Incofin Annual report 2014

Annual Report 2014
2
Incofin cvso Annual Report 2014
Mission
Incofin cvso invests in sustainable microfinance institutions (MFIs) in developing
countries that offer financial services tailored to small local businesses that strive
to promote significant social added value. Incofin cvso supports MFIs that help
entrepreneurs to develop their businesses and improve their standard of living.
Incofin cvso investment chain
On 31 December 2014, the 1,132 shareholders of Incofin cvso represented a capital of 25.2 million euros. In 2014, 3.2 million euros in new capital was acquired.
Incofin cvso invests this in MFIs, which offer small-scale entrepreneurs a better future through financial services. In this way, the fund generates both financial and
social returns. Incofin cvso invested in 21 countries in 2014. The fund thus aided
2,813,670 micro-entrepreneurs in 37 MFIs. The average loan amount in 2014 was
933 euros.
MFIs
1,132
shareholders
in 2014
€ 46 million
total portfolio
in 2014
Annual Report 2014
2
Incofin cvso Annual Report 2014
Contents
Interview ............................................................................................................... 4
·· Frans Verheeke, Chairman of Incofin cvso
Global investing in 2014 .............................................................................. 6
Focus on Colombia ...................................................................................... 10
Our areas of expertise and funds......................................................... 14
·· Social performance and Technical Assistance
·· Other funds of Incofin cvso
Financial report ............................................................................................. 21
·· Corporate governance
·· Report of the statutory auditor
·· Report of the Board of Directors
·· Advisory role of Incofin Investment Management
·· Key figures
·· Annual accounts at 31.12.2014
·· Notes
·· Compliance
·· Valuation rules
·· Risk management
4
Incofin cvso Annual Report 2014
Interview | Chairman Frans Verheeke
‘Swimming
against the tide’
In 2014 political instability was felt around the globe, including in the
microfinance sector, but more than ever, Incofin cvso has proved that
it is a solid fund that can weather a storm. In the past year, the capital
of Incofin cvso grew by EUR 3.2 million.
Interview| Incofin cvso Annual Report 2014
In 2014, Incofin cvso increased its capital from EUR 22 to 25.2 million. The
number of shareholders surpassed the
1000 mark: with 204 new shareholders,
the total is now 1,132. Incofin cvso was
once again certified by the government as
a development fund. This means that in
the years to come (2015-2019), fiscal certificates will continue to be issued, which
is a meaningful way to encourage shareholders to continue to invest sustainably
in microfinance.
“Microfinance remains highly successful,
despite the general climate of uncertainty
worldwide at the moment,” says Frans
Verheeke, Chairman of Incofin cvso.
“The world has become a lot more unpredictable than five years ago. In the past,
through Incofin cvso, we also launched
activities in the newly independent
states, the former Soviet Republics. These
are countries in which there has been
increased political instability for some
time. But even under more difficult circumstances, microfinance has remained intact
– and that’s something to be proud of.”
Social and
financial returns
With the partial sale of the flourishing microfinance institution (MFI) Confianza in
Peru in 2013, Incofin cvso created a considerable financial buffer for the future.
For Frans Verheeke, this once again demonstrates how social and financial returns
– two essential values for Incofin cvso –
can be perfectly combined. “Incofin cvso
began supporting Confianza when it was
just a small MFI struggling to survive in
the heart of the Andes, in the face of guerrilla violence. Both socially and financially, this MFI has been a big success. The
added value that we have jointly realised
here is tremendous.” For each of its investments, Incofin cvso always asks: is this
project financially profitable for the business, but does it also create added value
for society at large? When Frans Verheeke
“Microfinance works: we are
truly having a major impact on
people’s welfare”
founded Incofin cvso in the summer of
Assistance’. “We provide support, but the
1992, he wanted to support Third World
countries without engaging in charity.
“We were true pioneers in that field. The
concept of microfinance was completely
unknown here. We got started out of a
kind of intuitive force, with a lot of hope
and love and a will to help remedy global
issues. What we are now able to achieve
with Incofin cvso may be a mere drop in
the ocean – but when a lot of drops are
combined, it starts to rain!”
MFIs are expected to co-invest and stand
behind their project together with us. We
need them to help increase both the social and financial returns. This long-term
thinking is a part of all of our projects.”
Frans Verheeke sees to it that the ideals
from the early years continue to play a
central role. “There has always been this
belief that as wealth grows, inequality will
automatically be reduced. The fact that
this is not the case is now being publicly
acknowledged, thanks to Thomas Piketty.
The inequality has increased because for
those without capital, it is impossible to
even get started.”
Pioneer
Incofin cvso currently plays its pioneering
role especially in ‘difficult’ countries such
as Haiti and Congo. “Congo is the richest
country in the world, and its population
is the poorest. It is anything but an easy
context in which to operate. In Congo we
jointly founded a fund, FPM SA, through
which we offer financing tailored to the
needs of micro, small and medium sized
enterprises. And in that way we are effectively swimming against the tide. In my
mind, this is one of our greatest achievements: we take the risk of investing in
‘difficult’ countries. At the same time, we
proceed with the utmost caution. We’re
covered against political and currency
risks, and we closely monitor the MFIs
on-site.”
Incofin cvso intentionally invests in training and support services for start-ups so
that the returns are guaranteed. The institutions themselves are required to help
fund what is known as the ‘Technical
Self-reliant
Incofin cvso offers people capital that they
can use to develop their own project and to
become self-reliant. “As a banker at VDKSpaarbank, I’ve always been attracted to
the bank’s somewhat atypical mission to
serve the ordinary public. This is an idea
that we are applying at Incofin cvso on a
much larger scale. Today, Incofin cvso has a
global presence, we are literally active from
Mongolia to Ecuador. That is what’s so fantastic about working with microfinance:
it gives you a global vision. Through our
annual report and our website, we demonstrate to shareholders and the general
public how microfinance can help to fix a
little piece of the world’s problems. Because
microfinance is one of the solutions that
actually works: we are truly having a major
impact on people’s quality of life.”
