responsAbility Social Investments AG Risks and microfinance AMFA CONFERENCE

responsAbility Social Investments AG A world leading asset manager in social investments 2 responsAbility Social Investments AG Microfinance, Fair Trade and SME financing in developing countries, debt and equity investments 900 Millions USD of on going investments in 285 Microfinance institutions in the world Independent asset manager founded in 2003 USD 1.3 billion of Assets under Management responsAbility Social Investment AG relies on a long time business partner, Credit Suisse, which was one of the responsAbilitys seed investors. 80 specialist experts with a wide range of competences Local presence in Switzerland, France, Peru, Kenya, India, Hong Kong, Lebanon FINMA regulated Asset Manager Focus on risk management, transparent reporting and Corporate Governance

FOCUS on underwriting assessment and use of credit bureaus What the recent development in the region regarding the : Assessment of the creditworthiness of clients Use of Credit bureau Adequate lending approach : : adequate repayment capacity : analysis cash flow analysis of each client (new and renewal!) adequate threshold of repayment amount to free cash must be in place Overall the impression : increasing attention given by LO / Branch manager and MFI Management on a proper assessment of the repayment capacity of the clients but some trend remains concerning 3 responsAbility Social Investments AG

FOCUS on underwriting assessment and use of credit bureaus In many MFIs according to procedures the ratio of net monthly income / monthly debt repayment has to be below 70%. In some MFIs, in reality around 90% … and it is increasing in many MFIs / countries… and without a proper evaluation of the debts with other MFIs For instance in Georgia : -When considering the loan of the MFI : only 11 % of the clients have a debt monthly repayment above 50% of their income, -But when including the loans with the other MFIs : only 33 % of the clients have a debt monthly repayment below 50% of their income, The majority of customers have loans which are 2 to 5 times greater than average monthly salary. 4 responsAbility Social Investments AG

FOCUS on underwriting assessment and use of credit bureaus Appropriate credit bureau infrastructure : No CB (Tajikistan..) and informal exchanges are not functioning well Existing CB could be : too costly (Azerb.), not exhaustive (Kirg.), update are not done frequently enough (Georgia).., Restrictive (CB not integrating all financial institutions :Banks / MFIs / consumer lending / pawnshop…) In Georgia : only MFIs 1% of the clients with 4 loans / 35 % when including banks / MFIs / consumer lenders… 5 responsAbility Social Investments AG

FOCUS on underwriting assessment and use of credit bureaus Extensive use of credit bureau by MFIs : not systematic check for all the loans barely checked the guarantor, the family members (very few Mfis in almost no systematical check on the global portfolio (post disbursement) even on a periodical basis Update Size of the loan is not an excuse ! On the contrary… 6 responsAbility Social Investments AG