Microfinance Focus on Demand: What do Investors Really Want? MIV Roundtable on Responsible Finance Meeting Investor Demand for Improvement Social Performance Measurement Paris, 19th of June 2008

Focus on Demand: What do Investors really want? Seite 2 Who are the Investors in Microfinance? Retail Institutional Public Semi-Institutional

Focus on Demand: What do Investors really want? Seite 3 Who are the Investors in Microfinance? 30% 13 % 19% 38%

Focus on Demand: What do Investors really want? Seite 4 Focus on Demand What do Investors really want? Financial Return or/ before Social Return?

Focus on Demand: What do Investors really want? Seite 5 Financial or Social Performance? Focus on Demand What do Investors really want? Financial Social Retail Semi-Institutional Institutional

Focus on Demand: What do Investors really want? Seite 6 Who are the Investors in Microfinance? Retail Clients Men/ Women 70 % 30 % 20 % 60% Age

Focus on Demand: What do Investors really want? Seite 7 Who are the Investors in Microfinance? Retail Clients (contd) Why do they invest? Social responsible investment To invest responsibly Risk averse To salve ones conscience What questions are they asking? Does the money reach the target group? Interest rates for the loans Gender Type of loans Political situation in the countries Outreach What kind of a return is possible?

Focus on Demand: What do Investors really want? Seite 8 Who are the Investors in Microfinance? Retail Clients (contd) How could they invest? Regulated Mutual Funds Structured Finance Vehicles Private Equity Funds Holding Companies Commercial Investment Companies Social Investment Companies Barriers Not registered for public distribution Access to the products Information about the products Investment size No access via the banks/ distribution

Focus on Demand: What do Investors really want? Seite 9 Who are the Investors in Microfinance? Semi – Institutional Investors Private Wealth/ Family offices Diversification of the portfolio Low correlation Low volatility Stable performance Transparency Security Why do they invest? What are they looking for? The concept of microfinance Social responsible investment Risk averse investments/ securities Reputation

Focus on Demand: What do Investors really want? Seite 10 Who are the Investors in Microfinance? Institutional Investors Pension funds, Trustees, Corporates, Clerical Institutions Why do they invest? What are they looking for? Risk-adjusted return Portfolio diversification Low correlation Low volatility Fee strucutre Market size The concept of microfinance Alternative investment Social responsible investment Reputation

Focus on Demand: What do Investors really want? Seite 11 What are they looking for? Transparency About the market About different products About comparable information About the underlyings About the investment process About the MFIs Quelle: Symbiotics SMX EUR 1,0% 0,9% 0,8% 0,7% 0,6% 0,5% 0,4% 0,3% 0,2% 0,1% 0% 118,0 116,0 114,0 112,0 110,0 108,0 106,0 104,0 102,0 100,0 98,0 Mrz.04 Jun.04 Sep.04 Dez.04 Mrz.05 Jun.05 Sep.05 Dez.05 Mrz.06 Jun.06 Sep.06 Dez.06 Mrz.07 Jun.07 Sep.07 Dez.07 Mrz.08 Institutional Investors (contd)

Focus on Demand: What do Investors really want? Seite 12 What are they looking for? Information Regular information Actual information about the market Historical information About the products About the MFIs OstasienSüdasienLatein Amerika EECAMENAAfrika Ø 341 MFI worldwide 1,43% Institutional Investors (contd)

Focus on Demand: What do Investors really want? Seite 13 What are they looking for? Standardisation Definition of microfinance Definition of social performance Statistics/ track record Indicies Ratings 14% 12% 10% 8% 6% 4% 2% 0% Systematic Risk (Standard Deviation ) Return Quelle: Bloomberg / eigene Berechnung * SMX = Symbiotics Microfinance Index Institutional Investors (contd)

Focus on Demand: What do Investors really want? Seite 14 Social Performance What are they looking for? Coporate governance of the MFIs Quality of the management Education Target group of clients/gender Types of lending Portfolio quality Profitability Interest Rates for the loans Outreach Institutional Investors (contd)

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Focus on Demand: What do Investors really want? Seite 16 Key take-aways for discussion Strong common interest in transparency good information/data standardization Microfinance is considered in comparison to other asset classes Investors are a diverse group What is the best fit for microfinance?