5
Investing
worldwide
New investments in 2014
10
loans for existing partners
Kazakhstan - Asian Credit Fund
Argentina - Fie Gran Poder
Ecuador - Finca Ecuador
Ecuador - Fundación Alternativa
Cambodia - HKL
Tajikistan - Imon
Armenia - Kamurj
Kyrgyzstan - Kompanion
Armenia - SEF International
Cambodia - TPC
5
new partners
Georgia - Crystal
Cambodia - Kredit
East Timor - Tubai Rai Metin
Mongolia - VisionFund Mongolia
Cambodia - VisionFund Cambodia
Countries in which Incofin cvso
invested in 2014 are shown in
pale green shading.
8
Incofin cvso Annual Report 2014 |Investing worldwide
New partners
In 2014, Incofin cvso invested EUR 13.63 million in microfinance institutions (MFIs) around the globe. Some of the loans were allocated to
MFIs that are current or former partners, while five new partners also
received funding from Incofin cvso.
Georgia
Cambodia
East Timor
Crystal
Kredit
Tubai Rai Metin
In the remote, rural regions of western Georgia, thousands of people have
no access to financial services. Crystal
offers this rural population financial
products that have been specifically designed for the agricultural sector, taking
into account the planting and harvesting seasons. Issued in local currency, the
loans are generally small – starting from
20 euros. A high-performance information technology system makes it possible
to rapidly determine whether or not to
grant a loan. Since Crystal maintains intensive contact with its clients, there are
very few past due payments. Its strong social performance was recently acclaimed
by MIX Market, a website that presents
public, transparent information on microfinance institutions. In the past three
years, Crystal has seen robust growth of
40% per year.
Since its founding in 1993, Kredit has
been active primarily in the north-western and southern regions of Cambodia.
Customer service and transparency are
the keywords for this MFI. Cambodia now
has a central credit bureau, which enables
Kredit to systematically verify whether
clients have also taken out loans from
other microfinance institutions. In this
way, clients can be prevented from taking on excessive debt. Kredit applies both
the individual and the group methodology, and stimulates the financing of business and agriculture. The institution also
offers financial products geared towards
more advanced companies and entrepreneurs. As a licensed MDI (Microfinance
Deposit Institution), Kredit can also offer
savings products.
Tubai Rai Metin (TRM) is a small, promising institution in a small, poor and very
young country. The context is clearly a
challenging one: East Timor has poor infrastructure, a poorly educated workforce
and a high level of unemployment. The
majority of the population of 1.1 million
has no access to the financial system.
TRM offers financing in remote areas
where agriculture and small-scale trade
are the only ways for poorer families to
earn an income. With a rural score of
94%, the institution is making a significant contribution to the economic reconstruction of rural East Timor.
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Mongolia
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VisionFund Mongolia
VisionFund Cambodia
The Mongolian division of the VisionFund
international network is still quite young;
the MFI is currently headed by a manager
who earned his stripes as financial director of VisionFund Cambodia. VisionFund
Mongolia is still operating at a slight loss,
but this young MFI is expected to reach
breakeven soon. The institution scores
extremely well on the Client Protection
Principles – a protocol created by the microfinance sector in order to protect the
often illiterate MFI clients. VisionFund
Mongolia provides individual loans as
well as group loans, often to families
who make up part of the Mongolian
“Ger” communities living in the outlying
districts of the capital Ulaanbaatar. The
clients can expect treatment that is transparent, service oriented and fair.
Sixty percent of the clients of VisionFund
Cambodia live below the poverty line of
2 USD per day. And yet, 99 percent repay
their loans on time, a rate the institution
attributes to its effective organization
and well considered credit risk system.
The social aspect is a priority for this MFI.
Each of its employees receives thorough
training. Poor clients are also offered
non-financial services such as life insurance so that they can improve their life
circumstances. VisionFund is available
throughout the entire country; the MFI
has offices in 17 of the 24 provinces.
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10 Incofin cvso Annual Report 2014
FOCUS ON
COLOMBIA
Incofin cvso invests in a number of major MFIs in Latin America. One of
these MFIs is Contactar, which has been providing microcredit in the
rural regions of south-west Colombia for over 20 years.
Surface
1,141,748 km²
Number of residents
45.7 million
Major economic sectors
Agriculture
Textile industry
Mining
Pasto
Ipiales
Cumbal
Capital
Bogota
Colombia| Incofin cvso Annual Report 2014 11
Collecting fresh milk
from small-scale farmers
Micro-entrepreneur
José Polibio Tipaz
In 2007, together with nine partners
from his local area and dairy producers
from Cumbal, José Polibio Tipaz started
the San Judas Dairy Organization. They
did not have much experience, but their
motivation more than made up for it. The
goal: to purchase raw milk from smallscale farmers in the region at a fair price
in order to enable them to build a future.
The San Judas Dairy Organization collected some 300 liters each day. As the
company grew, new investments were
urgently needed. Via the Ministry for
Social Welfare they were able to purchase
a refrigeration tank in which to store the
milk. Their self-confidence grew and José
Polibio Tipaz and his partners decided
to invest further in their business. They
took out a first loan with Contactar for
USD 435, followed by seven more loans,
for a total of USD 13,000. This money allowed them to upgrade the refrigeration
room and build a headquarters for the organization. The investment paid off: the
San Judas Dairy Organization was able to
engage a national company to purchase
the milk at a better price, increasing it
from 21 to 40 dollar cents per liter.
Cumbal
CONTACTAR
Corporación Nariño Empresa y
Futuro (Contactar) was founded
in 1991. The organization provides
credit to small growers and traders
in Colombia. It has a network of 39
branch offices, scattered throughout the departments Nariño and
Putumayo. The MFI is not only
present in rural areas, but also
funds the agricultural production
When one of the companies that purchased
their milk took a long time to pay them,
they found themselves in trouble. Thanks
itself. Contactar supports its clients
through individual credit, solidarity
groups, collective credit and village banking.
www.contactar-pasto.org
to their solid organization, the San Judas
Dairy Organization was nevertheless able
to fulfill all of its commitments and the
difficulties have since been overcome. The
fact that the business was able to grow is
thanks to the trust that Contactar placed
in them. Contactar offered not only loans
but also training and advice, about food
processing, high-quality product presentation and production costs.
Today, the San Judas Dairy Organization
has 24 members: all residents of the region
who also want to build a better quality of
life for themselves and their families.
