Microfinance News » Incofin

Incofin’s microfinance funds get ‘strongly recommended’ M-CRIL rating

Microfinance Focus — Fri, 13 Aug 2010 06:56:14 +0000

Microfinance Focus, Aug 13, 2010: Belgian microfinance fund, Incofin’s Rural Impulse Fund I and Incofin cvso have obtained ‘strongly recommended’ rating for both the financial and the social performance dimension from M-CRIL, a leading microfinance rating agency.

The rating exercise was funded by the Swiss Agency for Development and Co-operation. The report provides an in-depth analysis of both financial and social performance indicators at the level of the management of the funds, as well as the underlying data available for investees. The final report will be available in September.

David Dewez, regional manager of Incofin Americas, was invited as a guest speaker on the Annual Meeting of the Social Performance Task Force in Bern, where the rating was presented. The Social Performance Task Force consists of over 800 leaders from all over the world and includes every microfinance stakeholder group: practitioners, donors and investors (multilateral, bilateral, and private), national and regional networks, technical assistance providers, rating agencies, academics and researchers, and others.

Created in March 2005, the Task Force has been charged with clearly defining social performance and addressing questions about measuring and managing social performance. David presented an analysis of Incofin’s social performance measurement methodology and on the correlation between financial and social performance.Related Posts:

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Incofin aims at closing fundraising for Rural Impulse Fund II in 2 months

Microfinance Focus — Fri, 05 Feb 2010 16:38:18 +0000

Aditya Bhandari

By Nagesh Narayana

Microfinance Focus, Feb. 5, 2010: Incofin, a Belgium-based microfinance fund, is raising funds for its second Rural Impulse Fund with a target of about EUR100 million ($186 million), Incofin’s equity expert in India Aditya Bhandari told Microfinance Focus. It would be a successor to the existing fund and part of it would be invested in India. Incofin aims to close the fundraising in two months.

With assets worth over EUR 128 million, Incofin has invested in two microfinance institutions in India in the last one year. In June it invested about Rs 8 crore in Asomi Finance Private Limited picking up a 25 per cent stake in the northeastern MFI with focus on rural microfinance. Seven months later, it made its second investment in Bangalore-based Grameen Koota, another NBFC MFI with major presence in rural segments of Karnataka. So far, it has invested $4 million in India.

Incofin is currently examining few more deals ranging between $1 million and $5 million, said Mr Bhandari and explained the criteria that Incofin employs while making investment decisions. Firstly, the management of the MFI and its quality weigh more while considering investment options, and secondly, rural focus of the MFI or at least some presence in rural pockets would be taken into account. Finally, geography or location of the MFI or its operations in a particular area would come into picture, he added. (See BOX)

Essentially, those MFIs which take adequate care of their customers, provide quality products and do not charge very high or unreasonable interest rates are in the radar of Incofin while investing in India, said Mr Bhandari. He was quite confident that Incofin, through its international network and outstanding reputation in the field of microfinance, will bring additional value.

Mr Bhandari said there is a very high investor confidence in the Indian microfinance sector and investment funds look at the performance of an MFI in the long run. He pointed out that the dlinquency issue in Karnataka, purely a local problem, did not alter the performance of major MFIs in the region. He has also welcomed the move to set up credit bureaux to share information and keep a tab on borrowers who tend to avail excessive loans.

On SKS Microfinance’s forthcoming IPO, he said its success would pave the way for many other MFIs, especially in the southern part of India, to follow similar strategy. “Not all MFIs can do it. Smaller ones may also venture for the IPO route but they have to guaze the market seriously before going for it,” he cautioned but quickly added that the success in IPO by microfinance institutions would certainly lead to consolidation in the sector.Related Posts:

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Incofin closed 2009 with microfinance investments in Mongolia and Indonesia

Microfinance Focus — Thu, 21 Jan 2010 09:18:03 +0000

By Matthew Fuchs

Microfinance Focus, Jan. 20, 2010: Incofin finished the year with investments in Xacbank, a microfinance-focused bank in Mongolia, and MBK Ventura, an MFI in Indonesia, in the month of December, said a statement from the Belgian microfinance investor.

