Incofin Annual Report 2010

“Microfinance has

an iMportant social

iMpact, which is also very

quickly felt. thousands of

Microentrepreneurs

around the world

experience a significant iMproveMent of

their living conditions.

in this way they reap the fruits of our

investMents every day.”

Table of contents

IntervIew wIth Frans verheeke - ChaIrman oF the Board oF dIreCtors oF InCoFIn Cvso ........................................... 6

InCoFIn Cvso ......................................................................................................................................................................................................... 14

Investments By InCoFIn Cvso ...................................................................................................................................................................... 26

dIreCt Investments In mICroFInanCe InstItUtIons ...................................................................................................................... 27

Investments In mICroFInanCInG FUnds ............................................................................................................................................... 52

Investment In InCoFIn Investment manaGement .......................................................................................................................... 53

InCoFIn Investment manaGement ............................................................................................................................................................. 54

Corporate GovernanCe .................................................................................................................................................................................. 60

key FIGUres oF InCoFIn Cvso ......................................................................................................................................................................... 70

mICroFInanCInG In praCtICe:

mICroFInanCe InstItUtIon kompanIon ContrIBUtes to BUIldInG stronG CommUnItIes In kyrGyzstan .................. 32

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6 •InCoFIn annUal report 2010

• 7IntervIew wIth the ChaIrman

Interview with Frans VerheekeChairman of the Board of Directors of Incofin cvso

Frans Verheeke (b. 1934) made his career as general manager and chairman of VDK Spaarbank. He headed this Ghent-based savings bank for 36 years, during which time it expanded into a medium-sized bank offering a wide range of services. Throughout these years he was a passionate social banker, an enthusiasm reflected in his involvement as director of numerous social and cultural organizations. In 1992 Frans Verheeke was one of the initiators of investment fund Incofin cvso. Since then he has been Chairman of its Board of Directors.

Frans Verheeke, For anyone who does not yet know: what is incoFin cVso?

Incofin cvso is an investment fund with a distinctly social profile. We invest in the microfinance sector. That means we provide capi-tal that, through local organizations, reaches people in developing countries who are unable to tap the regular banking system. These people want to move out of poverty by developing small-scale eco-nomic activities, like chicken farming or setting up a fabric store. For this they need small loans, maybe 100 dollars, maybe 500, occasion-ally 1,000... This is what we call microcredit. Incofin cvso is active in this sector as an investor. We provide capital to so-called microfi-nance institutions or MFIs, and these in turn provide microloans to individuals and microenterprises.

where does your commitment to incoFin come From? why did you take the initiatiVe to set up the Fund?

I’ve always been interested in socially relevant projects. VDK Spaar-bank (savings bank) was established in 1926 with the social purpose of teaching the “little man” to save and take out loans. A good por-tion of VDK’s social objectives have since been achieved in Belgium,


but in developing countries the protection of the same “little man” is still very much the order of the day. This is how Incofin came into being, in order to get people outside the Western countries to take their future into their own hands... not through charity, because charity implies a subordinate relationship and leaves the recipient in dependency. But through economic projects, aimed at achieving a return - more specifically a double return: financial and social.

what For you were the main deVelopments in the microFinance sector in 2010?

Overall we can say that the sector, after applying the brakes heav-ily in 2009, found a renewed impetus in 2010. Although for Incofin let me remark that in 2009 we were not really affected by the slow-down in growth that certain sectors experienced. We continued to grow well, in terms of volume of capital and also of the number of capital investments. Indeed, in 2010, we outpaced the general posi-tive evolution of the sector as a whole. We therefore have ground for satisfaction.

Less pleasant, however, and to our regret, is the fact that microfi-nance was cast into a bad light in 2010 by a number of excesses. Some people over-borrowed, with no apparent way out, while certain lend-ers started to apply highly aggressive collection techniques... Too bad, because it is a story of just a few rotten apples in a whole basket of good ones. Worldwide in 1997 there were 13 million microcredit borrowers, today there are approximately 150 million. Investment volumes are growing explosively, in certain cases at up to 50 per-cent per year. A sector with such impressive growth rates inevita-bly attracts people and organizations who do not play by the rules. Then growth and profit take the upper hand over social purpose, and things get out of hand, as we have seen in among others India.

IncofIn cvsoEvolution investment portfolio

2004 2010

€ 2,

991,

262

€ 25

,090

,113


as a result, people haVe begun to question microFinance as a weapon in the Fight against poVerty.

But even so we continue to believe in it unconditionally. Yes, ex-cesses do exist and these need to be addressed. We are heartened that the sector itself is calling for a regulatory framework. Invest-ment funds have a responsibility to screen MFIs thoroughly before investing. Incofin has always played a pioneer role here. Using our ECHOS system, that maps an MFI’s social performance alongside the purely financial parameters, we assess in an objective manner how an MFI treats its customers.

An additional problem is that not all countries have adequate gov-ernance structures, and that many lack a national level regulator. In our view, the best way to ensure a properly functioning microfi-nance system is to set up central registers in each country, which can serve to check whether a customer has too many loans out-standing, and strong and effective regulation.

another Frequently heard criticism is that the interest rates charged in microFinance are too high.

Let me qualify that. We need to consider the specific context in which such credits are awarded. These are small, short-term loans, which require a lot of administration. To collect and pay out funds, people also often have to cover large distances, because in our tar-get markets there is not a bank at every street corner, which increas-es the expenses as well.

And what is the alternative for the local population? Local usurers charging up to 100% interest per week? Compared with this, the 18 to 25% interest rates per year charged by the MFIs are more than reasonable. Until a few years ago the maximum interest rate in Bel-gium also used to be 20% per year. Look also at the so-called default

“Investment funds have a responsibility

to screen MFIs thoroughly before investing. Incofin has always played

a pioneer role here.”


rates, the percentages of microcredit borrowers who are unable to repay their loans: these are very low. These people become resilient and find no great difficulty in repaying their loans. But because this is an informal sector, you do not always find its effects reflected in macroeconomic statistics. For this reason microfinance is unjustly accused of being unable to prove that it really contributes to reduc-ing poverty. But we see concrete results.

you stated that incoFin does remarkably better than other players in the industry. why this success?

Up to 2008 many big financial players saw the microfinance market as an interesting way to invest in emerging countries, as a means of diversification and with short term return prospects. Then came a shift with the global crisis. Only now are they venturing back, reluc-tantly, into the microfinance market.

Incofin by contrast, came in this sector from the beginning with a long-term goal. We never went looking for quick profits, but right from day one we have attached as much importance to our social performance as to our financial performance. In this way we have no difficulty in attracting private and institutional investors, in both good financial times and in more testing ones. We have demonstrat-ed in practice that we do meaningful work, based on solid financial foundations. It is no coincidence that large companies and organiza-tions express interest and join in our story.

Also important is that we do not pay exceptionally high dividends, but place part of our profits into provisions. This is necessary when you are operating in difficult and uncertain markets. Being recog-nized as a cooperative means that our dividends are tax-exempt up to 180 euros. This allows us to address not only institutional inves-tors but also private individuals.

“We have demonstrated in practice that we do meaningful work, based on solid financial foundations.

It is no coincidence that large companies

and organizations express interest and join in our

story.”


Finally, what are the challenges you see Facing incoFin in the coming years?

We have a very solid reputation abroad, but we now want to get our organization and the way we operate better known in Bel-gium. We are also keen to increase the portion of private investors. Our recent recognition as a microfinance development fund enables us to offer them an additional tax benefit of up to EUR 300 per per-son. Add to that the stability of an investment in our fund and, more particularly the knowledge that your investment is contributing to a fairer, better world, and you know why Incofin is a responsible investment.

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InCoFIn annUal report 201014 •

Incofin cvso

microcredit and microFinance: the essence

Access to financial services is crucial for the development of any individual, com-munity, or country. Without collateral, property or a regular income, poor people in developing countries do not qualify as an attractive target for conventional banks. It is precisely on such people that microfinance institutions (MFIs) focus, with customized financing solutions. In this way poor people can borrow very small amounts (microcredits). Loans can also be made to groups of people. With rigorous monitoring by the MFIs and thanks to the inbuilt social control mechanisms, this leads eventually to independence. The vast majority of loans are repaid on time, and people see their income and their standard of living expand substantially.

In this way people who lack resources but have ideas and initiative are given a lever with which to build a better life for themselves and their families, in their own strength. That, in a nutshell, is the essence of microfinance. Today an estimat-ed 150 million people have access to microcredit, through more than 10,000 MFIs across the world.

3 types oF inVestment

Incofin cvso invests in (1) microfinance institutions in developing countries, (2) other microfinance funds, which in turn invest in microfinance and (3) the Incofin Investment Management limited partnership, a microfinance fund advisor.

InCoFIn Cvso• 15

Incofin cvso Vision

Incofin cvso is a high-quality international player which specializes in invest-ments in microfinance institutions. Incofin cvso develops initiatives that have a demonstrable social impact. Incofin cvso is a private initiative in which business companies, unions and employers’ organizations, associations, foundations and private persons, both in Belgium and abroad, participate.

mission

Incofin cvso invests in sustainable microfinance institutions (MFIs) in develop-ing countries, which offer customized financial services to small entrepreneurs with a view to creating high social added value. Incofin cvso supports MFIs that help enterprising people set up their own businesses, improve their living condi-tions and thus break the vicious circle of poverty.

marCel GerrIts Investment Manager

noémIe renIer Investment Manager

alejandra valderrama Legal Expert

mIeke wInne Administration Manager

davId dewez Regional Director

thIs Chapter Is IllUstrated with pictures of the team members of Incofin Investment Management who manage the investment

portfolio of Incofin cvso: » Belgium » Colombia » India


social return and Financial return on an equal Footing

Incofin makes its decisions based on a number of values that direct both the crite-ria it applies in selecting investments and its relationships with its customers and stakeholders:

» a good balance between customer and profit orientation » a clear view of customers » a thorough knowledge of the market and of niche markets » a varied service offering » a strong social focus » transparent communication

a strong social Focus: the principle oF the “double bottom line”. Incofin attaches great importance to the social impact of its investments. The fund

seeks a balance of financial and social return, what it calls a “double bottom line”. It wants to invest in MFIs that make a real difference to the quality of life of their stakeholders, their staff and their customers.

how does incoFin cVso select its inVestments?Incofin applies clear criteria in its selection of investment opportunities. Incofin

takes into account the impact of the microfinance institutions on the local economy, the quality of management, their financial situation, their proven track record and their future prospects. For each investment dossier a thorough due diligence is done of the microfinance institution on site. After the investment, the investment file is carefully followed up.