12 Incofin cvso Annual Report 2014 |Colombia
Artisanal products
for retail chains
Pasto
Micro-entrepreneur
Luz Marina Ortega
Luz Marina Ortega lives with her husband
Miguel Ángel in Pasto, in south-western
Colombia. Miguel makes artisanal products: wooden spoons, ladles, fruit bowls
and trays, … – a craft that he learned from
his parents. When their children were
older, Luz Marina decided that she wanted
a role beyond that of housewife. She decided to help with the sale of their products. Up until that point, Miguel had been
focused on the local market. Luz Marina
wanted to explore other cities, and sell
their products door-to-door. In the city of
Cali, a colleague admired their beautiful
products. He advised her to offer them to
a retail chain. Luz Marina summoned her
courage and went off to meet the owner
equipped with two bags of products. To
her amazement, he not only accepted her
products but immediately offered her a
contract worth USD 1,700 to supply him
on a monthly basis. The deal brought a
fourfold increase in their average sales,
but the workshop did not have enough resources and staff, nor the funds to fulfill
an order on this scale.
In a hardware store in Pasto, Luz Marina
tried to purchase a machine on credit.
The shop owner refused, but referred her
to Contactar. There, in addition to a loan,
Luz Marina was also offered various training courses: cost management, design,
product presentation, ... In total, Contactar
“There is now also money
available for the children’s education”
provided the pair of entrepreneurs loans
amounting to some USD 19,000. This
money enabled them to buy a piece of land
and build a house, adapt the workshop and
invest in machines. There was also now
money available for the children’s education: currently, one of their sons works
for the National Police, the other is studying physical education at university. And
business is going well. Thanks to various
loans from Contactar, Luz Marina and
Miguel Ángel have been able to continue
to expand their market. Luz Marina and
Miguel sell their products in department
stores in Bogotá, Cali and Palmira, and take
part in the largest trade fair in Colombia in
the sector – Expoartesanias – where they
continue to meet new customers.
Colombia| Incofin cvso Annual Report 2014 13
Dreaming of
a bakery of their own
Ipiales
Micro-entrepreneur
Carmen Elena Reina
Colombian Carmen Elena Reina met her
husband Wilson in Ecuador, while he was
going through a difficult time. As the result of a theft, he had been ruined financially. He sold the few possessions he still
had and went to work as an assistant baker in Quito, Ecuador. For Carmen Elena,
there was no work, so she was forced to
return to her native village in the south
of the department Nariño in Colombia.
There, she began breeding guinea pigs
and chickens. The business grew, but
Carmen Elena did not have the resources
to improve the facilities or to purchase
more breeding stock and feed. With
little hope of receiving a loan, she got in
touch with Contactar. The financial advisor then paid a visit to her business and
granted her a first loan of USD 450, which
she invested in improvement plans. Her
income grew, and Carmen Elena was able
to pay off her loan without any difficulty
and was even able to save a bit – money
that she reinvested in the business. Later
she decided to take out a second loan
from Contactar, for a similar amount.
She used this money to purchase household products that she then sold, travelling from village to village. One year
later, Wilson returned from Ecuador and
the couple started a bakery in Ipiales:
La Uruguaya. In order to purchase an
oven and raw materials, they took out a
“Since the first Contactar loan,
the family has made major
financial progress”
new loan from Contactar. This time, the
amount was somewhat larger but the mutual trust had been established and the
loan was granted quickly.
After the birth of their daughter, Elena
and Wilson used some of their savings as
a down payment on a mortgage for a small
house, where they installed the bakery
and a little shop. After their second child
was born, they bought a house in which
to live, for which Elena and Wilson once
again took out a loan from Contactar, this
time in the amount of USD 10,500. It’s
a hard-working life: between 6 PM and
3 AM, Elena and Wilson make the bread,
and then deliver the orders to shops with
whom they have contracts. Carmen Elena
makes the deliveries on a motor scooter,
while Wilson uses a bicycle. The couple is
determined to be able to pay off the loan
for the house in full and to continue to get
ahead. Since Contactar awarded the first
loan, the family’s financial situation has
improved considerably. Carmen Elena is
proud of all that they have achieved so
far: their business, their house. “A house
of your own doesn’t necessarily mean
that you’re rich, but if you don’t have a
house, that’s poverty.”
14 Incofin cvso Annual Report 2014
OUR
areas of
expertise
and funds
Areas of expertise and funds| Incofin cvso Annual Report 2014 15
Social performance
Incofin cvso monitors the social component of the investment, thus guaranteeing the promised financial and social returns. For this purpose,
fund advisor Incofin IM developed a proprietary tool: ECHOS®.
Just investing in MFIs is not enough to be
recognized as “social investor”. Therefore
Incofin cvso invests first and foremost
in MFIs that can demonstrate high social performance. Thanks to ECHOS®,
Incofin IM is able to calculate the social
performance score of an MFI, based on
5 dimensions.
1. Social performance
How does the MFI achieve its social
goals? How are these goals institutionalized and promoted within the
organization?
2. Financial inclusion
How does the MFI managed to include
those people who are excluded from the
ordinary banking circuit? How does it offer specially adapted products to them?
3. Quality of service
Does the MFI respect the Client
Protection Principles?
4. HR policy
How does the MFI treat its personnel?
Is there a gender policy in place? Is
there transparency in the remuneration
system?
5. Corporate social responsibility
How does the MFI take up its role in
society? Does the MFI also show concern
for the environment?
The ECHOS® questionnaire is completed
by the Incofin IM investment manager
during the assessment. Only MFIs with
a minimum score of 55% will be considered for funding. There is a strong correlation between the financial health of
an MFI and its social performance. MFIs
which are financially sound usually also
score well on social parameters.
Incofin IM believes that social performance is important for the entire sector. That is why the fund adviser regularly participates in sector initiatives on
topics such as quality of service, social
performance management and reporting, pricing transparency and financial
inclusion. Incofin IM is a member of
the Board of Directors of Principles for
Investors in Inclusive Finance (PIIF) and
in 2014 took part in the first PIFF public
reporting exercise. During this process,
the social performance and sustainable
investment policy of Incofin IM was
compared with that of other PIIF members. Incofin IM received an “A” for its
efforts on behalf of sustainable investments. The complete report is available
on the PIIF website.