The $3 million subordinated loan to Xacbank was made through Incofin’s Impulse Microfinance Investment Fund, and will have a seven-year maturity. Since beginning operations in 2001, Xacbank has grown to become both Mongolia’s leading microfinance provider and one of its largest banks, serving over 200,000 clients with a gross portfolio of more then $130 million.

Incofin CVSO’s investment in MBK Ventura is the company’s first investment in Indonesia. Equivalent to $1 million, the loan will be made in Indonesian Rupiah in support of MBK’s policy of managing foreign exchange risk and is expected to directly benefit 12,000 microentrepreneurs.

“Launched in 2003, MBK has quickly become one of the fastest growing MFIs in the country. This institution maintains at the same time its strategy focus on the bottom poverty strata of the Java Island population”, said a statement on the Incofin website.

Incofin Investment Management oversees five microfinance funds with over €128 million in assets under management as of December 28, 2009.Related Posts:

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Incofin Rural Impulse Fund invests $500,000 in Fundacion Dominicana de Desarrollo

Microfinance Focus — Thu, 21 Jan 2010 09:13:38 +0000

Microfinance Focus, Jan. 21, 2010: The Rural Impulse Fund has recently invested $500,000 in a senior loan to Fundacion Dominicana de Desarrollo (FDD), a microfinance foundation in the Dominican Republic.

The investment has been provided in local currency through the use of MFX to support the FDD’s growth strategy, Incofin said in a recent statement.

FDD, established in 1966, is one of oldest MFIs in Latin America and a pioneering microfinance provider in the Dominican Republic.

The foundation was created and remains supported by major Dominican companies. In the past two years, FDD and its new management team have been implementing measures to increase the MFI’s outreach, according to Incofin.Related Posts:

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Microfinance investments make 2009 a watershed year

Microfinance Focus — Thu, 31 Dec 2009 06:04:44 +0000

By Asma Azmi, Assistant Editor -Microfinance Focus
Microfinance Focus, Dec. 30, 2009: The year 2009 may go down as the watershed year for the Indian microfinance industry. Marked by strong growth and pioneering deals the industry is riding high, growing at a rapid pace of 100%-200% year-on-year. Attracting attention from mainstream investors, the sector accounted for 40 percent of all Private Equity deals in the past 18 months. There were 11 PE deals worth $178 million during the financial year 2009, compared to three deals worth $52 million in 2008, according to Venture Intelligence.

A plethora of reasons like huge untapped rural market, lower delinquency rates, high resilience, Union Budget emphasis on rural development and a volatile world economy have made investors flock to this segment. MFIs have reported growth in outstanding portfolio at a CAGR (Cumulative Annual Growth Rate) of 80 per cent and ROE (Return on Equity) of 30 per cent between 2003 and 2008. According to the 2008 microfinance industry report by Intellecap, the current Indian MFI market is around $1.5 billion with a penetration of around 10 per cent while the overall market size is estimated to be as high as $50 billion. Even the MFIs seem to be well prepared to exploit the new opportunities and take their business through uncharted ways like experimenting with various financial instruments like non-convertible debentures (NCDs), commercial papers, IPOs mutual funds etc.

International Investments

From the global funders, there was a steady flow of funds though the investment cycles turned a little longer due to credit crisis. India Financial Inclusion Fund (IFIF), an off-shore India-focused equity fund for microfinance companies and enablers, has achieved a final close of $90 million. Incorporated in Mauritius last year and advised by Hyderabad-based Caspian Advisors, IFIF has raised commitments from the likes of UK’s CDC Group ($30 million), Global Microfinance Equity Fund and Switzerland’s Social Investment Services. Since its inception it has made a gross total investment of $30 million in MFIs like Equitas Microfinance, Trident Microfin, to name few.

Grassroots Capital’s global microfinance equity fund, mainly meant for Indian microfinance sector, received investments worth $60 million (approx) from Dutch Pension Fund PGGM. In the last quarter, India’s EXIM Bank was able to raise $100 million loan from the Asian Development Bank. The investment arm of World Bank, International Financial Corporation also committed INR 350 million in Rajasthan-based NBFC, AU Financiers Pvt. Ltd. Entering India for the first time, Incofin, a Belgium based microfinance company, has picked up a 34 per cent stake (Rs 8 crore) recently in Asomi Finance Private Ltd. Other institutions like IFC and Blue Orchards (Switzerland) too are showing a keen interest to invest in Asomi Finance Pvt Ltd.

