Funding Platform for SMEs Innovative Access to SME Financing Presented by: Aparajita Agrawal Director – Sankalp Forum, Intellecap

Our Journey of Nurturing Innovation & Enterprise Over 100 employees, 70+ clients, 300 engagements, 25 countries Over $200Mn equity raised for impact enterprises Incubated & funded new innovations India’s first impact angel network 55+ members, 7 deals 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 US$ 32 Mn to over 200,000 customers in low-income states 4 Funds Under Mgt with $157 Mn 50+ investments, 9 Exits & 4 part. $100Mn follow-on Funding Aavishkaar Frontier Fund: Pakistan, Bangladesh, Sri Lanka and Indonesia Incubated 20+ MFIs Driving Partnerships for Inclusive Development Active India and Africa, expanding to Asia Enterprise Sourcing, Mentoring & Recognition Regional Summit + Global Summit First venture debt company for SMEs Disbursed 100Cr across 70 loans Backed by Shell Foundation, MSDF, ON

Ecosystem Approach to Nurture Early-Stage Impact Enterprises Financial Inclusion Technology Services Capacity Building & Incubation Advisory & Research Entrepreneurial Support Ecosystem Debt Services Equity Investments Angel Investments Pre-incubation Support Global Convening & Enterprise Showcase

Intellecap is Focused on Accelerating Market-Based Approaches to Inclusive Development Intellecap is a pioneer in providing innovative business solutions that help build and scale profitable and sustainable approaches to social and environmental change. The firm was founded in 2002 and has more than 100 employees. Intellecap has worked with more than 70 clients on over 300 engagements across 25 countries. Intellecap's core Practices Areas include Investment Banking, Consulting and Research Intellecap has two strategic Initiatives designed to contribute to building and catalyzing the inclusive development space. These are Sankalp Forum and Intellecap Impact Investment Network (I3N). Intellecap funded and provided early support to companies that fill critical institutional gaps in inclusive development. These include IntelleGrow Finance and Arohan Financial Services.

Why SMEs The World Bank estimates that SMEs contribute an average 51.5% of GDP in high income countries, but only 15.6% in low income countries In India, 48.8 million SMEs employ close to 40% of India's workforce, but contribute only 17% to GDP, with 2-2million of the SMEs owned by women In Nigeria, there are a total of 17.28 million SMEs in the country out of which 17.26 million are enterprises valued at less than N5 million (US$ 32,000) In India alone, SMEs employ 69 million people. The sector includes 2.2 million women-led enterprises and ~15.4 mn rural enterprises (51.8 %)

Need for Innovation in SME funding (WBE Survey) of more than 10,000 firms in 80 countries states that SMEs in developing economies named financing as the biggest constraints! Traditional banks complain of lack of financial data, securitization and cost of scaling down to service the SMEs MFIs do not have the expertise and bandwidth to scale up and service SMEs as well as (often) the legal status to lend to SMEs VCs and Angel Investors express concern with exit and undeveloped secondary market Several innovative funding platforms have recently emerged to service the funding challenges that SMEs face. These include: Alipay CrowdCube IntelleGrow SCF-Nafin M-Pesa/ M-Shwari GroFin

Innovative Financing via Web In 2004, only 1% of Chinese citizens had credit cards and transacted online Online transactions swelled from nearly nothing in 2008 to around RMB 4 trillion ($660 billion) in 2012 Alibaba became an e-commerce giant and launched Alipay in 2010. It started with offering up to US$82,000 in 30 days but today it offers larger ticket sizes with the option of a group of 3 SMEs standing in for each other as guarantors Two years after its launch, by 2012, Alipay had made loans worth some US$2.09 billion The difference! Chinese consumers grow wary about being fleeced by local businesses and individuals. To allay that fear, Alipay developed a payment model that holds the payment in a dedicated account until the customer confirms that the purchased goods have been delivered and were as advertised.