InCoFIn Cvso• 17

ellen woUters Senior Legal Expert

elIen eGaña Junior Legal Counsel

jUan Carlos Gomez Senior Investment Manager

natalIe de Geyseleer Administration Officer

kaat van Bosstraeten Communication Manager

lUCe perez Technical Assistance Coordinator

adItya BhandarI Private Equity Expert

wIm van looveren Financial Analyst

rIta van den aBBeel Chief Financial Officer

aChIm devIaene Financial Officer

jerome BIrolInI Investment Manager


diVersiFication and risk management

Incofin diversifies its investment portfolio (comprising equity investments and loans) and spreads its risks in a prudent manner based on the risk distribution pol-icy set by the Investment Policy Committee. This policy states that the exposure to any one country or MFI should not exceed 20% and 15% respectively of Incofin’s net asset value. Moreover, Incofin’s entire investment portfolio is insured against country risk with the ONDD (Belgian public credit insurance agency).

Incofin’s investment decisions are taken by the Investment Committee, which consists of a qualified team of experts with broad expertise of financial and legal matters. They are familiar with the microfinance sector and are well-placed to judge the risks of a particular investment. The Investment Committee closely monitors the evolution and management of all of these risks.

Geert peetermans Chief Investment Officer

dIna pons Investment Manager

domInIek deConInCk Director Private Equity

rodrIGo arIas Castaño Senior Investment Manager

InCoFIn Cvso• 19

country risksIncofin invests in developing countries, which are subject to substantial country

risks. These risks include political risk (e.g. war or civil war) and transfer risk (in-ability to repatriate funds invested in the country owing to foreign exchange short-ages or other government measures). To cover these risks, Incofin has subscribed an insurance policy with Belgian export credit agency ONDD, covering its entire investment portfolio against the above-mentioned risks (with an excess of 10%).

market risksIncofin’s investments are also exposed to market and environmental risks, which

are not insurable. These risks include the economic environmental factors, legal certainty and the quality of the local regulation of microfinance institutions. Incofin analyses these issues carefully. It also applies a healthy geographic spread in the composition of the portfolio, in order to limit this risk as much as possible.

commercial risksIncofin invests in microfinance institutions, which in turn grant loans to people

who are often unable to present any collateral. It can therefore not be excluded that the microfinance institutions in which Incofin invests may one day become insol-vent, in which case Incofin could lose its investment. Incofin manages this risk by:

» conducting a rigorous financial analysis of investees » evaluating their business plans » evaluating their management and directors » calling for regular business reporting » regular on-site follow-up » building up provisions.

currency risksIncofin actively manages its currency risk using hedging techniques (such as cur-

rency swaps). Hedging is not available, however, for investments in local currency. But in most such cases the return on investment exceeds the depreciation of the currency concerned. The interest rate and liquidity risks are actively managed by Incofin.


where does incoFin cVso deriVe its income From?

As an investment company, Incofin cvso derives its income from its direct invest-ment portfolio and from its own investments in investment funds. This income consists of dividends on its shareholdings and of interest on loans. Incofin’s financial income from its investment portfolio increases as it expands this portfolio in developing countries. This expansion is made possible by the growth of Incofin’s share capital, which gives the company greater resources with which to invest.

management

In June 2009, Incofin cvso split off the daily management of its investments and placed it in Incofin Investment Management (Incofin IM). Incofin IM at the same time also took over all the other fund advisor activities. Thus, after the split, Incofin cvso became a pure microfinance investment fund, without its own staff.

key eVents in the past yearaid For kyrgyzstanIncofin was severely affected by the ethnic unrest in southern Kyrgyzstan in

June 2010. Microfinance institution Kompanion (see also the central photo section of this report) worked actively to help victims of the riots. Together with a number

of other organizations, Kompanion provided five tons of emer-gency aid – including food parcels, care products, medicine and disinfectants – to the city of Osh, at the centre of the riots.

Incofin cvso and Incofin Investment Management de-cided to support this aid initiative with a joint donation

of 5,000 euros.

loïC de CannIère Chief Executive Officer

InCoFIn Cvso• 21

establishment oF the rural impulse Fund iiIncofin IM set up the Rural Impulse Fund II in June 2010. This specialized micro-

finance fund focuses on poor rural communities. Rural Impulse Fund II is backed by leading public and private financial institutions and investors, including EIB, IFC (part of the World Bank Group), KfW (DE), BIO (BE), FMO (NL), NMI (NOR), the Italian “Microfinanza 1” fund of funds, ACV-CSC Metea, VDK Spaarbank and Bank für Kirche und Caritas in Germany. The Rural Impulse Fund II is aiming at a total volume of 120 million euros, of which 86 million euros has already been pledged in the first closing.

successFul (partial) exit From the peruVian mFi Financiera conFianza

Just before the end of 2010, the shareholders of Financiera Confianza concluded a merger agreement with Caja Nuestra Gente, a Peruvian MFI. Both MFIs specialize in rural microfinance and are geographically very complementary. From now on they will operate as Banconfianza, the first microfinance bank to focus on provid-ing services in the rural areas of Peru.

The merger creates a microfinance institution with national coverage that will serve 400,000 customers through over 2,000 employees in 150 branches.

Incofin first invested in Confianza in early 2003 when it had approximately 5,000 customers. Over the years the Incofin group accompanied Confianza’s expansion to the entire central region of Peru, including the capital Lima. Through a number of follow-on investments, Volksvermogen, Incofin cvso and Rural Impulse Fund I acquired a joint interest of 28%. The overall portion of all funds together now re-duces from 28% to 14%, and that of Incofin cvso specifically from 12% to 6%.

incoFin initiatiVe For haitiAfter the devastating earthquake of January 12, 2010 in Haiti, Incofin made a

special effort to help microfinance institution ACME. Thanks to the donations paid into Incofin’s account at the King Baudouin Foundation, Incofin was finally able to donate 171,000 euros to ACME’s customers.

Most of ACME’s customers lived in the poor neighbourhoods of the capital Port-au-Prince, which are precisely those areas that were very badly hit by the quake. Many of them lost all they had, and continue to live at the time of printing of this report in tent camps. To regain control of their lives, they often come back knocking at ACME’s door for loans to relaunch their business, buy new inventories or to repair their workshops. ACME’s management has decided to help these cus-tomers in a number of ways, including with money raised through the Incofin donations account.

The outstanding balances of existing loans of customers affected by the quake


have been written off. This means that all debts are forgiven. This decision has heavily impacted ACME’s balance sheet, but at the same time is a great help for cus-tomers. With no outstanding debts to ACME they can start again with a clean slate.

opening oF incoFin americasIn May 2010 Incofin Investment Management announced the opening of a new

office: Incofin Americas, based in Bogotá, Colombia. David Dewez, a former investment manager at Incofin Investment Management, was appointed to head up the office. With his team he is closely following Incofin’s Latin American portfolio on the ground.

highly recommended M-Cril, a leading rating agency in the microfinance sector, has rated Incofin

cvso on both its financial and its social performance. The report thoroughly analyses both the financial and the social performance

indicators, and looks at the management of the fund and the underlying details of the investments.

Incofin cvso obtained the highest possible rating (“highly recommended”) for both financial and social performance (see box on next page). With the combina-tion of financial and social performance being one of Incofin’s main objectives from the outset, the board of directors is very proud of this excellent rating.

stephane sapor Investment Manager

sara vermeIr Head of Business and Fund Development / Private Equity Manager

alejandra rodrIGUez Administrative Officer

InCoFIn Cvso• 23

prize For banco Fie Banco FIE, the Bolivian MFI in which Incofin cvso

invests, received the first social performance prize awarded by the Inter-American Development Bank. Banco FIE performed best in terms of social perform-ance in the Latin American region. The price is a very important recognition, both for Banco FIE and for Incofin cvso.

new mFis in the incoFin cVso portFolioThe following microfinance institutions were added

to Incofin cvso’s investment portfolio in the course of 2010:

»AB Microfinance Bank Nigeria »Acorde (Costa Rica) » Finca Armenia » TenGer (Mongolia)

lIterally

M-Cril, a leading rating agency in the microfinance sector, evaluated Incofin cvso. These are the exact words of the assessment of Incofin in the M-Cril report:

FInanCIal perFormanCehighly recommended due to

- strong management, - the diversity of the MFIs and other instruments in which it invests,

- optimal use of risk management instruments

soCIal perFormanCehighly recommended due to

- the systematic screening of MFIs according to the double bottom-line principle,

- the constant monitoring of investments,

- proactive engagement of the MFIs (especially regarding social aspects),

- high degree of transparency - pioneering role in certain regions - focus on respect for people and the environment in equity investments

- investments in MFIs that are not yet profitable

- significant impact in rural environments

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Investments by Incofin cvso

Investments By InCoFIn Cvso• 27

a t t he end of 2010, Incofin cvso had investments in 29 microfinance institu-

tions across 22 countries. The total portfolio of investments in microfi-nance institutions amounts to EUR 25,090,113.

aB mICroFInanCe Bank nIGerIa

a B mic r o f i n a nc e Bank n i ge r i a (a Bn ) has provided credit and savings products since

November 2008. The loans range in size from 15,000 to half a million Naira (about EUR 70 to 7,000). Bor-rowers who can demonstrate that they run an existing and viable business are eligible for loans.

ABN has six offices in Lagos, the economic capital of Nigeria and one of the world’s fastest growing cities. At the end of 2010, it em-ployed around 250 credit managers. Whenever an additional branch is opened, a new team of credit man-agers can set to work after four to six weeks of intensive training.

www.aB-mFBnIGerIa.Com

aCep BUrkIna Faso

a Cep Bu r k i n a s a is a pioneer in one of the least developed countries in West Africa. The

MFI, which is still in the start-up phase, will support microentrepre-neurs in their economic develop-ment. In this it can rely on the extensive experience of the ACEP (Agence de Crédit pour l’Entreprise privée) network in French-speaking African countries.