Incofin IM is also a founding member
of the Global Impact Investing Network
(GIIN), an organization dedicated to
increasing the scale and effectiveness
of impact investing. Incofin IM is also
on the Board of Directors of the Social
Performance Task Force (SPTF). It is the
moderator of the investors committee,
which comprises some 20 members. In
2014 Incofin IM convened two meetings
of this committee in order to debate
topics such as the effect of the Client
Protection Principles, to discuss preventing an excessively high debt ratio,
and to promote the universal standards
of social performance.
www.smartcampaign.org
www.sptf.info
www.mftransparency.org
www.unpri.org
www.thegiin.org
16 Incofin cvso Annual Report 2014 |Areas of expertise and funds
Technical assistance
7 MFIs received
intensive support
in 2014
Congo
Advans Banque
Congo
Mongolia
Credit Mongol
Ecuador
Espoir
Argentina
Fie Gran Poder
Ecuador
Fundación
Alternativa
Armenia
Kamurj
Azerbaijan
Viator
In the context of its social vision, Incofin cvso has
been providing technical assistance since 2011
to the microfinance institutions in which the fund
invests. This assistance is chiefly focused on risk
management, social performance management
(SPM) and restructuring.
The past 3 years, Incofin cvso has allocated
a budget of EUR 150,000 to finance technical assistance. It is an intentional strategy:
in this way, Incofin cvso is able to enhance
the impact, sustainability and returns on
its investment. Thanks to the technical
assistance, both the operational and financial viability of the MFIs can be considerably improved. In 2014, seven MFIs in six
different countries were able to access the
technical assistance funds. For 2015, there
are three new projects in the works.
Areas of expertise and funds| Incofin cvso Annual Report 2014 17
Examples of
technical
assistance
Advans Banque Congo
Founded in 2009, Advans Banque Congo
provides support to small to medium
sized enterprises and offers better access to banking services for many Congo
residents. In late 2013, however, the auditing department was found to lack
sufficient structure. The department’s
three auditors had only limited experience in the banking sector. With the support of Incofin cvso, Advans Banque was
able to hire two consultants in the Risk
Management and Internal Audit departments. The technical assistance also
comprised ongoing efforts to support and
train the personnel. More than 12 training programs were organized, allowing
the team’s skills to be reinforced. In addition, a complete auditing methodology
was developed and implemented, with
reference procedures and documents for
credit risk analysis and internal audits.
Allocation of the funds for
technical assistance per area of
intervention
Risk management
Personnel matters
Restructuring
Social performance
Fundación Alternativa
Since 1991 Fundación Alternativa has been
stimulating private entrepreneurs and local
social actors to improve the financial and
social situation in disadvantaged communities. Incofin cvso provided financial support to this NGO that enabled them to implement an online monitoring system. The
system uses indicators to reliably assess the
social performance, strategy and functioning of the institution.
8%
14%
52%
8%
26%
18 Incofin cvso Annual Report 2014 |Areas of expertise and funds
Other funds of Incofin cvso
Incofin cvso invests in the Fairtrade Access Fund (FAF), thus
encouraging fair trade with small-scale farmers in the Global South.
In Congo, Incofin cvso invests in the FPM SA fund, a Congolese
financing company licensed by the Central Bank of Congo.
FAF
The Fairtrade Access Fund stimulates fair
trade with small farmers from the Global
South. By investing in the fund, Incofin
cvso creates more opportunities for farmers and agricultural workers. In 2014 the
Fairtrade Access Fund became active for
the first time in Africa and added two new
products to its portfolio: cacao and nuts.
Founded in 2012 in collaboration with
Fairtrade International and the Grameen
Foundation, the Fairtrade Access Fund invests in small, well-managed farming cooperatives and associations of farmers that
are Fairtrade-certified or have applied for
certification.
Coffee continues to be the single most
important commodity for the Fund, representing 53% of the portfolio. In order to
maintain a diversified portfolio the Fund
actively sought investments in new products and countries. Trade finance loans in
cocoa provided to SPOs in Peru and Ivory
Coast are examples of success in this strategy, as were the inclusion of two new investments in Brazil nut exporters working with
Fairtrade certified organizations in Bolivia.
Further diversification came through a second investment in an SPO working with
bee keepers in Brazil. This was the second
honey loan for the fund and the first in
Brazil. In addition, the Fund has increased
its diversification, by expanding into new
products: cocoa and Brazil nuts, as well as
new countries: Colombia, Brazil, Bolivia,
Guatemala and Mexico. The Fund also expanded its reach further by concluding the
first deal in Africa, with a cocoa cooperative
in the Ivory Coast.
In 2014, the second year of operations for
the FAF, the Fund disbursed 14.8 M USD
to Fairtrade certified Small Producer
Organizations (SPOs) and Exporters/
Traders. The result was an increase of the
Fund size from 7.6 M to 13.8 M -- growth of
79%. The fund invested USD 14.8 million
in 23 different organizations, primarily
small-scale agricultural growers, but also
a number of exporters. The fund reached
43,281 farmers in 11 countries. Together,
they cultivated over 104,000 hectares of
land. Of the 23 investees financed in 2014,
12 were new investees to the Fund. In 5 of
these cases the FAF was the first international funder to have ever provided a loan
to the organizations. In 2015 the Fund will
continue to focus on finding high quality
investees working in a variety of countries
and crops in order to further increase the
FAF portfolio’s diversification.
Areas of expertise and funds| Incofin cvso Annual Report 2014 19
FPM
In the Democratic Republic of Congo,
barely 5% of the local population has
access to financial services. In 2014,
Incofin cvso invested in the FPM SA fund,
a Congolese financing company that is
certified by the Central Bank of Congo.
“Thanks to
FPM, many
small-scale
entrepreneurs
can access
financial
services”
The “Fonds pour l’inclusion financière
en République Démocratique au Congo”
(FPM SA) invests in financial and microfinance institutions which are geared
towards micro, small and medium enterprises. Thanks to the capital invested by
FPM SA, numerous small entrepreneurs
are able to access financial services. In this
way, the fund is helping to develop the local private sector and stimulate entrepreneurship, which will lead to job creation
and poverty reduction.
FPM SA is a supplement to FPM ASBL, the
non-profit that has been providing technical assistance to financial and microfinance institutions in Congo since 2007.
In recent years, this non-profit has carried
out over 50 projects. FPM SA has an initial capital of USD 25 million and aims to
provide up to USD 60 million in lines of
credit over a period of five years.