Innovative Financing Via Mobile M-Pesa, launched in 2007 by Safaricom, is now used by the equivalent of two-thirds of the adult population in Kenya with over 20 million subscribers With the success in adoption, it launched another brand M-Shwari in a partnership between Vodafone, Safaricom and Commercial Bank of Africa (CBA) that led to 2.15 million new CBA accounts opened in just 3 months The system is connected to a Government of Kenya database to enable real-time verification during customer enrolment, and uses a credit score algorithm based on their credit history to determine a customer’s loan eligibility and maximum loan amount, thus, crediting their M-Pesa account almost immediately. The Difference! M-Pesa and M-Shwari made simplicity the key to success. They reduced banking, payment systems, credit score rating and loan advancement into a mobile phone. There are 5billion mobile users against 2billion account holders globally, making mobile phone a huge access point.

Innovative Financing Via Crowdfunding Crowdcube is an equity-based crowd funding platform that offers people equity in unlisted UK registered businesses in exchange stakes. This was developed as an alternative to institution currently disbursing ticket size as large as EUR 1Mn With Crowdcube, macro and micro investors can invest in any business of their choice for as little as £10 upward. Launched CrowdCube Venture Fund in 2013 with the unique benefit of the EIS and SEIS tax relief opportunities, with minimum investment for participation of £2500. Exit, which is continually the challenge of angels and other SME investors, is reasonably addressed by the ability to create a secondary market which has proved liquid so far. The Difference! The crowd can participate as investors. Risk is minimized through crowd due diligence. Exit is very simple and no collateral is required.

Innovative Financing Via Reverse Factoring Model On approval of an invoice for a supply by a large company, the supplier, in this case SMEs can access funds from financiers to provide the goods/service as approved on the invoice, leveraging on the credibility of the larger company rather than their own credit rating. The Nafin SCF Programme, as at 2009 have attracted 445 big buyers to its platform and more than 80,000 of their suppliers. It has advanced more than US$60 billion to Mexican SMEs with over 20 banks and financial institution lending through the Nafin Platform. The Difference! Follows a socially-focused impact investing model. Replaces collateral with business viability, promoters competence, knowledge of business concept/industry and deploys debt at a 400% faster rate than traditional institution with 100% success till date.

Financing+ Approach Via Business Support GROFIN is a specialist finance company that serves the needs of businesses. Its finance solution includes business development making it a ‘one-stop-shop’ for committed entrepreneurs. GroFin leverages patient capital and specialized business support to grow emerging market enterprises. By generating employment, strengthening value chains and building markets, GroFin’s investments are intended to catalyse inclusive growth and improved living conditions in low and middle income countries. GroFin manages 7 funds on behalf of 24 international investors, development funders, banks, corporates and foundations with committed capital in excess of US$400 million. It has on-the-ground local teams in 14 offices across 12 countries in Africa and middle East. The Difference! Focuses on providing business support that often go beyond financing and funding and improves the chances of success of the enterprises that it lends to.

Intellecap Impact Investment Network (I3N or I-cube-N) India’s first angel network focused on funding impact enterprises. An opportunity to invest in carefully screened for-profit enterprises across diverse sectors that aim to create positive social / environmental impact. 50+ investor members and partners. 38 enterprises showcased. 400+ enterprises screened. 7 enterprises funded. Deep domain knowledge of Intellecap, a 10-year old advisory firm dedicated to impact. Knowledge sharing through monthly newsletters, sector deep dive tele-seminars. Quarterly showcases of carefully screened enterprises. Focus on impact, sustainability, scalability. Investment horizon of ~5 years. Average return expectations for angel investors: 8%-15%. Exit usually via further rounds of capital raise by VC / PE firms. The network is an initiative of and is supported by and 12

Problem: Unaddressed Debt Needs of SMEs Debt gap for small businesses segment Debt Gap of USD 8 billion USD 48 billion USD 40 billion Addressable Demand Financed by financial institutions Highly underserved Missing Middle segment SMEs form a significant part of the Missing Middle In existence between 1-4 years Limited operational and financial track record Limited ability to provide collaterals Challenges for this segment to access debt Lack of collateral Lack of flexible repayment structures High processing and approval time Debt gap analysis USD Mn Total debt gap Working capital (61% of gap) Term loan (39% of gap) Small Enterprises 8,333 5,083 3,250 Medium Enterprises 3,000 1,833 1,167 11,333 6,917 4,417 Existing NBFCs not serving the ‘Missing Middle’ High transaction costs do not allow developing a profitable business model Lack of financial transparency poses risks that they are not equipped to mitigate IntelleGrow’s target market Representing a large market opportunity for an SME focused venture debt provider * Source; IFC report on Micro, Small and Medium Enterprise Finance in India