ACEP SA Burkina wants to specialize in lending to micro and small enterprises in urban areas. In this way, it seeks to contribute to the economic development of Burkina Faso by meeting the needs of microentrepreneurs who lack access to conventional banking products, while being itself a profitable operation.

aCme

a Cme was founded in 1997 by the Belgian Bernard Brou-wer. In July 2009, this NGO

was converted into ACME nv, with Incofin as one of the shareholders. The portfolio grew from EUR 2.7 million in 2005 to 10.2 million in 2010. The smallest loan available is EUR 20. Of all loans, 69% are

dIreCt Investments In mICroFInanCe InstItUtIons1.

nIGerIa loan

5,500,000portFolIo (eUro)

8,134ClIents

678averaGe loan (eUro)

nGnCUrrenCy

BUrkIna Faso eqUIty

XofCUrrenCy

aCorde

haItI eqUIty


23,906ClIents


HTGCUrrenCy

http://www.ab-mfbnigeria.com


between EUR 20 and 350. ACME has 21 branches, mostly

in the capital Port-au-Prince. On January 12, 2010 occurred the great earthquake, which also caused ex-tensive material damage for ACME. Incofin immediately organized a special emergency aid initiative, with an impressive response. The MFI now faces the task of rebuild-ing its business. Incofin continues to support it in this.

www.aCmehaItI.orG

aCorde

a corde , the largest MFI of Costa Rica, provides loans from USD 10,000 to 500,000.

The client base consists of SMEs (accounting for 80% of the loan portfolio) and micro-entrepreneurs.

Acorde has two branches in the capital San Jose and a call centre which promotes its innovative products and services. The institu-tion works closely with the public sector and has strategic alliances with universities and training centres.

www.aCorde.or.Cr

aGroInvest

a gr o In v e st is the largest MFI in Montenegro. Its main activity is providing loans for starting

business activities in the agricultur-al sector (which makes up a major share of the domestic economy). Cost efficiency, a flat hierarchical structure and low overheads are central to the way this MFI works. AgroInvest serves all rural areas of Montenegro through eight branch-es. 40,000 farming families avail of AgroInvest’s services. The MFI is currently operating in a very diffi-cult context. It therefore focuses on optimizing its services and improv-ing the outstanding portfolio.

www.aGroInvest.orG

aCme

monteneGro loan


17,606ClIents

1,559averaGe loan (eUro)

EURCUrrenCy

Costa rICa loan


685ClIents


cRcCUrrenCy

http://www.acmehaiti.org

http://www.acorde.or.cr

http://www.agroinvest.org


akIBa CommerCIal Bank

a k iba C ommer c i a l B ank (aCB) has been operational since 1997. The bank is owned by

270 shareholders - mostly Tanzanian citizens, but also including a small number of international investors. ACB provides microcredit tailored to SMEs, government institutions and the retail sector.

Customers are located predomi-nantly in Dar-es-Salaam and the large urban areas in northern Tan-zania, like Arusha and Moshi. ACB has contributed to the development of the local financial sector by intro-ducing best practices and launching innovative products.

www.aCBtz.Com

azerCredIt

a zer C r ed i t obtained its bank-ing licence in 2003 and is today the third largest MFI in

the country in terms of number of customers. The bank is represented in both rural and urban areas. As a member of the World Vision group, AzerCredit enjoys support in fund-raising and institutional strength-ening. 71.3% of the credit portfolio of over USD 23 millio consists of loans to individuals and 28.7% of group loans.

The network covers the country’s

main economic centres through seven main branches and fourteen sub-branches. AzerCredit will continue to extend this network with main and sub-branches in the countryside, where agriculture con-stitutes the main economic activity.

www.azerCredIt.az

BanCo FIe

w her eas the first Banco FIE outlets were mainly in cities and provincial towns,

the MFI began from 2007 onwards to move into more rural areas. The new Bolivian law that allows financial intermediaries to work with agents offers the necessary perspectives to bridge the long distances and to cir-cumvent the disadvantages of poor infrastructure.

Banco FIE has 104 branches in all nine Bolivian departments. 48% of the portfolio is located in La Paz and El Alto. In remote areas Banco FIE shares office space with similar institutions in order to develop pro-fessional and cost-efficient services. Banco FIE promotes social responsi-bility and sustainable business.

www.BanCoFIe.Com.Bo

CreCer

tanzanIa eqUIty


18,973ClIents


TZsCUrrenCy

azerBaIjan loan


35,868ClIents


UsD CUrrenCy

BolIvIa loan


108,013ClIents


UsD CUrrenCy

http://www.acbtz.com

http://www.azercredit.az

http://www.bancofie.com.bo


CreCer

C r ecer (C r ed i t o c on e du -c ac i ón ru r a l ) was founded in 1990 as a joint project by

Freedom From Hunger (FFH) and Plan International. With a market share of 30%, it is today the largest non-governmental microfinancier in Bolivia.

Crecer serves the entire country through 61 offices in the 9 Bolivian departments. Credit managers are recruited from the local population so as to acquire a good understand-ing of their customers’ needs. Crecer is keen to develop new prod-ucts for its customers, including health insurance, in the near future.

www.CreCer.orG.Bo

Credo

C r edo is one of the leading ag-ricultural lenders in Georgia. This position it owes to its

quality service, product innovation and vision. The MFI approaches the market with a dozen credit prod-ucts. In 2010 its share of agricultural loans grew to 55.8%, while its share of urban lending decreased to 25.8%. The tourism industry is also demanding a place in the portfolio.

With sixteen branches Credo’s network is smaller than that of its competitors, but more successful thanks to the agency model that

was introduced with the support of AgroInvest. The intention remains to open additional sites in rural towns in order to achieve a better distribution.

www.Credo.Ge

edpyme proempresa

p r oempr e s a focuses heavily on small and microenterprises in the cities and suburbs. 84% of

its credit portfolio consists of loans to microenterprises, 5% of loans to consumers and 11% to SMEs. The average credit sum is USD 1,100.

Proempresa has thirteen offices in Lima, one in the neighbouring city of Huacho and another three in the southern cities of Arequipa, Ayacu-cho and Andahuaylas. During the past year it opened new branches in Trujillo and Huancayo.

www.proempresa.Com.pe

edpyme solIdarIdad

e dpy me so l i d a r i d ad was estab-lished under a USAID project that is seeking to combat

poverty in different provinces of the Andes. In many regions it is the sole MFI. Edpyme Solidaridad

BanCo FIe

BolIvIa eqUIty


146,816ClIents


BoBCUrrenCy

GeorGIa loan

24,800,000 portFolIo (eUro)

43,172ClIents


UsDCUrrenCy

perU eqUIty


39,622ClIents


PEnCUrrenCy

perU loan


18,849ClIents

http://www.crecer.org.bo

http://www.credo.ge

http://www.proempresa.com.pe


finances by preference alterna-tive forms of (agricultural) activ-ity, which are less risky and more profitable than working the land. Its group loans range between USD 140 and 1,700, and individual loans between USD 30 and 800.

The 12 main branches and 27 smaller outlets are located in small rural regions and cities. Edpyme Solidaridad is investing heavily in renovating its offices and in new branding, as required by the local financial authorities.

www.CredIsol.Com.pe

espoIr

F undación espoir has more than 53,000 active borrowers with a total outstanding portfolio of

USD 20,000,000, mainly in the form of loans. The institution grants loans of between USD 200 and 1,500 to microentrepreneurs. Two years ago, it started making personal loans from USD 1,000 to 8,000. Espoir runs a ‘credit + training’ programme for women in rural areas, following a model developed by the American NGO Freedom From Hunger.

Espoir has six offices, six sub-branches and eight contact points in five provinces of Ecuador. The MFI wants to expand into the small rural towns through non-bank outlets (shops and pharmacies).

www.espoIr.orG.eC

FIe Gran poder

t his spin-off of FIE Bolivia has been in existence since 2001 and is active in Buenos Aires.

FIE-GP’s target group lives mainly in the suburbs (10 million inhabit-ants). Many of them are economical-ly disadvantaged persons working on a self-employed basis. A study shows that this region contains more than 440,000 potential bor-rowers.

FIE-GP has eight branches. Economic activity in the barrios consists primarily of manufactur-ing companies, especially textile workshops with one to twenty employees. For this reason FIE-GP limits its activity to providing personal business loans. Given the enormous potential this remains the core activity for the coming years, even though it also offers other facilities such as home loans.

www.FIeGranpoder.Com.ar

FInCa armenIa

eCUador loan


53,146ClIents


UsDCUrrenCy

arGentIna eqUIty


9,687ClIents


ARsCUrrenCy


UsDCUrrenCy

http://www.credisol.com.pe

http://www.espoir.org.ec

http://www.fiegranpoder.com.ar


Microfinancing in practice

mICroFInanCe InstItUtIon kompanIon ContrIBUtes to BUIldInG stronG CommUnItIes In kyrGyzstan

kompanion , founded in 2004, is the largest microfi-nance institution in Kyrgyzstan. With 900 employ-ees in 90 branches, Kompanion is active across the country, even in more difficult-to-reach rural areas.

The financial institution serves 119,000 customers, which is more than one third of all microfinance borrowers in Kyrgyzstan.



Working together with Incofin has been a fantastic experience. I used to work in banking in the U.S. There everyone spoke about

“relationship banking”, but it is here that for the first time I have experienced what this means in practice. Incofin works closely with Kompanion, building up a relationship that goes far be-yond merely negotiating prices and closing a business deal.

A telling example of our experience with Incofin came in 2010, when the government was overthrown by a revolu-tion, and ethnic fighting broke out in parts of the country. Our lenders responded in different ways. Some of them called a halt to all domestic lending and one of them even cancelled a previ-ously signed contract. Incofin however, took the initiative to get in touch with Kompanion, with a proposal to delay the repayment of an existing credit that was approaching maturity.