Domestic Market

Back in the domestic market, the Indian microfinance sector witnessed the first ever listed non-convertible debentures issued by Hyderabad-based SKS Microfinance which has raised Rs 75 crore by issuing one-year NCD at a coupon rate of 10%. Listed on Bombay Stock Exchange, the NCDs have been placed with the Standard Chartered Bank’s Foreign Institutional Investments (FII)7. The company chose to raise funds through debt so that it could match its debt with the recently raised equity and its total equity capital is placed at about $135 million. Following its footsteps, Tamil Nadu-based Grama Vidiyal Micro Finance Limited (GVMFL) plans to raise Rs 100 crore by way of NCDs. Prior to this it had raised $4.25 million (Rs 21.7 crore) from private equity investors including Micro Vest, Amar Foundation and Unitus Equity Fund. Spandana Sphoorty Financial Ltd of Hyderabad also raised Rs 80 crore ($16.74 million) in the same manner.

Credit Securitization

Microfinance Institutions are also venturing into Credit Rated Securitization deals, to access funds at a lower cost. Securitisation is the process of converting existing assets or future cash-flows into marketable securities. In the case of microfinance, the loans are written in the books of the MFI and sold as future receivables to the bank. “A credit rated securitisation deal will give a pricing advantage of 100-150 basis points as against a term loan. This will further reduce the cost of funds. Also rating by an independent agency assures the investors of the portfolio quality,” claimed Dilli Raj, Chief Finance Officer, SKS10. The company’s securitized portfolio worth Rs. 137 crore (Rs. 1,370 million) with YES Bank has been rated by Credit Analysis & Research Ltd. (CARE) as PR1+ SO (Highest Safety) rating in October this year. The Securitization enables YES Bank to purchase from SKS 1, 58,878 micro loans offered to SC, ST and other minority sections of the society across 17 different states. Other MFIs including Spandana have used the securitization route to save on interest costs and make more efficient use of capital.

A recent micro-loan securitization, completed by IFMR Capital and Equitas Micro Finance, has enabled the first-ever mutual fund investment into the Indian microfinance sector. The Rs. 480 million ($10.4 million) transaction is backed by over 55,000 micro loans originated by Equitas Micro Finance, a Chennai-based microfinance institution with approximately 700,000 low-income clients. ICICI Prudential Asset Management, India’s third largest mutual fund, subscribed to a majority of the securities. Axis Bank, Dhanalakshmi Bank, and IFMR Capital also subscribed. Micro-loan securitization provides banks a profitable way to increase their investment in the microfinance sector through rated and tradable securities. They also benefit from the MFIs collection efficiency and NPAs of less than 0.5 per cent. SHARE Microfin Limited executed a unique rated loan assignment transaction of Rs 49.34 crore with YES Bank. The transaction involved rating identified loan receivables from micro clients, numbering around 104,000 borrowers, with an average loan size of Rs 4,700. The transaction has been rated A2+ (SO) by ICRA Limited.

Private Equity Bubble

Although the pouring investments are helping MFIs in actualizing their expansion and diversification plans, but the unconstrained flow of funds may soon be cascading as investors fear an approaching bubble. Since a large number of credit-rich companies are chasing a very few profit making MFIs, the market valuation of MFIs has inflated artificially. For instance, valuation of SKS rose to at least Rs2,000 crore in its recent round, and Spandana is expecting a valuation of at least Rs1,800 crore for its latest round. Most MFIs are raising funds now at approximately 10 times their earnings while many are doubling earnings annually, said Eric Savage of Unitus capital. Many investors have thus put on hold their investing plans due to such skyrocketing prices.

MFIs plan IPOs

This year Indian microfinance industry had its first brush with controversy when its largest MFI unravelled its plans for stock market floatation. There are fears among some of the industry’s leading figures that the SKS listing could further raise the pressure on the group to make profits, possibly at the expense of poor borrowers as was the case with Mexico’s Banco Compartamos, which went public in the year 2007. Its return on equity is more than three times the 15 per cent delivered by Mexico’s conventional lenders and was able to raise $450 million for a group of backers that had originally invested only $6 million. It ended up charging an annual percentage rate of interest of more than 100 per cent — about treble the global microfinance average from its poor borrowers.