20 Incofin cvso Annual Report 2014
Incofin cvso Annual Report 2014
FINANCIAL
REPORT
Corporate governance
Report of the statutory auditor
Report of the Board of Directors
Advisory role of Incofin
Investment Management
Key Figures
Annual accounts at 31.12.2014
Notes
Compliance
Valuation rules
Risk management
21
Incofin cvso Annual Report 2014 |Financial report
22 Incofin cvso
Corporate
governance
General Meeting
The General Shareholders Meeting takes place annually on
the last Wednesday in April. In 2014, it fell on 30 April.
Board of Directors
The Board of Directors met three times in 2014. During these
meetings, the financial figures, the annual budget and the
general operations of Incofin cvso were discussed.
The Incofin cvso Board of Directors holds a two-day meeting
every two years, the focus of which is on the company strategy
in view of the results, future prospects, and developments in
the microfinance sector. The last strategic meeting was held
in November 2013.
Members of the Board of Directors receive no remuneration
or financial benefits of any kind in return for their mandate.
The composition of the Board of Directors at the end of 2014
was as follows:
Voorzitter
·· Frans Verheeke - Chairman, Volksvermogen
Bestuurders
··
··
··
··
··
··
··
··
··
··
··
··
··
··
··
··
··
··
··
··
··
··
Willy Bosmans - Individual
Benoît Braeckman - Former head of asset management, Electrabel
Erik Brijs - Vice President Accounting & Control
Jos Daniëls - Honorary Chairman of the Board of Directors, KBC
Insurance
Frank De Leenheer - Investor Relations & Corporate Communications
Manager
Alfons De Potter - Vice Chairman, ACV Bouw – Industrie & Energie
Johan De Schamphelaere - Director VDK Spaarbank
Rein De Tremerie - General secretary, ACV-CSC Metea
Eric Delecluyse - Former chairman, ACV Voeding en Diensten
Yvan Dupon - Individual
Michiel Geers - General secretary, Volksvermogen
Tony Janssen - Former Chairman, ACV Metaal and European Metal
Association
Mark Leysen - Chairman, Lintrust
Philip Leysen - Director, Tradicor
Fanny Machiels - Managing Director, Group Machiels
Greet Moerman - Manager, Sociaal fonds Bedienden Voedingsnijverheid
Guy Pourveur - Company Director
André Sarens - Grid Participations Manager Electrabel
Frans Samyn - Chairman Tabor
Ignace Schatteman - Internal Auditor VDK Spaarbank
Paul Steppe - Honorary Chairman, Management Committee Centea
Marc Timbremont - Former Managing Director, Huisvesting Het Volk
·· Herman Van de Velde - Chairman, VKW
·· Peter Van den Brock - Former Director, Pax-Bank, Vorstand
Pax-Bank-Stiftung
·· Leen Van den Neste - Chairman, Management Committee, VDK
Spaarbank
·· Miguel Van Hoof - Director, Wereld Missie Hulp
·· Ann Van Impe - Compliance Officer VDK Spaarbank
·· Bart Vannetelbosch - Director, Sociaal fonds Arbeiders Voedingsnijverheid
·· Henri Vansweevelt - Former Vice President, Bekaert Group
·· Frank Vereecken - Director, VDK Spaarbank
·· Koenraad Verhagen - Investments and microfinance advisor
·· Pieter Verhelst - European and international policy advisor, MRBB
·· Dirk Vyncke - Honorary Chairman, Vyncke
Ere-bestuurders
·· Jan Bevernaege - Director, Volksvermogen
·· Erik Bruyland - Former senior journalist at Trends magazine
·· Frank Lambert - Chairman, Antwerp Management School Fund for
Sustainable and Innovative Entrepreneurship
·· Guido Lamote - Former CEO, Trias
·· Walter Vandepitte - Honorary Chairman, AVEVE Group
·· Roland Van der Elst - Former professor EHSAL
Executive Committee
The Executive Committee is responsible for the preparation and
follow-up of the current and long-term strategies, objectives,
plans and budgets, and for monitoring the general affairs of the
company. The Executive Committee met four times in 2014.
The Executive Committee is composed as follows:
·· Frans Verheeke (Chairman)
·· Willy Bosmans
·· Jos Daniëls
·· Eric Delecluyse
·· Yvan Dupon
·· Paul Steppe
·· Leen Van den Neste
·· Ann Van Impe
Members of the Executive Committee receive no remuneration.
Back row, from left to right:
Peter Van den Brock – Eric Delecluyse
Frank De Leenheer – Philippe Leysen
Koenraad Verhagen – Frans Samyn
Tony Janssen – Marc Timbremont
Michiel Geers – Yvan Dupon
Rein DeTremerie – Frans Verheeke
Ann Van Impe – Greet Moerman
Paul Steppe – Jos Daniels
Front row, from left to right:
Benoît Braeckman – Guy Pourveur
Ignace Schatteman – Frank Vereecken
Willy Bosmans – Leen Van den Neste
Herman Van de Velde – Henri Vansweevelt
Incofin cvso Annual Report 2014 23
Financial report| Incofin cvso
Investment Committee
The Investment Committee is responsible for the implementation of the company’s investment policy, as set out in the investment guidelines. The Investment Committee is composed
of members of the Board of Directors specialising in financial
affairs and development issues. The Committee met ten times
in 2014.
The members of the Investment Committee are:
·· Frans Verheeke (Chairman)
·· Johan De Schamphelaere
·· Tony Janssen
·· Walter Vandepitte (until 30/04/2014)
·· Michiel Geers
·· Peter van den Brock
·· Ignace Schatteman
·· Pieter Verhelst (from 01/12/2014)
Members of the Investment Committee receive no remuneration.
Audit Committee
The Audit Committee supervises the company’s procedures and
processes, as well as all aspects related to risks and their management. The Audit Committee is composed of members of the
Board of Directors and meets in principle twice a year, in 2014
this was once.
··
··
··
··
Roland Van der Elst (Chairman, until 11.06.2014)
Frans Samyn (Chairman, until 11.06.2014)
Marc Timbremont
Henri Vansweevelt
Members of the Audit Committee receive no remuneration.
Auditor
Deloitte Bedrijfsrevisoren, represented by Frank Verhaegen and
Maurice Vrolix, was appointed by the General Shareholders
Meeting of 30 April 2014 as auditor of Incofin cvso for a period
of three years.