This was possible thanks to the close relationship we already had built. They had a clear vision of the working conditions in Kyrgyzstan and of Kompanion’s financial health. And they keep their word when it comes to long-term commitments with customers and with the MFI markets on which they operate. Kompanion values highly such partnerships.

Incofin repeatedly proposed new initiatives to Kompanion, which more than covered our basic financial needs. Examples of this approach include their nominating Kompanion for an award for our work in value chain finance (financing of small manufacturers or retailers, where the existence of a stable relationship with certain sup-pliers or customers is viewed as sufficient collateral, editors’ note) and of course their dona-tion for the victims of the fight-ing in the south of the country. They themselves pointed to areas where we could use help, even before we ourselves could think of it. For example, when financial aid was available, they alerted us to this, and helped us consider which of our applica-tions might be eligible. This led, inter alia, to Incofin awarding us a grant (with funding from FMO) to enable us to bring in specialist assistance, as we push ahead in our development and are keen to obtain a banking licence to enable us to also offer microsavings to our clients.

relatIonshIp BankInG In praCtICe songbae lee, cfo at koMpanion (bishkek)



CUstomer FoCUs

C us t omer service is central to Kompanion. For each customer Kompanion goes looking for the appropriate financial

product. For this reason it offers both indi-vidual loans and group loans. Borrowers use these loans for small income-generating activi-ties but also for larger, growing companies. Kompanion also offers mortgage loans and employee loans.


CommUnIty development

k ompan i on presents itself as an institution dedicated to community development. This means that it not only provides

financial services, but also launches initia-tives to strengthen local communities. For this purpose the Kompanion staff maintains close ties with its end customers.


apple FestIval

e ver y year an apple festival is held with support from Kompanion, and 2010 was no exception. In October, 400 people

from 40 villages in the regions of Naryn and Issyk-Kul came together to celebrate the apple harvest. During roundtable discussions, they exchanged views on important ecological and economic issues that may affect their activities. Kompanion also made available a team of spe-cialists to advise participants on horticulture, gardening, gardens and garden layout and the breeding and keeping of pets.


more than FInanCInG

t ha t Kompanion does more than provide funding became even clearer in the sum-mer of 2010. The south of Kyrgyzstan

faced violent ethnic unrest during which, par-ticularly among the Uzbek minority, caused many hundreds of casualties and forced thousands to flee their homes. Together with other organizations, Kompanion launched an emergency aid initiative, which was also sup-ported by Incofin. Together they collected five tons of food parcels, care products, medicine and disinfectants.



oUt oF love For the joB adila asanbekova, credit Manager, barskoon

Adila Asanbekova is a credit manager at the Barskoon office. She is a member of the

“Five Hundreds Club”, which recognizes Kompanion em-ployees who serve more than 500 customers.

Adila has worked for Kompanion since 2008. “In my early days at Kompanion I made horticulture loans,” she says. “I always wanted to work with a company that encourages creative ac-tivities. I attended a training course in farming techniques for gardening. The people lis-tened with great enthusiasm to the Kompanion agrono-mists and I thought, what we do is really important.”

103 customers of Adila have received loans for their horticultural activities. This was under the Apple Project, which Kompanion started up in 2005-2006 in the villages of Tamga and Tosor near Issyk-Kul.“With the loans from Kom-

panion I planted 400 trees over a period of several years. With my first loan I could plant ten trees, but when I saw the results I decided to plant more”, says Isa Saty-baldiev, a customer to whom Adila granted a loan. “With the help of Kompanion we

have more confidence in the future. The fruit trees are growing and are providing an income for my fam-ily. We would like to build a big house for the entire family and also grow other crops. Through Kompanion I learned techniques that I will convey to my children and neighbours.”

This is just one of the many success stories from Adila’s customers. Today she manages a portfolio of 542 clients, representing a loan portfolio of almost USD 200,000 with a 100% repayment rate. Adila owes this success to her ambition, her professionalism and her love for the job. Her success is measured not only by the size of her portfolio, she is also an excellent mentor for new employees. Her achieve-ments are a good example of continuing service to custom-ers. Her motto is “Rest makes you rust!”.



an attraCtIve eXample

t he investment in Kompanion fits perfectly into Incofin’s strategy. With each invest-ment Incofin seeks to balance financial

and social objectives. As well as being a mi-crofinance institution with a sound financial structure, Kompanion is also an organization that scores very well socially. With a focus that includes human resources, customer satisfacti-on and the environment, Kompanion is a good example of a microfinance institution that Incofin is ready to ‘go the extra mile’ for.


Yrys Kenjebayev lives with his family in Tosor, a village in the oblast (province) of Issyk-Kul. They possess a well-kept orchard with over a hundred apple and apricot trees, the pride of the family.

Yrys remembers how he prepared a plot of land and planted seedlings. He picked and sold the apples, but was insufficiently instructed in agricultural practices to im-prove their quality.

In 2005, Kompanion’s “Ap-ple Project” was launched in the village. Yrys was immediately interested. He registered and asked all sorts of questions to Kompanion’s agricultural experts. “Step by step I learned to maintain my fruit trees”, says Yrys. “I learned how I could improve the soil by removing the stone layer and how I could replant trees. It took us quite a lot of trouble, but now we are literally plucking the fruits of healthy trees, full of fruit.”

Yrys remembers how he concluded his first loan to buy apple and apricot seedlings. He realized that the loan helped him not only to build a successful business, but at the same time he learned how to maintain his orchard. He decided to take a new loan to build a cellar. This time, for the building work, he was able to call on the Kompanion construction specialists.

In 2010, a third loan follo-wed in order to cultivate more land. Yrys says: “I will soon be buying a few hives to deve-lop my work as a beekeeper.” And he concludes: “With Kompanion’s help, we have started a family business. In this way we can grow and have a bigger income.”

100 trees, thanks to kompanIon yrys kenjebayev, one of Many koMpanion custoMers in the village of tosor



FInanCIera ConFIanza

F inanc i e r a c on f i a n z a has been active in Peru since 1998 and provides financial support

to small and micro enterprises in both urban and rural areas of Peru. Today, it specializes in microfinance and microinsurance, but is also an approved pension fund institution.

Confianza has 26 branches and 10 sub-branches in all economi-cally dynamic areas of the country. Thanks to the MFI, customers gain productivity, employment is created and quality of life improves. Special attention is paid to the female target group, including a specific credit product with an educational dimension.

At the end of 2010 Confianza signed a merger agreement with Caja Nuestra Gente. From now on they will operate together as Banconfianza, the first microfinance bank focusing on rural areas in Peru.

www.FInanCIeraConFIanza.pe

FInCa armenIa

F inca is the largest MFI in Armenia in terms of clients and credit portfolio. Finca was

founded in 1999 with the American network Finca International as the sole shareholder. 25% of the loan

portfolio (= 40% of customers) goes to rural areas to finance trading, agriculture and livestock breeding. More than 37,000 Armenian bor-rowers have obtained loans averag-ing USD 500.

With nineteen branches, Finca Armenia covers the most densely populated regions of the country. four new branches are planned. The loan portfolio is spread over three categories: personal loans, group loans and rural activities.

www.FInCa.am

FInCa ConGo

F inca drC was founded by Finca International in 2003. It provides easy access to fi-

nancial services to people from the lowest income groups. It was one of the first microfinance institutions in the country and wants to become the largest by means of a market-directed offering.

Finca DRC has five branches, fo-cuses on urban commercial centres and provides loans to individuals and village communities. The loan portfolio stands at over USD 10 mil-lion. More than 60,000 customers (an increase of 22.3%) have average loans of USD 337. MFI also manages an additional USD 4.2 million in customer savings.

FIe Gran poder

armenIa loan


37,975ClIents


AMDCUrrenCy

perU eqUIty


75,813ClIents


PEnCUrrenCy

ConGo drC loan


61,825ClIents


UsDCUrrenCy

http://www.financieraconfianza.pe

http://www.finca.am


FInCa jordan

F inca has been providing mi-crocredit in Jordan since 2007. Finca Jordan has a headquar-

ters in Amman, three branches in Al-Hussein, Hitten and Zarqa and four agencies. Finca focuses on ru-ral areas with widespread poverty.

It stands out from the competition with a diversified product offering, including group loans (small busi-nesses and women), Islamic credits, flexible working capital loans and SME loans. The average loan is under USD 600. 98% of customers are women.

www.FInCa-jordan.orG

Forjadores

m ex ico ’s microfinance sector has developed considerably in recent years. In 2005 a

number of experienced local micro-finance experts set up ‘Forjadores-Negocios’, which operates mainly in rural areas and works exclusively with female clients. Group loans make up 92% of its portfolio. Each group consists of no less than nine and no more than thirty members.

Forjadores’ nineteen branches can present impressive growth figures: in December 2010 it had 53,500 customers. The main shareholder is the ACP Group, a solid partner that is also the main shareholder of the large Peruvian MFI Mibanco.

The ACP Group is focusing on the development of several MFIs in Latin America.

www.Forjadores.Com.mX

FUndaCIón alternatIva

t he nGo Fundación alternativa para el desarollo was founded in 1991 by private entrepreneurs and

local social players. The goal was to start up projects with a financial and social impact in deprived areas of Ecuador. Alternativa is a found-ing and active member of Fome (Forum of the Micro Enterprise)

hkl

meXICo loan


53,520ClIents


MXnCUrrenCy

jordan loan


10,804ClIents


UsDCUrrenCy eCUador

loan


5,074ClIents


UsDCUrrenCy

http://www.finca-jordan.org

http://www.forjadores.com.mx


and RFR (Red Financiera Rural). It was also a co-founder of the Grupo Solidario and of Banco Solidario.

Fundación Alternativa focuses on financial services, supporting migrants returning to Ecuador and training and advising public or-ganizations, commercial businesses and voluntary associations. The six current branches are located in the northeast of the country. In 2011, however, two new branches were opened in the provinces of Chimbo-razo (province with the highest illit-eracy rate) and Napo (the economi-cally least developed province).

www.FUndaCIonalternatIva.orG.eC

hkl

h a t t ha k a k sek a r is an NGO that was set up in 1996 at the initiative of Oxfam Quebec

as a food security project in the province of Pursat. Hattha Kak-sekar Limited (HKL), which has been active since 2001, invests pri-marily in rural areas of Cambodia (representing 65% of customers), where agriculture and fishing are the main economic activities.

