May 2016 ARIZ AFD’s CREDIT RISK-SHARING MECHANISM

Table of contents ARIZ’s Key Objectives Potential Beneficiaries and Risk Covered Two Types of Guarantees ARIZ Guarantee for Single Deals ARIZ Portfolio Guarantee ARIZ presentation 2 1. AFD at a Glance 2. ARIZ Risk Sharing Mechanism

ARIZ presentation 3 AFD at a glance

ARIZ presentation 4 AFD at a glance AFD : Established in 1941 the French Development Agency is the bi-lateral Development Bank of France: AFD is AA rated by S&P and AA+ rated by Fitch 100% owned by the French State and subject to Banking Regulation PROPARCO = AFD’s private sector subsidiary (providing funding at market rates) Present in 80+ Countries, Over € 8 Billion New Commitments in 2015 Wide Range of Financing Tools Non sovereign loans to the private and public sectors (concessional or market conditions) Sovereign loans (from very concessional to market conditions) Equity financing Guarantees on loans in EUR, USD and local currencies Grants (projects, studies) 1.1

ARIZ presentation 5 Guarantees at AFD Group AFD : ARIZ a risk-sharing mechanism offering Individual guarantees up to 2 MEUR Portfolio guarantees Equity guarantees Proparco : Different types of guarantees from 2 to 100 MEUR For bonds from banks or corporates For interbank borrowing dedicated to finance private sector corporates For local currency loans from banks to corporate dedicated to productive investment programs For liquidity for money market funds, private equity funds and mobilizing the local saving 1.2

ARIZ presentation 6 ARIZ Risk-Sharing Mechanism

ARIZ presentation 7 ARIZ’s Key Objectives (1/2) Mesofinance financing needs are unadressed because of: SMEs own limits: Not formalized Lack of management competency No projection effort Low level of Capital Few guarantee Financial institutions limits: Reluctant to offer loan to client considered too risky Credit risk analysis appropriate for Corporate Costly guarantee enforcement procedures 2.1 SMALL and MEDIUM ENTERPRISES MICRO-to-SMALL ENTREPRISES Usually / Frequently unaddressed Market by Commercial Banks MICRO- ENTERPRISES MFIs LARGE CORPORATIONS Domestic and International Commercial Banks

ARIZ presentation 8 ARIZ Key Objectives (2/2) ARIZ was designed to bridge the gap of the « missing middle finance » In facilitating SMEs and MFIs access to finance… …by providing a risk-sharing tool to commercial banks… …that is flexible, cost effective and easy to use. A partner for local banks and MFIs in developing countries Promoting private sector development and SMEs especially in Africa : In February 2008 the endowment of AFD’s credit risk sharing mechanism “ARIZ” reaches €250 million In 2015 ARIZ guaranteed outstanding amount was circa €400 million  An on-going initiative to support SMEs in Africa in 2016 (and beyond) 2.1

ARIZ presentation 9 Potential Beneficiaries and Risk Covered Final Beneficiaries of the Guarantee SMEs under local law, individual entrepreneurs, associations and MFIs, All business sectors (except real estate, tobacco, alcohol and weapons…), Start-ups or development projects, New loans financing medium term investments (overdrafts are excluded) Loans denominated in EUR, USD or local currency Risk Covered by ARIZ All risks of default covered on the principal (including political risk and natural disasters) and unpaid interest capped to one year Triggers for call of guarantee: i) In case of default (acceleration of loan decided by the bank) or ii) Insolvency of the client (such is in case of insolvency proceedings) 2.2

ARIZ presentation 10 Two Types of Guarantees 2.4 A Guarantee deal by deal A Guarantee for a portfolio of SME loans ARIZ INDIVIDUAL GUARANTEE FOR A SINGLE DEAL ARIZ PORTFOLIO GUARANTEE

ARIZ presentation 11 ARIZ Guarantee for Single Deals ARIZ Bank SME / MFI ARIZ covers up to 50% of a loan extended by the bank Interests + repayment of principal Fees on the outstanding principal amount Loan Request Step 1 Step 2 Step 3 Request

ARIZ presentation 12 ARIZ Guarantee for Single Deals Target Term loans Maximum Amount & Quota ARIZ guarantees a maximum of 50% of the loan (up to 75% for MFIs) with an upper limit for AFD’s risk exposure of €2 million (i.e. 50% of €4 million loan) Term of guarantee From 2 to 12 years maximum (starting at 1 year for MFIs) Extent of risk covered The guarantee covers maximum 50% of the Final Loss on a Defaulting Loan. The Final Loss being defined as : Principal outstanding amount + due and unpaid interest (at the normal rate of interest due on the loan) up to a maximum of one year's worth of interest due - all sums recovered either from the borrower, or from calls on guarantees and indemnities, or the enforcement of security interests provided by the borrower to underwrite the loan. Fees An eligibility fee of 10 KEUR per annum An annual fee from 1,45% to 2,1% (paid twice a year) on the outstanding guaranteed amount

ARIZ presentation 13 ARIZ Portfolio Guarantee ARIZ Bank SME ARIZ automatically guarantees 50% of each eligible loan Interests + repayment of principal Fees SME 1 2 ARIZ and the bank together define the key features of the portfolio Loan

ARIZ presentation 14 ARIZ Portfolio Guarantee Target SME Term Loans (start-ups and business development) Term of guarantee Time period allowed for building-up of the portfolio: 2 years Maturity of the loans covered: between 1 and 7 years Amount of portfolio guarantee To be defined with the bank Size of the loans Between the equivalent in local currency of 10,000 EUR to the equivalent of EUR Quota 50% of individual loans Extent of risk covered Same as for individual guarantees: 50% of the final loss of every defaulting loan Fees An appraisal fee of 1% on the portfolio sub participation and An annual fee (from 1,45% to 2,1%) based on the guaranteed outstanding amount 2.4.2

ARIZ in partners (Banks, IMF or Guarantee Funds) In 39 countries + 1,7 Bn€ SMEs loans guaranteed M€ guarantees issued from 2008 to % of the risk exposure in SSA major countries: Cameroon, Ivory Coast, Senegal, Madagascar and Mali Between 100 to 120 M€ of guarantees issued every year (121 M€ of guarantees issued in 2015) Sectorial distribution: productive sector (46%), agriculture (25%), microfinance (17%)

Thank you for your attention Nicolas Picchiottino Please visit our website : Thank you for your attention