (functioning credit bureaus) Enhancing client protection and transparency Customer financial literacy 10

12 Microfinance Business Model Characteristics of MFIs Local nature of the business Short-term working-capital loans Weekly to monthly repayments Relationship-based lending system Public-private mix in funding structures MFI BancoSol, Bolivia 12

13 13 Modell calculation interest rate

14 Access to money Various possibilities to take out a loan: Family / friends Recipient of doles Dependency Relationship with family & friends is often strained Local money lenders ( loan sharks ) Unpredictable, risky Extortionate rates of interest of > 100 % / month and short duration Money lenders can change their terms anytime Microfinance institutions Regulated access to money Interests of approx. 2-4 % / months and longer durations Official business relation on an equal footing Microcredit 14

15 Sample calculation interest rates 100 $ loan 500 $ loan A MFI has to estimate an interest rate of 36 % for a 100-Dollar-loan. A MFI has to estimate an interest rate of 16 % for a 500-Dollar-loan. Source: Phineo-Guide Small money, big impact. Guide for effective investments in microfinance. 15

16 16 How does one invest in microfinance

17 MFI Due Diligence on Social Impact Field of activity and focus: city, country and industry Client structure Products and range of services Interviews with management, staff and micro entrepreneurs Review of the strategic and business plans Examination of policies and procedures of an MFI related to its social performance Compliance with CGAP client protection rules 17

18 Generating Alpha Dual Return Fund I SMX Microfinance Debt Index

19 Cross-border investment in microfinance Hard currency lending remains prevalent BUT: the trend is for more demand in LC financing 19 Source: CGAP

20 Vision Microfinance Local Currency targets capital appreciation through exposure to the microfinance institutions worldwide enables investors to have an involvement in the microfinance industry in local currency promotes a sustainable delivery of financial services to the working poor aims at investing in microfinance either directly or indirectly: almost 100 % promissory notes in local currency follows a conservative approach: no investments in equity of MFIs no leverage is transparent and actively takes part in initiatives to safeguard the social impact and sustainable work of MFIs Certificated by Certified by 20

21 Vision Microfiance Local Currency Region Allocation Country Allocation Central & Eastern Europe 8% Sub Sahara Africa 7% Central America, Mexico & Caribbean 4% Central Asia 31% Mexico Dominican Republic Tanzania Indonesia Cambodia Kenya Peru 2% 2% 3% 4% 4% 4% 5% Tajikistan 7% South America 16% Armenia Kazakhstan Mongolia 7% 8% 8% Russia 8% Azerbaijan 8% Caucasus 16% South East Asia & Pacific 18% Kyrgyzstan Philippines Colombia 9% 10% 11% 0% 2% 4% 6% 8% 10% 12% 21

22 Currency Allocation 09/2012 (VMF Local Currency) Performance against the USD Weight YTD Since Inception COLOMBIAN PESO PHILIPPINES PESO KYRGYZSTAN SOM NEW AZERBAIJAN RUSSIAN RUBLE MONGOLIA TOGROG KAZAKHSTAN TENGE ARMENIA DRAM TAJIKISTAN SOMONI PERUVIAN NEW SOL THAI BATH KENYAN SHILLING INDONESIAN RUPIAH TANZANIAN SHILLING DOMINICAN REPUBLIC PESO MEXICAN PESO $ ,31 11% 8% 0% $ ,21 10% 5% 5% $ ,99 9% -1% 0% $ ,45 8% 0% 2% $ ,22 8% 3% -2% $ ,51 8% 0% -5% $ ,52 8% 0% -1% $ ,56 7% -5% -11% $ ,88 7% 0% -8% $ ,79 5% 4% 7% $ ,05 4% 2% -2% $ ,12 4% 1% -5% $ ,25 4% -5% -7% $ ,02 3% 1% -4% $ ,03 2% -2% -5% $ ,41 2% 8% -2% 22 Source: Fund Portfolio Vision Microfinance Local Currency

23 MFI Assets MFI Assets Loan Distribution: DFIs vs. VMLCF >500 Developing Finance Institutions (DFIs) Loan Distribution 7% 18% % of Total Investment >500 VMLCF Loan Distribution % of Total Investment 9% 8% 100 to % 43% 100 to 500 9% 8% 50 to to 50 11% 22% 23% 20% Amount lent Number of MFIs 50 to to 50 25% 24% 42% 40% Amount lent Number of MFIs 10 to 20 5% 13% 10 to 20 12% 16% <10 1% 6% <10 2% 4% 23 Source: MicroRate, APM