Besides its headquarters in Phnom Penh, HKL has 24 branches in 11 provinces. For the near future it is planning to extend into three south-ern provinces. HKL provides both personal and group loans. Loans run between USD 25 and 15,000.

www.hkl.Com.kh

Imon

I n 1999, the National Association of Businesswomen in Tajikistan and Mercy Corps set up the

very first microfinance project in the country. IMON International fo-cused from the outset on entrepre-neurs in wholesaling and retailing, service industries and small-scale manufacturing. 63% of loans are group loans, representing 32% of the outstanding portfolio. Personal loans account for a share of 56%. The largest loan granted amounted to USD 20,000.

Apart from its headquarters in Khujand (second largest city in Tajikistan), IMON International has nine branches in the three regions of the country, where some 90% of the population lives.

www.Imon.tj

kwFt

s ince 19 81 k en y a women F i n a nc e tr u s t has been Africa’s largest financial

institution that works exclusively with and for women. KWFT fi-nances female entrepreneurs so as to improve their economic status and quality of life. No institution penetrates deeper into the cities and rural areas of Kenya. KWFT has more than 400,000 affiliated members.

Besides business loans, KWFT also offers savings products,

FUndaCIón alternatIva

tajIkIstan loan


28,900ClIents


UsDCUrrenCy

kenya loan


416,813ClIents


EURCUrrenCy

CamBodIa loan


47,952ClIents


UsDCUrrenCy

http://www.fundacionalternativa.org.ec

http://www.hkl.com.kh

http://www.imon.tj


consumer loans, credits for clean energy projects and mobile bank-ing. Customers enjoy advantageous prices, attractive interest rates, a safe savings environment and a female-friendly service (like mother and child space in any office and ATM machines).

www.kwFt.orG

mBk ventUra

m i t ra B i sn i s k e l u a r ga ven -t u r a (mBk ) is an Indone-sian microfinance institu-

tion that was founded in 2003 and focuses exclusively on rural women in Java. At the end of 2010, MBK had around 200,000 clients and a loan portfolio of EUR 12.6 million. With group loans ranging from EUR 70 to 490, MBK succeeds in reaching very poor women, most of whom do not own land and are illiterate, and who live from small livestock farming, snack stalls or vegetable growing.

In 2010-2011, MBK intends to launch a new product, ‘Working Capital for Small Enterprises’, in amounts of USD 500 to 1,000. 1,200 people work at MBK Ventura, in 160 branches.

www.mBk-ventUra.Com

prestanIC

p r es t an i c was established in 1991 in Managua as the microcredit department of

the NGO CEPAD. Today, the MFI has eighteen branches in the centre and west of the country. Prestanic has focused from the outset on agricultural activity.

70% of the portfolio is microfi-nance for livestock breeding. Loans are also made for vegetable farm-ing, trading, services and small businesses. Personal loans run between USD 125 and 20,000. Poten-tial borrowers’ repayment ability is evaluated using e-scoring software. Due to the ‘Movimiento de no pago’ (no payment movement) in 2009, Prestanic is facing difficulties. In-cofin is closely monitoring this MFI.

www.prestanIC.orG.nI

seF InternatIonal

s mal l e n t e r p r i s e F und (se F ) I n t e r na t i o na l has grown from the World Vision Armenia

Micro Enterprises Development Programme (MED). Since 1998 it has been known as the largest MFI in the country. It is also Armenia’s third non-banking financial institu-tion.

SEF International is well repre-sented in rural and agricultural loans, thanks to its cooperation with Ardshin invest bank, the bank

seIlanIthIh

IndonesIa loan


211,155ClIents


IDRCUrrenCy

nICaraGUa loan


10,859ClIents


UsDCUrrenCy

armenIë loan


8,219ClIents


UsDCUrrenCy

http://www.kwft.org

http://www.mbk-ventura.com

http://www.prestanic.org.ni


with the most widely distributed network in Armenia. SEF Interna-tional’s high quality and diversified portfolio is divided into agricul-tural loans (27.4%), business loans (44.4%), construction loans (4.8%) and consumer loans (23.4%). It has nine branches in four of the eleven Armenian regions.

seIlanIthIh

w i t h nea r l y 15 , 0 0 0 b o r-r owe r s , Seilanithih (established in December

2003) is one of Cambodia’s most successful MFIs. The target group consists of farmers (for group loans) and micro enterprises (for microfinancing). The group loans range between USD 25 and 600, and personal loans between USD 100 and 5,000. Consumer and business credit facilities are also offered. In addition, a loan product has been created for farmers who have fol-lowed training programmes by the Provincial Department of Agricul-ture, Forestry and Fisheries.

Seilanithih employs 165 employ-ees in 23 branches.

www.seIlanIthIh.Com.kh

semIsol

s emiso l started in 2004 and inherited then the credit portfolio of the NGO Funda

Chiapas. The MFI has developed five products, of which group loans of up to USD 3,000 are the most important. Members can also bor-row parallel loans to cushion peak needs. 79% of the loan portfolio

seF InternatIonal

meXICo loan


10,582ClIents


UsDCUrrenCy

CamBodIa loan


14,395ClIents


UsDCUrrenCy

http://ww.seilanithih.com.kh


consists of loans of less than USD 1,000. Since last year SemiSol has also provided personal loans and construction loans. Most customers are from the highly rotating retail area, especially in the food and clothing sectors.

SemiSol has nine branches and is represented in the coastal region of Chiapas and in Comitán, where it opened an office during the past year. This immediately provided a

breakthrough into a new market, given the huge differences between the two regions in terms of climate and population.

tenGer

t enGer is an investment hold-ing company with interests in four subsidiaries in Mongolia:

XacBank LLC, XacLeasing LLC, Horus Nomadic Solutions LLC and TenGer Insurance LLC, all market leaders with significant growth potential.

The group was formed in 2001 fol-lowing the merger of Goviin Ehlel (founded in 1999 by Mercy Corps) and X.A.C. (set up in 1998 by the United Nations Development Pro-gramme). Both were non-banking institutions with a focus on micro-credits for the SME sector. In 2008, XAC-GE LLC was renamed TenGer Financial Group LLC (TFG).

www.tenGerFInanCIalGroUp.mn

monGolIa loan

holdInG Company,

does not IssUe loans

EURCUrrenCy

http://www.tengerfinancialgroup.mn


Investments In mICroFInanCInG FUnds2. I nco f i n c v s o does not invest only

in microfinance institutions. The fund is also a shareholder

in three other funds: Impulse Microfinance Investment Fund, Rural Impulse Fund and MFX Fund. These investments total EUR 2,412,907.

impulse microFinance inVestment Fund

Impulse Microfinance Investment Fund is a Belgian investment fund for microfinance with an invest-ment portfolio of EUR 40,506,702 (at 31/12/2010). With an investment of EUR 1,000,000, Incofin cvso holds 7.03% of the capital of Impulse Microfinance Investment Fund. The fund advisor of Impulse Microfi-nance Investment Fund is Incofin Investment Management.

rural impulse FundRural Impulse Fund is a Luxem-

bourg-based investment fund for rural microfinance with an invest-ment portfolio of USD 33,489,997 (at 31/12/2010). Incofin cvso has a shareholding of EUR 1,036,882, representing 16.67% of the capital. The fund advisor of Rural Impulse Fund is Incofin Investment Management.

mFx FundMFX Fund is a US fund that

provides currency exchange rate hedging for investment funds. This allows Incofin cvso to offer hedged local currency financing to MFIs, also in countries where this is not possible through conventional avenues.

This shareholding amounts to EUR 376,025. The Incofin share represents 5.51% of the capital.

7.03%*

Impulse microfinance Investment Fund

16.67%*

rural Impulse Fund


I nco f i n c v s o is the silent part-ner, with a 51% equity stake, in the Incofin Investment

Management limited partnership. Incofin Investment Management was founded on June 25, 2009. Incofin Investment Management is fund adviser to six microfinance funds.

Investment In InCoFIn Investment manaGement

3.

5.51%* 51%*

mFX Fund Incofin Investment management *Inc

ofin

cvs

o’s

shar

e of

cap

ital


InCoFIn Investment manaGement

At the end of 2009 the Board of Directors of Incofin cvso decided on a structural change. In this way the development and advising of microfinance funds was placed in the separate company Incofin Investment Management (Incofin IM). This separating of the invest-ment and advisory functions avoids potential conflicts of interest.

Incofin Investment Management was founded on June 25, 2009 as a limited partnership with Incofin cvso as the silent partner and Incoteam (the company providing the management) as the active part-ner. The silent partner has limited liability and is not involved in the management of the company.

the actiVities oF incoFin imIncofin Investment Management

manages six funds totalling EUR 274 million. The product portfolio consists of loans, equity invest-ments and subordinated loans.

the strengths oF incoFin imWithin Incofin Investment Man-

agement, an international and mul-tilingual team of 25 experts works to provide tailored financial solu-tions. Incofin has particularly wide experience with microfinance and international markets and contacts with investors worldwide. Incofin Investment Management’s methods

are fully aligned with those of In-cofin cvso. Incofin IM too pursues a

“double bottom line” approach, with financial and social performance on an equal footing. These are evalu-ated using the ECHOS© tool and the CRS risk management tool.

the incoFin im working method

Candidate 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 performance and financial profit-ability, the Investment Committee can give the green light. Incofin Investment Management closely monitors all investments, performs annual audits and reports back to shareholders.

echos©: measuring social perFormance

Investing in MFIs is not suffi-cient in itself to be recognized as a “social investor”. Incofin wants in the first place to invest in MFIs that are able to demonstrate a high social impact. Incofin measures MFIs’ social performance using the ECHOS© tool, which it has devel-oped in-house.


MFIs applying for an investment from Incofin go through a detailed procedure. This includes a field audit, with the ECHOS© question-naire 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 environ-ment 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©, 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.