Vikram Akula, the SKS founder and chairman has recently told the media that his group hoped to steer a middle path between the microfinance model proposed by Mr Yunus, where funds come from sources that do not expect to make significant returns, and the Compartamos model, where investors buy in because of the possibility of earning huge profits.

Financial Regulation

With its unprecedented growth, Microfinance sector have also recognized the need for a regulated financial environment. Till now, the lenders have been appraising credit risks on their own but now they are looking for institutional assessment of borrowers’ creditworthiness. Microfinance India Network (MFIN)—an association of microfinance lenders has come with a code of conduct, and took some concrete measures like not to offer above Rs50,000 to any single borrower and not more than three lenders should lend money to one individual. In another similar development, around 30 microfinance lenders jointly took a 5% equity interest in High Mark Credit Information Services Pvt. Ltd, a company that has obtained in-principle approval from the Reserve Bank of India to offer credit information services. Investors are also in talks to set up a Credit Information Bureau for keeping accurate records of its rising customer base.

Saving Schemes for Poor

SBI Mutual Fund has launched an equity-based micro-systematic investment plan, called SBI Chota-SIP. The plan, which aimed at low-income households, allows a person to invest in mutual funds with a minimum sum of Rs 100 a month. In line with the government’s increased emphasis on financial inclusion, Sahara Mutual Fund is planning to launch a daily systematic investment plan or SIP — Sahara Daily Fund — under which one can invest a minimum sum of Rs 10 ($0.2) a day. “This scheme is a trend-setter in the mutual fund industry, which provides opportunity to small investors to participate in the economic development and reap the fruits of financial inclusion as intended by the government,” Garg, CEO of Sahara Mutual Funds stated.

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Incofin gets Govt guarantee for microfinance investments in Congo

Microfinance Focus — Wed, 16 Dec 2009 11:14:06 +0000

Microfinance Focus, Dec. 16, 2009: The Flemish government has approved the request for guarantee for the Incofin investment in DR Congo, which will facilitate Incofin to invest safely in Finca Congo, a microfinance institution with more reach and posting a steady growth, said a note.

Despite negative coverage, Congo microfinance institutions have managed to keep offering micro-entrepreneurs opportunities to progress, it said.

Incofin in association with Finca Congo through the international Finca network, has established 21 microfinance institutions. Finca has been operational in Congo since 2003 and is currently the second biggest MFI in the country. Through its branches in Kinshasa (Gombe and Massina) and in Matadi, FINCA Congo reaches more than 32,000 clients. It has a team of 180 employees.

Microfinance is not widely spread in Congo though the scope is huge enough for Incofin to invest, the statement said. The Incofin investment will help Finca Congo to expand its services.Related Posts:

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Incofin`s Microfinance Investment fund increases equity stake in FIE FFP Bolivia

Microfinance Focus — Mon, 09 Nov 2009 16:59:05 +0000

Microfinance Focus , Nov. 09, 2009 : Incofin’s Impulse Microfinance Investment Fund has increased its stake in Bolivian MFI “FIE Fondo Financiero Privado (FIE FFP)” in a secondary transaction from the Stichting Triodos Doen fund. With this transaction, Incofin and the Impulse Fund will own a combined 15% share in FIE, making it the second largest shareholder after FIE Holding.

FIE FFP has a market share of 19%, the third largest after BancoSol and Banco los Andes, and serves over a 100000 clients country-wide.

Earlier this year, FIE shareholders approved the conversion of FIE from a Non-Bank Financial Institution to a Commercial Bank. The objective of the transformation is to strengthen FIE’s position within the market by allowing it to mobilize savings from institutional investors and provide additional services. The application has been submitted to the Financial Authorities, with Banco FIE expected to start operations as of January 2010.
Incofin is a Belgian firm overseeing several funds which invest in MFIs across Latin America, Central and South Asia and Africa with a combined portfolio value of over €125 million.Related Posts:

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