24 MFIs key indicators (VMF Local Currency) Data as of 09/2012 Dual Return Fund Vision Microfinance LC* Benchmark SYM 50 Index Total assets of a MFI (m USD) 100,36 210,26 Loan portfolio (m USD) 73,83 157,61 Number of clients of a MFI Average micro-loan of a MFI (USD) Debt/equity ratio 3,64 4,67 Portfolio yield 37% 30% Borrowing costs ~12% - Operational expense ratio 16% 17% Operational self-sufficiency ratio 126% 122% Return on equity 21% 18% Portfolio at risk > 30 days 2,36% 3% 24 Write-off ratio 1,0% 1,4% Source: Symbiotics, Fund Portfolio Vision Microfinance Local Currency *Weighted by EUR Outstanding

25 Performance Performance VMFLC versus Emerging Market Debt Vision Microfinance Local Currency USD + 11,52% PIMCO Emerging Local Debt Fund + 12,58% Source: Bloomberg

27 Vision Microfinance: Key Social Performance Facts 83% of MFIs implement a rigorous system to determine a client s level of indebtedness 83% of the MFIs provides good-quality social information to its stakeholders through a diversified range of communication channels (MIX Market etc.) 90% of MFIs have fair and not coercive collection policies 95% of MFIs strive to promote diversity among loan officers and hire staff that reflects the clients served 96% of MFIs have a written, formal social responsibility policy or code of conduct 27

28 Social Responsibility (Symbiotics Social Rating tool) 100 indicators in line with industry standards, the MIX, UN Reporting Initiative: Social governance Labor climate Financial inclusion Client protection Product quality Community engagement Environmental policy

29 Country visit - Armenia, August 2012 Visit of parntner microfinance insitution Small Enterprise Foundation " (SEF) International founded in 1997 by World Vision International provides loans to farmers, sole proprietors and small enterprises as well as renovation and consumer loans majority of their microcredits is used for retail businesses and agriculture. has a team of 129 employees (which doubled since 2009) and serves over clients in 8 regions of Armenia 29

30 Microentrepreneur Aram Begijanyan Aram Begijanyan, 32 years old, lives in Dimitrov village in the Ararat region with his wife and 2 children (4 year old daughter & 6 year old son) runs a farm where he breeds hens and ducks and keeps 2 green houses, where he grows peppers. After borrowing USD 1,500 from SEF International, Aram was able to improve his farm and to expand it. purchased a special incubator to hatch eggs in just a few days bought fertilizer to cultivate the land and trees repaired the greenhouse 30

31 Contact Austria Absolute Portfolio Management GmbH Wallnerstraße 3/ Vienna Austria Phone: info@absolutepm.at Web: Germany Absolute Portfolio Management GmbH Office Frankfurt am Main Braubachstraße Frankfurt am Main The greatest good you can do for another is not just to share your riches but to reveal to him his own. Benjamin Disraeli 31

32 Legal Disclaimer This presentation is for general information only. It does not constitute any recommendation to buy or sell nor offer any investment advice. It merely summarises the key characteristics of the fund. The content of this document is not a substitute for investment advice or other consultations. The full details of the fund can be found in the simplified or full prospectus, supplemented by the respective latest audited annual reports and the respective semi-annual reports ( if these are more recent than the last annual reports). These previously mentioned documents are the only binding basis for the purchase of fund shares. They are available for free in electronic or printed form at Axxion S.A., 1B, rue Gabriel Lippmann, L-5365 Munsbach, Luxemburg, Phone: , Investment funds are subject to currency fluctuations which can lead to a loss of the invested capital to the point of a total loss. The risk disclosure statement is explicitly referred to in the fund prospectus. The information in this presentation is to be used under one s own responsibility only. Prior to an investment decision, potential investors are strongly recommended to read the full prospectus, the annual report and the semi-annual report (where applicable) and to consult a financial advisor, lawyer and tax accountant. All data and information has been compiled with utmost care and we rate the used sources as trustworthy. However, we cannot guarantee their completeness and correctness. No liability is accepted for any and all liability for investment losses or other damages resulting from investment decisions based on this information. Past performance is not a guide to future performance. 32