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


incoFin cVso

inVestors

Private enterprises and individuals

strategy

Early stage investment in high potential microfinance institutions, with a focus on social performance

products

Loans and equity investments

rural impulse Fund i

inVestors

Development banks and European financial sector

strategy

Investing in commercial microfinance institutions offering financial services in disadvantaged rural areas

products


rural impulse Fund ii

inVestors

Development banks and European financial sector

strategy

Investing in commercial microfinance institutions offering financial services in disadvantaged rural areas

products


the Funds managed by incoFin inVestment management

30million euro

30million euro

120million euro


impulse microFinance inVestment Fund

inVestors

European financial sector, private enterprises and individuals

strategy

Investing in microfinance institutions at a later stage

products


Vdk mFi loan portFolio

inVestors

VDK (Belgian retail bank)

strategy

Investing in large and well-developed microfinance institutions

products

Loans

VolksVermogen

inVestors

Volksvermogen (Belgian investment company)

strategy

Selective investment in microfinance institutions and SMEs in developing countries

products


43million euro

75million euro

10million euro

4

4


Corporate governance

management structure

executiVe committee » Frans Verheeke (Chairman) » Willy Bosmans » Jos Daniëls » Eric Delecluyse » Johan De Schamphelaere »Yvan Dupon » Paul Steppe »Ann Van Impe

The Executive Committee is responsible for preparing and monitoring the current and long-term strategies, objectives, plans and budgets, and for following up the general business of the company. The Executive Committee met four times in 2010.

board oF directorsThe Board of Directors met twice in 2010. Members of the Board of Directors

receive no remuneration or fringe benefits of any kind. The Board of Directors of Incofin cvso holds a two-day meeting every two years, at which it discusses its corporate strategy in particular in the light of its results, its future prospects and developments in the microfinance sector. The most recent strategic exercise took place in February 2011.

Corporate GovernanCe• 61

chairman

FransVerheeke IndependentChairmanVolksvermogen,ChairmanHogeschoolGent

Directors

WillyBosmans WBManagementBVBA Manager

BenoîtBraeckmanSuez/FondsMariaJanssens-Braeckman FormerheadassetmanagerElectrabel

ErikBruyland RoulartaMediaGroup SeniorjournalistatTrends

JosDaniëls VKWSynergiavzw HonoraryChairmanoftheBoardofDirectors

EricDelecluyse ACVVoedingenDiensten FormerChairmanACVVoedingenDiensten

FrankDeLeenheer GimvInvestorRelations&CorporateCommunicationsManager

JohanDeSchamphelaere VDKSpaarbankChairmanoftheManagementCommittee,VDKSpaarbank

ReinDeTremerie Volksvermogen GeneralSecretaryACV-CSCMetea

EmmanuelDoutrepont FoodIndustrySocialFund Vice-President,FoodIndustrySocialFund

YvanDupon YvanDuponConsultBVBA Manager

MajindeFroidmont

MichielGeers Volksvermogen SecretaryGeneralVolksvermogen

TonyJanssen ACV-CSCMeteaFormerPresident,ACVMetaalandEuropeanMetalworkers'Federation

FannyMachiels GroupMachiels GeneralManager,MachielsGroup

GuyPourveur Anonymousfamilies CompanyDirector

AndréSarens Electrabel HeadofBelgianGridParticipations

PaulSteppe KBCGroup HonoraryChairmanExecutiveCommitteeCentea

MarcTimbremont Volksvermogen ManagingDirector,HuisvestingHetVolk

PeterVandenBrock Pax-BankDirector(retired)Pax-Bank,ManagementBoardofthePax-Bank-Stiftung

WalterVandepitte MRBB&AVEVE HonoraryChairman,AVEVEGroup

RolandVanderElst FormerprofessorEHSAL

LucVanDessel ACVBouw-Industrie&Energie Chairman

HermanVandeVelde VKW ManagingDirector,N.V.VandeVelde

AnnVanImpe VDKSpaarbank LegaladviserVDKSpaarbank

HenriVansweevelt Bekaert FormerVice-PresidentBekaertGroup

FrankVereecken VDKSpaarbank AssistantDirector,SecuritiesDepartment,VDKSpaarbank

LynVerelst Solid GeneralManager,Solid

MartineVerluyten Umicore ChiefFinancialOfficer,Umicore

DirkVyncke VynckeEnergietechniekn.v. ChairmanoftheBoard,VynckeEnergietechniek

Honorary Directors

FrankLambertChairman,AntwerpManagementSchoolFundforsustain-ableandinnovativeentrepreneurship

JozefLambrechts† HonoraryManagingDirector,Kredietbank(nowKBC)

GuidoLamote Director,Trias


HEnRI vAnswEEvElT - EMMAnUEl DoUTREPonT - fRAnk vEREEckEn - PAUl sTEPPE

RolAnD vAn DER ElsT - Tony jAnssEn - BEnoîT BRAEckMAn - joHAn DE scHAMPHElAERE

MIcHIEl GEERs - wIlly BosMAns - MARTInE vERlUyTEn - fRAns vERHEEkE

Board oF dIreCtors


yvAn DUPon - fRAnk DE lEEnHEER - AnDRé sAREns

jos DAnIëls - MARc TIMBREMonT - GUy PoURvEUR - wAlTER vAnDEPITTE

ERIc DElEclUysE - REIn DE TREMERIE - Ann vAn IMPE - HERMAn vAn DE vElDE - DIRk vynckE - PETER vAn DEn BRock

noT on THE PIcTURE: lUc vAn DEssEl - MAjIn DE fRoIDMonT - fAnny MAcHIEls - ERIk BRUylAnD - lyn vERElsT


inVestment committee » Frans Verheeke (Chairman) » Johan De Schamphelaere » Michiel Geers » Tony Janssen » Peter van den Brock » Walter Vandepitte

The Investment Committee is responsible for implementing the company’s investment policy, as defined in the Investment Policy document. The Investment Committee is composed of members of the Board of Directors who have special-ist knowledge of financial affairs and development issues. The Committee met six times in 2010.

audit committee » Roland Van der Elst (Chairman) » Marc Timbremont » Henri Vansweevelt

The Audit Committee supervises the company’s procedures and processes, and all aspects of risk and risk the management. The Audit Committee is made up of members of the Board of Directors. The Committee met once in 2010.

The members of the above committees are not remunerated.

auditorDeloitte Bedrijfsrevisoren, represented by Frank Verhaegen and Maurice Vrolix

shareholders Incofin cvso issues shares worth EUR 2,604 per share (nominal value of EUR 2,480

euros + 5% share premium) and 1/20th shares worth EUR 130.20 (nominal value of Euro 124 + 5% share premium).

The share capital of Incofin cvso increased in 2010 by EUR 2,376,583, reaching EUR 14,158,072 at the end of December 2010. The number of shareholders rose from 308 to 332. Capital growth remains important for Incofin cvso to meet the growing demand from MFIs for equity investments. Incofin cvso is recognized as a cooperative by the National Council for Cooperation (NRC) as from August 1, 2009. This decision was published in Belgian Official Gazette of November 27, 2009. This recognition means that private investors are exempt from withholding tax on


dividends up to a maximum of EUR 180 (indexed amount).Since 2010 Incofin cvso has been recognized as microfinance development fund.

Thanks to this recognition investors buying shares for a minimum amount of 350 euro, can obtain a tax reduction of 5% (with a maximum reduction of 300 euro).

Volksvermogen Banks&HoldingCompanies 1,438,400€ 10.16%

ACV-CSCMetea Professionalassociations 1,202,800€ 8.50%

VDKSpaarbank Banks&HoldingCompanies 843,200€ 5.96%

SocialFundforFoodindustryEmployees Professionalassociations 669,600€ 4.73%

Anonymous Foundations,associationsandcooperatives 565,440€ 4.00%

ACVVoedingenDiensten Professionalassociations 496,000€ 3.50%

Gimv Industry&Businesses 496,000€ 3.50%

KBCPrivateEquity Banks&HoldingCompanies 407,960€ 2.88%

Umicore Industry&Businesses 379,440€ 2.68%

YvanDuponConsultBVBA Privateindividuals 295,120€ 2.09%

Pax-Bank Banks&HoldingCompanies 285,200€ 2.02%

VKWSynergiavzw Professionalassociations 263,500€ 1.86%

WBManagement Privateindividuals 262,880€ 1.86%

SocialFundoftheFoodIndustry Professionalassociations 252,960€ 1.79%

Electrabel Industry&Businesses 250,480€ 1.77%

VanderElst,Roland Privateindividuals 248,000€ 1.75%

Anonymous Privateindividuals 248,000€ 1.75%

StiftungsfondsKircheundCaritasderBankimBistumEssen Banks&HoldingCompanies 248,000€ 1.75%

ACVConstruction-Industry&Energy Professionalassociations 248,000€ 1.75%

Koinon Industry&Businesses 238,080€ 1.68%

KingBaudouinFoundation Foundations,associationsandcooperatives 238,080€ 1.68%

GillèsFoundation Foundations,associationsandcooperatives 215,760€ 1.52%

StichtingMariaJanssens-Braeckman Foundations,associationsandcooperatives 202,368€ 1.43%

Vandersanden,Constant Privateindividuals 198,400€ 1.40%

MRBB Professionalassociations 177,320€ 1.25%

AVEVE Industry&Businesses 177,320€ 1.25%

WillemenJohan Privateindividuals 148,800€ 1.05%

Arcofin Banks&HoldingCompanies 148,800€ 1.05%

Shareholders<1.00% 3,307,204€ 23.37%

14,153,112 €



5

5


social perFormance

Incofin cvso has investments in 29 microfinance institutions in 22 countries. Together, these MFIs reach 1,519,192 clients, of whom 76% are women. The involvement of these local intermediaries creates a pow-erful leverage effect for the Incofin invest-ments. The combined loan portfolios of the MFIs in which Incofin invests amount to EUR 952 million.

The MFIs in Incofin’s portfolio are healthy and efficient financial institutions: they have good quality loan portfolios (with limited delinquency), they keep their overheads under control, and are profit-able. Data on the Incofin portfolio is given in the table opposite.