Our Solution: NBFC Dedicated to Lending to SMEs Evolution of IntelleGrow Our Solution: NBFC Dedicated to Lending to SMEs Systemic lack of appropriate debt finance for small and growing businesses (SGB), represents a large underserved market or the “Missing Middle” Lack of viable debt financing options for SGBs results in them resorting to expensive equity funding - a fairly inefficient solution Existing forms of lending are unable to cater to this requirement with a viable solution Need for innovative financing solution Problem Statement Intellecap recognizes the need for an innovative business solution with support from the Shell Foundation Study to identify debt gap for MSME segment1 Formation of IntelleGrow IntelleGrow’s cumulative disbursement amount surpasses USD 1.7 Mn IntelleGrow raises debt of USD 5 Mn Feb 2010 June 2010 Oct 2010 Dec 2011 Dec 2012 Feb 2013 Oct 2013 March 2014 Started institutional lending to early-stage financial inclusion businesses A new division is formed within IntelleCash Strong performance leads to spin-off of this division into a dedicated NBFC Michael and Susan Dell Foundation (MSDF) makes an investment of USD 1.7 Mn in IntelleGrow Omidyar Network invests USD 4.2 Mn in IntelleGrow IntelleGrow was formed to provide accessible and timely debt financing to SGBs 1 IFC-Intellecap report on Micro, Small and Medium Enterprise Finance in India

Existing Forms of Lending Not Aligned to SME Needs Debt Provider IntelleGrow NBFCs (L&T Finance, Tata Capital) Banks (SBI, HDFC, Kotak) (CGTMSE Scheme) Vintage of Borrower > 1 year > 3 years < 2 years Ticket size < = INR 30 million > INR 25 million > INR 50 million < = INR 10 million Stage of Lending Growth Phase - potential to establish track record Growth & Mature Phase - established track record Growth Phase - established track record Collateralisation Not a prerequisite Typically 100%+ Product Structuring Customised for each case Standardized Interest rate Bank lending rate* + ~4.0% Bank lending rate* + ~2.5% Bank lending rate* Processing Time < = 1.5 months < = 2 months < = 3 months Lack of viable debt providers for SMEs creates a unique value proposition for IntelleGrow’s business model

Case Study: Electronic Payment and Services Company Profile: Electronic Payments and Services is Mumbai based company developing and implementing Banking and financial Infrastructure for electronic banking and payments; currently executing Govt. contract to deploy and manage 5,262 ATMs Sector: Financial Inclusion ; Existing Investors: Aavishkaar and FMO Six Working capital loans for a total of USD 0.2 Mn. Working capital loan of USD 0.4 Mn Working capital loan of USD 0.5 Mn June & July 2012 February 2013 February 2014 Pre-operations Networth of ~USD 8,000 13 employees Just received contract from govt. for installation and management of 5,400 ATMS in Maharashtra for PSU Banks Completed deployment of ~500 ATMs Revenue of USD 0.9 million Received VC investment of USD 3.3 million 3,000 ATMs deployed and under management Received investment from FMO Revenue of USD 1.25 million per month IntelleGrow was the first external capital provider to EPS Loans from IntelleGrow helped EPS execute its first contract; helped scale from pre-operations to USD 1.25 million per month in revenues Loan structures aligned to availability of cash flow and security with Company at different stages 6 Working Capital Loans over the period of 20 months cumulatively disbursing ~ USD 1.50 Million

Thank You! Contact: Aparajita Agrawal Director – Sankalp Forum aparajita@intellecap.com www.sankalpforum.com Mumbai 13A, Techniplex-II IT Park, 6th Floor Off Veer Savarkar Flyover, Goregaon West Mumbai – 400 062, India Hyderabad 5th Floor, Building 8-2-682/1 Banjara Hills Road No 12 Hyderabad – 500 034, India info@intellecap.com www.intellecap.com