Report of the
statutory auditor
The statutory auditor Deloitte Bedrijfsrevisoren CVBA, represented by Frank Verhaegen and Maurice Vrolix, delivered an unqualified audit opinion on the financial statements. The financial
statements as of 31 December 2014 give a true and fair view of
the company’s assets, financial position and results in accordance
with the accounting principles applicable in Belgium.
Incofin cvso Annual Report 2014 |Financial report
24 Incofin cvso
Report of the
Board of Directors
We hereby present our report on the financial year 2014 and ask
you to approve the annual accounts at the balance sheet date of
31 December 2014. The Board has monitored the activities of the
company, with attention for its special social purpose.
At the end of 2014 Incofin cvso’s assets stood at 49,218 k euro, an
increase of 4.9% over the previous year. At the end of the financial
year, the equity of Incofin cvso stood at 29,288 k euro in comparison with 25,986 k euro at the end of the 2013 financial year. The
subscribed capital rose by 3,163 k euro to 25,198 k euro thanks to
the arrival of new shareholders.
The Board of Directors proposes to offer Incofin cvso shareholders
a total return on capital invested of 591 k euro for the 2014 financial
year (equal to a 2.5% dividend). The new partners and the partners
who have increased their capital during the course of the financial
year will be remunerated pro rata in accordance with Article 34 of
the Articles of Incorporation.
Debt in the form of short and long term loans decreased by
750 k euro during the course of 2014 as a consequence of the
decrease in the portfolio. At the end of 2014, Incofin cvso had
18,885 k euro in loans effectively outstanding, representing 64%
of its equity. The fund also had undrawn credit lines totalling
7,615 k euro. Within the guidelines set by the Board of Directors,
these credit lines may be drawn on to a maximum of 100% of the
amount of the shareholders’ equity.
At year end the investment portfolio stood at 45,958 k euro, consisting of 14,623 k euro in participations and 31,335 k euro in loans.
In 2014 the loan portfolio consisted of 39 loans to 32 microfinance
institutions across 17 countries.
During 2014, the participations portfolio grew by 812 k euro to
14,623 k euro thanks to (i) dividend payments from Banco Fie, Fie
Gran Poder, Akiba and Proempresa amounting to 844 k euro, (ii)
the new investment in the fund FPM (DRC, Congo) for 79 k euro,
(iii) the follow-up investment in Incofin IM for 125 k euro. The
Board of Directors decided to record an impairment of 237 k euro
on its holding in FIE Gran Poder following a sustained depreciation
of the Argentinian Peso (ARS) over recent years. In recent years the
MFI had consistently shown very good results but last year this was
no longer the case.
At the end of the reporting period the loan portfolio stood at
31,335 k euro. At the end of the reporting period the general provision for any write-downs was 1,403 k euro – 4.5% of the loan
portfolio – and was offset against the loan portfolio. The loan portfolio of the MFIs in which Incofin cvso invests is generally of good
quality (with average overdue payments (PAR 30) of MFI clients of
2.3%). The MFIs to which Incofin cvso gives credit have fulfilled
their repayment obligations to Incofin cvso correctly, except one
MFI in Azerbaijan for which a court in Baku has blocked the accounts for reasons which remain unclear. Incofin cvso has an outstanding loan of 813 k euro to this institution. Incofin cvso has
passed the case over to Delcredere, as it is insured against political
risks. As of the end of the year, there was a single outstanding interest payment. It would be premature to draw any definitive conclusions about this case.
At the end of the reporting period cash in hand totalled 4,036 k euro.
The remaining balance sheet entries consist mainly of expected
interest on the loan portfolio of 502 k euro and other receivables
amounting to 118 k euro (mainly recoverable VAT).
Off-balance sheet obligations include the contracts with KBC Bank
and MFX Solutions in the form of cross-currency interest rate swaps
and forward currency contracts to hedge exchange rate risks on
the outstanding loans to MFIs. These hedge all non-euro interest
and capital flows for loans made by Incofin cvso in local currency
with a cross currency swap. At the end of 2014 Incofin cvso had exchange rate hedging products outstanding in a total notional sum
of 31,335 k euro at the hedging rate, representing 100% of the outstanding loan portfolio. Hedged loans to MFIs in exotic currencies
in 2014 represented 23% of the hedged loans. The remaining 77%
consisted of USD loans to MFIs.
Explanatory notes to the 2014
Incofin cvso profit and loss account
Incofin cvso ended the financial year with post-tax profits of
730 k euro. This result is significantly lower than in the previous year (2013: 1,842 k euro). In 2013 a gain was realised on the
transaction with Confianza for 1,592 k euro and an impairment
booked on FIE Gran Poder of 509 k euro.
The financial income amounted to 2,802 k euro, principally
composed of (i) interest received on MFI loans amounting
to 2,249 k euro, (ii) stock dividends received amounting to
844 k euro, (iii) cash dividends received amounting to 127 k euro,
and (iv) financing charges amounting to 555 k euro. The remaining financial income consists of upfront fees, bank charges and
the revaluation of cash on bank accounts at closing date.
The profit on ordinary activities before taxes for the reporting
period 2014 was 1,106 k euro, up 25% on the 2013 figure thanks
Incofin cvso Annual Report 2014 25
Financial report| Incofin cvso
to the significant increase in income from the loan portfolio
(+15%) and the good results of the participations portfolio.
Services and other goods totalled 1,368 k euro for the reporting
period 2014 and are in line with the operational expenses for
the reporting period 2013. Allocations to the general provision
(2014: 335 k euro) amounted to 1% of the current gross loan
portfolio in the form of receivables weighted on the basis of ECA
risk scores. This general impairment is applied to offset possible
future defaults and foreign currency fluctuations.
This year the fund has recorded an exceptional impairment of
237 k euro on the holding in Fie Gran Poder. This means that the
fund has realised a profit before taxes for the reporting period of
869 k euro. After deduction of taxes relating to the withholding
tax on interest received abroad the profit for the reporting period
is 730 k euro.
We kindly ask you to approve the annual accounts at 31
December 2014. After approval, we propose to appropriate the
profit for the financial year and the profit carried forward from
the previous financial year as follows:
Profit available for appropriation
3,606,266 euro
Profit for the financial year available for appropriation
730,365 euro
Profit carried forward from the previous financial year
2,875,900 euro
Allocation to capital and reserves
36,518 euro
Allocation to the legal reserve
36,518 euro
Allocation to unavailable reserves
0 euro
Allocation to capital and issue premiums
0 euro
Retained earnings to be carried forward
2,978,413 euro
Retained profit to be carried forward
2,978,413 euro
Profit for distribution
591,335 euro
Return on capital
591,335 euro
Risks and uncertainties
As a result of its activity, Incofin cvso is subject to a range of risks
including credit risks, country-specific risks, exchange rate risks
and liquidity risks. The Board of Directors pays the necessary attention to monitoring these risks and is of the opinion that the
risks are limited and more than adequately covered.