Valuation rules

Without prejudice to the specific valua-tion rules mentioned hereinafter, the valu-ation rules that apply are those that were established pursuant to the provisions of the Royal Decree of January 30th, 2001 in implementation of the Companies Act, more particularly Book II, title I, chapter II relating to valuation rules. Unless stated otherwise, the article numbers refer to the

Key figures of Incofin cvso

sTATIsTIcs on THE IncofIn cvso PoRTfolIo 31/12/2010*

financial indicators

Delinquentloansas%ofloanportfolio 5.90%

Operatingcostsas%ofloanportfolio 26%

Growthinnumberofclients 111%

ReturnonEquity(ROE)excludingdonations 12%

SumoftheMFIstotalloanportfolios 951,820,532EUR

Averageloan 868,3EUR**

number of active MfIs 27

Smallinstitutions(portfolio<EUR5million) 3

Mediumsizedinstitutions(portfolioEUR5-20million) 11

Largeinstitutions(portfolio>EUR20million) 13

Smalloutreach(with<10,000clients) 5

Mediumsizedoutreach(with10,000to20,000clients) 7

Largeoutreach(with>20,000clients) 15

Loans<EUR500:average 6

LoansEUR500-EUR1.000:average 12

LoansEUR1,000-EUR2,000:average 7

Loans>EUR2,000:average 2

Total number of MfI clients 1,519,192

Percentageofwomen 76%

* ACEP Burkina Faso and TenGer Financial group (Mongolia) are not included in this table. ACEP Burkina Faso is a start-up institution that will only become operational in 2011. TenGer is a holding company.

** Acorde (Costa Rica) is not included in this figure because the institu-tion also provides loans to small and micro enterprises. The average loan is therefore much higher than with other MFIs.

key FIGUres oF InCoFIn Cvso• 71

relevant articles in the above-mentioned Royal Decree of January 30th, 2001.

Valuation oF assetsWithout prejudice to the specific valu-

ation rules mentioned hereinafter, each asset item is valued separately at its ac-quisition cost and included in the balance sheet at that amount, after deduction of the depreciation and reductions in value on the individual asset items in question (art. 35, first paragraph).

intangible Fixed assets

Intangible fixed assets are valued at their acquisition value, exclusive of additional costs. They are amortized over the assets’ economic lifetime. Software is amortized over 5 years.

tangible Fixed assets

Tangible assets are valued at their acquisition cost, exclusive of additional costs. They are depreciated over the assets’ economic lifetime, being:

» office technology 5 years » computers 3 years » furniture 10 years

participations and shares

Participations and shares are valued at their acquisition cost, exclusive of addi-tional costs (art. 41, §2).

Write-downs are applied in case of sustained loss of value, as justified by the status, the profitability, or the prospects of

inVestments per currency

sol 8%

BolIvIAno 10%

EUR 10%

oTHER 16%

UsD 50%

DRAM 6%

inVestments per instrument

EqUITy 32%

loAn 68%


the company whose participations or shares are held (art. 66 §2 - Royal Decree January 30th, 2001).

The participations and shares that are listed under financial fixed assets are not revalued (art. 57, §1).

Once a participation has been written down, this particular participation will be revalued back up to no more than the original acquisition value, if the status, the profitability or the prospects of the company justify this (in the judgment of the Board of Directors).

Fixed-interest securities

Fixed-interest securities are valued at their acquisition cost. The difference between the acquisition value and the redemption value is transferred to the income statement on a straight-line basis pro rata temporis.

amounts receiVable

Without prejudice to the provisions in articles 67, §2, 68 and 73, accounts receivable are posted at their nominal value (art. 67, §1) at balance date.

amounts receiVable aFter one year and within

one year

Without prejudice to the provisions in articles 67, §2, and 73, accounts receivable are posted at their nominal value (art. 67, §1).

As per article 68, write-downs are applied where repayment of all or part of the receiv-able on the repayment date is uncertain.

To make allowance for the special credit risk that arises from extending credit to high-risk countries with unstable economic and political climates, global depreciation

of 1% is applied annually to the outstanding investment portfolio), weighted by the ECA risk scores published per country. Said glo-bal depreciation is charged in accordance with article 47 of the RD on the Companies Act, given the similar technical and legal characteristics of these claims.

The level of this write-down can be ad-justed on the basis of historical credit loss data.

inVestments and cash and cash equiValents

These are entered at their acquisition value or at market value if the latter is lower at balance date (art. 74).

Valuation oF liabilitiesproVisions For risks and costs

Provisions are set up to cover clearly specified types of losses or costs that are probable or definite at balance date, but the amount of which it is not possible to assess precisely (art. 50 - Royal Decree January 30th, 2001).

amounts payable aFter one year and within

one year

Without prejudice to the other provisions in articles 77, 67, §2 and 73, amounts payable are posted at their nominal value (art. 67, §1).

translation oF Foreign currencies (art. 34)

Amounts payable and amounts receivable in foreign currency are translated at bal-ance date at the closing rate at balance date or at the last available rate before balance date. The translation difference is recog-nized in the income statement.


explanatory notes to the accountsexplanatory notes to the incoFin 2010 balance sheet

At the end of 2010 the total assets of Incofin amounted to EUR 30,207,341, an increase of 37% over the previous year. Incofin’s equity at 31 December 2010 amounted to EUR 17,080,239, up by no less than EUR 4,077,138 (+ 31%) on the previous year. 61% of this increase of EUR 2,376,583 (to EUR 14,158,072) is due to the capital increase and the associated issue premiums. In addition, equity is also significantly (+ 36%) enhanced by the EUR 1,485,300 in-crease in retained profit to EUR 1,628,748 at year end. This increase in equity is largely due to the sale and merger agreement which was concluded for the participation in Confianza, Peru.

The Board of Directors proposes to offer Incofin shareholders a capital remuneration of 2.5% on their invested capital for 2010. This is 50 basis points higher than for 2009. Those partners who have injected capital during the year will be remunerated pro rata temporis in accordance with Article 35 of the Articles of Association.

Debt in the form of short and long term loans increased by EUR 3,462,500 in 2010. Existing loans amounting to EUR 1,237,500 were repaid and new loans were taken out with VDK Spaarbank, KBC, Dexia and Hefboom in a total of EUR 4.7 million. This borrowing fits with Incofin’s strategy of increasing the company’s total available funds by attracting debt capital. The vol-ume of loans may, however, never exceed

1992

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CAPITAL(IN EUR ‘000)

NUMBER OF SHAREHOLDERS

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0

4,000

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10,000

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14,000

16,000

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eVolution oF capital and shareholders incoFin cVso

eVolution oF total assets and portFolio

2005

2006

2007

2008

2009

2004

2010

TOTAL ASSETS(IN EUR ’000)

PORTFOLIO(IN EUR ’000)

5,000

0

10,000

15,000

20,000

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30,000

35,000

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the amount of Incofin’s equity. At the end of 2010, Incofin had EUR 11,952,500 of loans effectively outstanding, equal to 70% of its equity. It also had undrawn credit lines totalling EUR 3,047,500 with KBC, VDK and Dexia at 31/12/2010. Within the limits set by the Board of Directors these may be drawn down up to 100% of the volume of the shareholders’ equity.

On the assets side of the balance sheet, the gross investment portfolio (before general depreciation and specific write-downs) amounted at year end to EUR 25,090,112; that is EUR 7,976,353 of equity investments and EUR 17,113,759 of loans. Overall the investment portfolio grew by 20% in 2010. This net increase took place entirely in the loan portfolio through new investments in Nigeria, Costa Rica, Armenia, Mexico, Ecuador and Mongolia; and a further strengthening of MFIs that were already in the portfolio.

Equity investments decreased by a net EUR 370,947. This is entirely due to the sale of 50% of the Confianza shares that stood in the Incofin cvso portfolio at EUR 1,846,788. Without this sale, the value of the portfolio of participations would have risen by EUR 552,447. This increase is primarily due to in-creases in existing participations in Bolivia, Argentina and Peru, and to the payment of stock dividends amounting to EUR 475,342. The remaining growth in the investment portfolio is explained by the conversion of preference shares into ordinary shares at Proempresa in Peru, which was accompa-nied by an increase in the carrying value of this investment.

The net investment portfolio amounted at the end of the financial year to

impact portFolio

2003

2004

2005

2006

2007

2008

2009

2010

TOTAL VOLUMEDISBURSEDIN EUR OR USD(IN EUR ‘000 )

TOTAL VOLUMEDISBURSED INLOCAL CURRENCY(IN EUR ‘000)

10,000

0

20,000

30,000

40,000

50,000NUMBER OF DISBURSEMENTSIN EUR OR USD

NUMBER OFDISBURSEMENTS IN LOCAL CURRENCY

20

0

40

60

80

100

120

160

140

142 transactions executed with 47 partners since 2003

more than eur 43.6 million inVested in the period 2003-2010,

oF which 23% in local currency


EUR 24,222,090, after the following adjust-ments:

1. The Fundación Nieborowski, which is structured as an NGO, did not re-cover from the crisis that manifested itself in Nicaragua in 2009 following the creation of the Movimiento de No Pago (non-payment movement) which knew it could rely on the support of Nicaragua’s political leaders. The loan to the Fundación Nieborowski was therefore writ-ten off in full in Incofin’s books by means of a specific write-down of EUR 197,145. This additional write-down was largely offset by the EUR 181,807 compensation paid out on this file by Delcredere (Belgian na-tional foreign investment insurance company).

2. In the aftermath of the same crisis the Nicaraguan MFI Prestanic also struggled in the course of 2010. As a precautionary measure, a specific write-down of EUR 164,334, equal to 50% of the principal amount, was included in the accounts at year end. Delcredere also guarantees the remaining 50% of this transaction. Nevertheless, the MFI continues to pay down its loan, and as early as February 2011 a part of the written-down balance was recovered. The fund manager is closely monitoring this file with a view to limiting the damage.

3. After consultation with the CBFA, the general provisions for possible risks in the portfolio are no longer recorded as a provision on the liabili-

BO

LIV

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PE

RU

AR

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NIA

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4.5

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LGIU

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SO

% EXPOSURE ON TOTAL ASSETS

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16.0BOOKVALUE(in mio EUR)

US

D

BO

B

EU

R

AM

D

PE

N

MX

N

NG

N

CR

C

IDR

AR

S

TZS

HTG

XO

F

2,000

0

4,000

6,000

8,000

10,000

12,000

14,000

FX HEDGED(LOANS)

(NET BOOK VALUE PORTFOLIO IN

EUR ‘000)

NOT HEDGED(EQUITY)

book Value portFolio per country

book Value portFolio per currency


ties side of the balance sheet, but as depreciation on assets. In the course of 2010, EUR 155,446 was added to this general depreciation account.

