Venture capital for the development of your institution. Luxembourg Microfinance

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1 Venture capital for the development of your institution Luxembourg Microfinance and Development Fund

2 ADA LMDF ADA has been a pioneering microfinance expert for more than years. As a pioneering expert in microfinance, ADA both instigates and develops new financial products, provides support for research and builds partnerships in order to be better placed in accompanying microfinance institutions (MFIs) in their process of professionalization. Almost four hundred microfinance institutions throughout the world benefit, either directly or indirectly, from the range of services provided by ADA. The (LMDF) is an open ended investment fund (SICAV) that supports responsible financial institutions whose aim is to reduce poverty in developing countries (Africa, Asia and Latin America). LMDF was initiated by ADA and the Luxembourg Government, in collaboration with a variety of financial institutions and the general public in Luxembourg. The Fund provides its shareholders with a financial return which, at a minimum, should be equivalent to the rate of inflation, so as to maintain the real value of the capital invested. As a social venture capital fund, the aim of LMDF is to support MFIs that have limited access to international funding. In recent years, there has been a significant increase in the number of microfinance investment vehicles (MIVs). The majority of these MIVs are aimed at MFIs situated in the upper level of the microfinance sector, known as tier institutions. The distinctive feature of LMDF is that it provides support to tier and MFIs, with the following objectives : Carry out operations over a minimum duration of three years, so as to enable the MFIs to focus on essential areas such as innovation, the management of social performance or staff development ; Reduce an MFI s risk profile by providing access to funding on appropriate terms. This means that LMDF can offer transactions in local currency and can cover foreign exchange related risks ; Develop equity or quasi-equity investment so as to ensure the long-term development of tier and tier MFIs by creating an appropriate level of capitalization. In order to meet the MFIs funding needs, LMDF is targeting a microfinance portfolio of million Euros, three-quarters of which has already been committed by LMDF s shareholders. LMDF s Philosophy Venture This document contains information regarding the Luxembourg Microfinance and Development Fund Social Venture Capital Sub-Fund (LMDF or Fund) and is aimed at microfinance institutions. This is not the Fund s Prospectus. Investment in the Fund is only valid on the basis of the Prospectus accompanied by the most recent annual report or semi-annual report. We strongly recommend that you consult these documents, your financial advisor and the website, if you are interested in investing in LMDF. capital for the development of your institution

3 Products and TERMS LMDF has adopted an approach that focuses on the flexible, sustainable and responsible development of the partner institutions. Within this framework, the Fund offers a wide variety of financial products in both hard and local currencies, such as: Various credit products and other financing instruments such as term deposits, promissory notes, bonds or other interest bearing instruments ; Equity or quasi-equity investments such as subordinated debt or preference shares and ; Guarantees or letters of credit. The LMDF gives priority to the establishment of longterm partnerships with MFIs in order to enable them to benefit from stable funding and to plan their activities over a period of several years. The amount of investment per MFI typically ranges from 00,000 to 00,000 Euros or the local currency equivalent. In keeping with its mission to create links with commercial actors, LMDF provides financing at terms that are close to market conditions. Furthermore, LMDF adheres to the use of best practices in microfinance and promotes transparency through the establishment of rigorous and constructive contracts with its partners. In the case of equity financing, ADA and LMDF may complement the investment through technical assistance projects in strategic or operational areas. LMDF focuses its action on medium-sized institutions that belong to the nd and rd tier of the sector. In order to gain access to LMDF funding, the following basic criteria apply : The MFI must have been active for at least years ; Have at least,000 micro-entrepreneurs amongst its client base ; Have a portfolio that is equivalent to at least half a million Euros ; Be generating a profit or be very close to running at a profit ; Have a portfolio at risk (PAR 0 days) that does not exceed 0 % of its overall loan portfolio, Have audited accounts. The possession of a financial or social rating is not a requirement, although it does constitute an advantage. LMDF pays particular attention to the following areas : The institutional structure: its history, governance, human resources ; The operational profile : types of products, methods used, portfolio management ; The social profile : social mission and vision, target group and the appropriateness of products provided, geographic areas of intervention ; The financial performance : coverage of costs, structure of the resources, composition of the capital, degree of dependency on donors ; The context : economic, social, political and market ; The added social and economic value that is expected as a result of LMDF financing. Selection and Analysis of the MFIs Venture capital for the development of your institution

4 The investment process Initial contact Analysis of the file and decision regarding the eligibility of the application MFI Visit Decision taken by LMDF s investment committee Finalisation Follow up carried out on a quarterly basis through a standardised reporting system Annual visit to the partner Receipt of the application documents First contact with the investment officer in charge at ADA Exchange with and analysis of the institution Due diligence visit Meeting with stakeholders, the Board, Management, staff and clients Finalisation of investment file Formal decision taken by LMDF Finalisation of the investment file (contract, legal and fiscal structuring) Follow up All applications must be addressed to ADA, which is responsible for the identification and follow-up of investments on behalf of LMDF. The following documents must be included in your application : A covering letter that sets out why financing is being sought ; The most recent annual report or activity report ; The current or envisaged business plan ; A set of recent (preferably audited) financial statements. Other recommended documents : An external financial or social rating report ; An institutional presentation of the MFI ; Any document that provides a further insight into the MFI. These documents, which will be treated with the utmost confidentiality, are indispensable in order for consideration to be given to a request for financing. contacts Alexandre Brajou Investment Officer for Asia and Africa alexandre.ada@microfinance.lu + Paul Surreaux Investment Officer for Latin America paul.ada@microfinance.lu + Quentin Lecuyer Investment Officer quentin.ada@microfinance.lu + How to submit an application Venture capital for the development of your institution

5 ADA (Appui au Développement Autonome), rue Sainte Zithe L- Luxembourg + place de Metz L-90 Luxembourg + With the support of : le gouvernement du grand-duché de luxembourg Ministère des Finances F BANQUE ORTUN A Société Coopérative