Social performance
Incofin cvso invests in 37 MFIs in 21 countries. Together these
MFIs reach 2,813,670 clients (in 2013: 2,458,721), 71% of whom
are women. The involvement of these local intermediaries creates
a very powerful leverage effect for Incofin cvso investments. The
combined loan portfolios of the institutions in which Incofin cvso
invests amount to 2,917 million euro.
The MFIs in the Incofin cvso portfolio are sound and efficient financial institutions: they have good quality loan portfolios (with
limited late payments), they keep their general costs under control, and they are profitable.
Directors
Please pronounce on the discharge to be given to the Board of
Directors and to all the directors individually for the performance of their mandate during the past financial year.
Auditor
Please pronounce on the discharge to be given to the auditor for
the performance of his mandate during the past financial year.
Appointments
Mr Luc Van Dessel resigned as director during the course of this
reporting year. On 11/6/2014 the Board of Directors filled this vacancy by provisionally appointing Mr Alfons De Potter to complete
the period of office of Mr Van Dessel. The Board of Directors is
proposing to the General Meeting that Mr De Potter’s appointment
be confirmed and since this period of office ends on the day of the
General Meeting of 29/04/2015, also to renew it for the statutory
period of six years.
Reappointments
·· The following terms of office expire on the day of the General
Meeting on 29/04/2015:
·· Mr Andre Sarens
·· Mr Yvan Dupon
·· Mr Willy Bosmans
·· Mr Benoît Braeckman
The Board of Directors proposes to renew these terms of office
for the statutory period of six years.
Resignation/end of term of office
·· M r Roland Van der Elst
·· Mrs Fanny Machiels
·· Mr Luc Van Dessel
Incofin cvso Annual Report 2014 |Financial report
26 Incofin cvso
Advisory role of
Incofin Investment
Management
Incofin Investment Management (Incofin IM) is the manager of the
RIF II fund and advisor to Incofin cvso and another 8 funds and
facilities for a total of around 600 million USD.
Rural Impulse
Fund II
(2010)
140M
USD
With a multilingual and international team of 37 experts,
Incofin Investment Management offers customised financial
services. Incofin IM in particular has extensive experience in
microfinance in international markets and the maintenance of
links with investors worldwide.
In 2014 Incofin IM, as the first Belgian microfinance expert,
obtained the AIFM licence from the FSMA, the Belgian authority for financial services and markets. The AIFM (Alternative
Investment Fund Managers) Directive is a European directive
which introduces harmonised rules for the managers of alternative investment funds. The AIFM licence is considered as a
quality label.
The methods used by Incofin IM are fully in line with those of
Incofin cvso. Incofin IM also aims for a “double bottom line”
approach, with equal attention to financial and social performance. This is measured using the ECHOS© tool and the CRS
risk management tool.
Impulse
Rural Impulse
Fund I
(2004)
(2007)
USD
USD
Fairtrade
Access Fund
Volksvermogen
VDK
(2012)
30M
USD
(2004)
15M
USD
(2007)
80M
USD
BIO
FPM
Invest In
Visions
(2012)
15M
USD
(2014)
(2015)
USD
USD
Incofin cvso Annual Report 2014 27
Financial report| Incofin cvso
Key figures in k euro
Balance sheet total
Portfolio
2014
2013
49,218
46,897
Return
Return on loan portfolio (IRR)
2014
2013
7.30 %
7.30 %
45,957
46,381
Weighted average financing charge
3.06%
3.20 %
Participations
14,623
13,561
Dividend
2.50 %
2.50 %
Loans
31,335
32,820
Average investment in MFIs
Average loan amount to MFIs
Equity
Capital
Debt financing
Available (uncalled)
Proportion of loan finance
General provision for loan portfolio
% balance sheet total
Portfolio per country
1,144
1,144
803
1,018
29,288
25,986
25,198
22,035
18,885
19,635
7,615
1,865
64%
76%
1,403
1,068
2.85%
2.28%
MFI performance
MFI portfolio (€ m)
Average loan amount (€)
Total number of clients reached
% women
Portfolio at risk – 30 days (PAR30)
2014
2013
2,917
2,259
933
764
2,813,670
2,458,721
71%
69 %
2.30 %
2.10 %
# of MFIs
37
37
# of countries
21
22
Portfolio per MFI
Portfolio k euro
Portfolio k euro
Cambodia
Bolivia
Peru
Ecuador
Georgia
Mongolia
Azerbaijan
Armenia
Nigeria
Congo, DRC
Kyrgyzstan
Argentina
Costa Rica
Tadjikistan
Colombia
Haiti
Nicaragua
Kazakhstan
Tanzania
Burkina Faso
East Timor
0
1,000
2,000
3,000
4,000
5,000
6,000
0
1,000
2,000
3,000
4,000
5,000
Incofin cvso Annual Report 2014 |Financial report
28 Incofin cvso
Annual accounts at 31.12.2014 in k euro
Balance sheet
Assets
Participations portfolio
Acquisition value
Stock dividends
Impairment
Loan portfolio
12/2014
12/2013
14,623
13,561
Liabilities
11,457
11,003
Capital
3,912
3,067
Reserves
1,111
1,074
-746
-509
Result carried forward
2,978
2,876
Equity
12/2013
29,288
25,986
25,198
22,035
29,932
31,752
18,885
19,635
Loan portfolio > 1 Year
16,007
19,249
Debt financing > 1 Year
11,085
14,100
Loan portfolio < 1 Year
15,328
13,570
Debt financing < 1 Year
7,800
5,535
General provision
-1,403
-1,068
1,045
1,277