4. On the other hand, the specific write-downs related to:

a. the investment in Prestanic, in an amount of EUR 164,334;

b. the additional specific write-down in respect of Fundación Nieborowski, to cover the amount of EUR 15,338 not recovered from Delcredere

were both imputed in 2010 directly to the general depreciation account and

therefore do not affect the results for 2010. This has the effect of reducing the outstanding balance of general depreciation from EUR 219,139 at the end of 2009 to EUR 194,914 at the end of 2010.

5. For the participating interest in the MFI FIE Gran Poder, it was decided to reverse the separate write-down of EUR 88,021 which had been charged in 2009 owing to the devaluation of the Argentinian peso. This write-down is no longer justified because the intrinsic value of this participa-tion increased in the course of 2010

BAlAncE In EUR - AssETs 2009 2010

fIXED AssETs 8,232,814 7,861,867

Iv. financial fixed assets 8,232,814 7,861,867

Grossequityinvestments 8,366,016 7,976,353

Valuedecreaseequityinvestments -133,202 -114,486

cURREnT AssETs 13,753,054 22,345,473

v. Receivables after 1 year 7,657,321 10,084,018

Grossloanportfolio 8,073,606 10,673,222

Specificdepreciationloans -197,145 -394,290

Generaldepreciation -219,139 -194,914

vII. Receivables within 1 year 4,408,713 8,754,817

Tradereceivables 24,771 139

Grossloanportfolio 4,320,199 6,440,539

Specificdepreciationloans -164,334

Taxes&VAT 61,078 56,999

Otherreceivables 2,665 2,421,470

vIII. longterm investments 128,576 2,684,464

IX. cash and banks 1,362,847 557,374

X. Accrued income and deferred charges 195,598 264,804

Deferredcharges 23,625 33,425

Accruedinterests 169,473 231,379

Otheraccruedincome 2,500 0

ToTAl AssETs 21,985,868 30,207,340


to well above its historical cost in Incofin’s books.

6. For Incofin’s participing interest in ACME (Haiti), a specific write-down of EUR 69,305 was recorded at year end. Initially, this write-down amounted to EUR 300,000, given the enormous damage following the earthquake in January 2010, but the institution was able to considerably improve its equity position towards year end.

At year end, the investment portfolio represented 80% of the assets. Cash and short-term investments amounted to EUR

3.2 million, corresponding to 11% of the Incofin balance sheet total. The balance consists of a receivable of EUR 2,421,155 following the sale of 50% of the Confianza shares, deferrals and accruals (primarily deferred interest of EUR 264,804), and other recoverable taxes and VAT.

As off-balance sheet obligations of Incofin at the end of 2010 we mention the forward transactions and Cross Currency Interest Rate Swaps contracted with KBC Bank and MFX Solutions to hedge exchange rate risks for the outstanding loans to MFIs. These serve to cover all non-euro interest and capital flows for loans issued by Incofin

BAlAncE In EUR - lIABIlITIEs 2009 2010

EqUITy 13,003,100 17,080,239

I. capital 11,781,488 14,158,072

II. share premium 251,088 371,653

Iv. Reserves 827,077 921,766

Legalreserves 70,403 165,093

Otherunavailablereserves 756,674 756,674

v. Accumulated P&l carried forward 143,448 1,628,748

lIABIlITIEs 8,982,768 13,127,102

vIII. Debt payable after 1 year 7,002,500 8,765,000

Existingdebt 7,002,500 8,765,000

IX. Debt payable within 1 year 1,854,487 3,916,620

Totalshorttermseniordebt 1,487,500 3,187,500

Totaltradedebt 58,327 340,097

Totaltaxes&socialdebt 39,439 74,888

Dividendspayable 219,140 313,998

Totalothershorttermdebt 50,082 137

X. Accrued charges and deferred charges 125,781 445,482

Accruedcharges 2,274 66,094

Accruedinterestcharges 69,494 73,011

Deferredincome 54,012 306,377

ToTAl lIABIlITIEs 21,985,868 30,207,340


in U.S. dollars, Mexican pesos, Armenian drams, Costa Rican colons, Indonesian rupiahs and Nigerian naira. At end 2010 Incofin had exchange rate hedging products outstanding in a total notional volume of EUR 15,529,136, at the hedging price. The volume of hedged loans to MFIs in exotic currencies rose significantly in 2010 and now stands at 31% of the hedged loans. The remaining 69% consists of USD loans to MFIs.

explanatory notes to the incoFin 2010 proFit and loss accountIncofin ended the year with a net profit after tax of EUR 1,893,988. This is almost three times the result of last year and includes

- as did last year’s figure - a general depre-ciation charge in an amount of 1% of the gross investment portfolio in the form of receivables weighted on the basis of ECA risk scoring. This general depreciation account has been set up to cover possible future defaults and currency fluctuations. The general depreciation charged in 2010 amounts to EUR 155,446. Specific write-offs were also recorded for Prestanic and Fundación Nieborowski, both Nicaraguan MFIs as explained above, in an amount of EUR 361,478. Of this, EUR 179,672 was imputed against the general depreciation account, with the balance compensated by the insurers.The total income of Incofin (operating income, financial income and extraordinary income) rose by 46% in 2010 to EUR 5,298,129. 9% of Incofin’s income in 2010 consists of operating income, mainly

compensation for losses, 57% of financial income, and 34% of extraordinary income. The discontinuation of the fund advisory activities has the effect of increasing the relative size of financial income in the operation of Incofin cvso. The large amount of extraordinary income relates primarily to the sale of half of the Confianza shares. These were sold by Incofin to the Peruvian MFI Caja Rural Nuestra Gente, which has the Spanish Fundación BBVA Para las Microfinanzas as a promoter. For the second half of the investment in Confianza, Incofin will, after approval by the Peruvian banking authorities, receive shares in the merged MFI Banconfianza, arising from the merger of the MFI Caja Rural Nuestra Gente and Confianza. The impact of this transaction is also very important at the local level since Banconfianza will offer its services to 400,000 customers through 150 branches with 2,000 employees. Also, the presence of a representative from the grouped Incofin-related investors on the Board of Directors of the new institution means that the emphasis on social policy will continue at Banconfianza. Total charges (operating charges, finan-cial charges, extraordinary charges and taxes) amounted to EUR 3,404,141 in 2010. These charges consisted 47% of operating charges (including the compensation of the fund manager, the cost of Delcredere insurance, the general depreciation charge and specific write-downs, and withhold-ing tax on the capital gain following the Confianza sale), 42% of financial charges and 11% of extraordinary charges related to


PRofIT & loss sTATEMEnT In EUR 2009 2010

operational income 915,679 484,410

A. Turnover 876,993 0

B. other income 38,686 484,410

operational charges 1,863,241 1,610,294

B. services and other goods 1,066,768 929,608

Officecosts 130,170 46,765

Transportandtravelling 167,004 0

Fees,managementexpenses,translationsandotherservices 608,010 768,758

Insurances 72,547 83,062

Otheroperatingexpenses(advertising,memberships,events,...) 89,036 31,023

c. Remuneration, social security & pensions 630,362 0

D. Depreciation, amounts written off & provisions 5,424 0

E. value decreases on debtors 136,012 337,252

f. Provisions for commercial risk 0

G. other operating expenses (registration fees, legal formalities,…) 24,675 343,433

oPERATIonAl REsUlT -947,562 -1,125,883

financial income 2,414,258 2,997,241

Incomeportfolio 1,945,731 2,345,072

IncomeBelgianinvestments 11,888 13,967

Otherfinancialincome(positiveexchangedifferences,…) 456,639 638,202

financial charges 957,264 1,439,052

Chargesonseniordebt 406,814 417,007

Otherfinancialcharges(negativeexchangedifferences,swapcharges,…) 550,450 1,022,046

fInAncIAl REsUlT 1,456,994 1,558,189

Extraordinary income 291,897 1,816,477

Extraordinary charges 88,021 300,000

EXTRAoRDInARy REsUlT 203,876 1,516,477

Result before taxes 713,308 1,948,783

Taxes 26,016 54,795

REsUlT AfTER TAXEs 687,292 1,893,988


the specific write-down on the Haitian MFI ACME (EUR 300,000) and taxes related to non-recoverable withholding tax on interest received from abroad. In the profit and loss account the negative currency losses are largely offset by the positive currency gains. The previously mentioned off-balance sheet liabilities in the form of forward transactions (forward foreign currency sales and swaps) serve to hedge the exchange rate risks on the outstanding loans to MFIs. The remaining costs are primarily bank charges, swap costs and the revaluation of cash on bank accounts at closing date.The profit for the financial year is appropri-ated as follows:

1. Profit to be appropriated € 2,037,436

Profitofthefinancialyeartobeappropriated €1,893,988

Profitcarriedforwardfrompreviousfinancialyear €143,448

2. Transfers to capital and reserves € 94,690

Transfertolegalreserves €94,690

Transfertounavailablereserves €0

3. P&l to be carried forward € 1,628,748

Profittobecarriedforward €1,628,748

4. Distribution of profit € 313,998

Dividends €313,998

incoFin

belgium

Sneeuwbeslaan 202610 AntwerpenT: +32 (0)3 829 25 36F: +32 (0)3 740 78 28E-mail: [email protected]

colombia

Incofin Americas SaSCarrera 14 No.93B - 45 Oficina 202BogotáT: +57 742 59 33E-mail: [email protected]

india

India Representative officeChennai, Tamil NaduT: +91 9940658276E-mail: [email protected]

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PHoToGRAPHy ConceptphotosteamAntwerp:SvenEveraert(www.sveneveraert.com);microfinanceinstitutionKompanion,BenjaminStruelens,EllenWoutersPRInTInG DeckersSnoeck

Documents

Incofin Annual Report 2010