Current assets
Other amounts receivable
Prepayments and accrued income
Cash and cash equivalents
Assets
627
628
125
88
Operating income
Participations portfolio
Current liabilities
Other debts
146
387
Dividends
591
506
502
540
Provisions for Technical Assistance (TA)
4,036
956
Accruals and deferred income
49,218
46,897
Profit & Loss Account
Profit & Loss Account
Loan capital
12/2014
Liabilities
72
85
236
298
49,218
46,897
Cash flow
12/2014
12/2013
2,793
3,763
Cash flow
12/2014
Cash flow from operations
EBIT
1,424
735
1,948
Cash dividends
127
124
Other cash results
-121
Stock dividends
844
741
Non-cash results
-287
Gains/(losses) on sales
1,592
Impairment
-237
-509
Loan portfolio
2,052
1,794
Interest
2,249
2,062
Upfront fees
138
99
General provision
-335
-366
7
21
Other income
Operational expenses
-1,369
-1,331
Incofin IM management fees
-943
-989
Portfolio insurance
-145
-125
14
-7
Additional TA provision
-50
Reversal of TA provision
64
Technical Assistance (TA) contribution
(Increase)/decrease in current assets/liabilities
Cash flow on net-income basis
335
-14
-302
715
Investment cash flow
(Increase)/decrease in participations portfolio
-454
1,746
1,424
2,432
-555
(Increase)/decrease in capital
Dividend paid out, 2012 financial year
3,163
-506
(Increase)/decrease in debt financing
-750
-469
Interest paid on debt financing in 2013
-568
-573
-543
(Increase)/decrease in outstanding interest
18
74
869
1,963
Corporation tax
Income after tax
Technical Assistance (TA)
335
Free cash flow
-91
Withholding tax interest
General provision
Financial cash flow
-210
Income before tax
Loan portfolio
237
-844
43
-165
Miscellaneous
Stock dividends
-50
-130
Interest
Impairment
1,485
Other goods and services
Financial results
-608
(Increase)/decrease in loan portfolio
Communications
Net operating result
Participations portfolio
Revaluation
Reversal of impairment
-1
-139
-121
730
1,842
Net cash flow
Cash and cash equivalents previous period
Cash and cash equivalents current period
-5
3,080
956
4,036
Incofin cvso Annual Report 2014 29
Financial report| Incofin cvso
Overview shareholders
Notes in k euro
Shareholders with more than 1% of equity
Volksvermogen
1,510
6.0 %
Financing structure
ACV Metea
1,263
5.0 %
VDK spaarbank
1,146
4.5%
Capital
Flemish Government – Flemish Department of
Foreign Affairs
1,000
4.0 %
In 2014 the shareholders’ equity rose by 3,163 k euro
to 25,198 k euro. This equity is represented by 1,132 shareholders, an increase of 22% since 2013.
This rise is mainly attributable to an increase in private investors. At 31 December 2014 they represented 40% of the equity
of Incofin cvso.
Capital variations
Paid-up capital k euro
#Shareholders
30,000
,
25,000
,
20,000
15,000
10,000
5,000
(Anonymous)
802
3.2%
Sociaal Fonds Bedienden Voedingsnijverheid
727
2.9 %
KBC
559
2.2%
Gimv
521
2.1%
ACV Voeding en Diensten
521
2.1%
Tradicor
469
1.9 %
Umicore
398
1.6%
Wereld-Missiehulp vzw
349
1.4%
Bosmans Willy
346
1.4%
YROANKA BM
333
1.3%
de Kade vzw
307
1.2%
(Anonymous)
302
1.2%
1.2%
Pax-Bank
299
VKW Synergia vzw
277
1.1%
Sociaal Fonds Arbeiders Voedingsnijverheid
273
1.1%
Suez - Tractebel
263
1.0 %
Vandersanden Constant
260
1.0 %
Stiftungfonds Kirche und Caritas der Bank im
Bistum Essen
260
1.0 %
Tabor vzw
260
1.0 %
The Majin Foundation
260
1.0 %
(Anonymous)
260
1.0 %
LINTRUST Comm. V.
260
1.0 %
(Anonymous)
260
1.0 %
ACV bouw - industrie & energie
260
1.0 %
(Anonymous)
253
1.0 %
Koinon
250
1.0 %
King Baudouin Foundation
250
1.0 %
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1997
1992
Shareholders > 1% of equity
10,697
42.5%
25,198
100.0%
Incofin cvso Annual Report 2014 |Financial report
30 Incofin cvso
Debt financing
> 1 year
< 1 year
12/2013
+/-
12/2014
12/2013
+/-
1,500
500
2,000
500
-500
3,000
3,000
ACV Metea
Bank Für Kirche und Caritas
Belfius
4,000
-1,750
2,250
Hef boom
1,000
-500
500
ING
-1,115
Book value
12/2014
12/2013
12/2014
2,000
2,000
3,000
1,750
1,750
4,000
4,000
500
500
1,000
1,000
1,000
-1,000
2,185
-685
KBC
3,050
LBC
500
1,935
VDK
4,050
-3,150
900
1,850
2,200
14,100
-3,015
11,085
5,535
2,265
1,000
1,500
500
5,235
3,435
500
500
4,050
5,900
4,950
7,800
19,635
18,885
Proportion of loan finance
12/2014
Equity
29,288
Debt financing
18,885
Proportion of loan finance (max 100%)
64.5%
Max. increase in debt financing
10,403
Available credit lines
7,615
Portfolio summary
Participations portfolio in k euro
MFI
Currency Country
Acquisition value
12/2013
+/-
12/2014
Stock dividends
12/2013
+/-
Impairment
12/2014
12/2013
+/-
Book value
12/2014
12/2013
12/2014
ACEP Burkina SA
XOF
Burkina Faso
244
244
244
244
Acme
HTG
Haiti
782
782
782
782
Akiba Commercial Bank
TZS
Tanzania
530
530
47
13
60
577
591
Banco FIE
BOB
Bolivia
2,463
2,463
2,675
664
3,339
5,138
5,803
Confianza SAA
PEN
Peru
2,516
2,516
2.516
2,516
FIE Gran Poder
ARS
Argentina
1,189
1,189
346
121
466
1,025
909
Proempresa
PEN
Peru
284
284
46
46
8,008
8,008
844
3.912
MFI portfolio
-509
-237
-746
284
330
10,566
11,174
1,000
1,000
1,000
395
20
395
583
583
583
3,067
-509
-237
-746
Impulse
EUR
1,000
Incofin IM
EUR
20
Fairtrade Access Fund
USD
583
MFX LLC
USD
355
355
355
355
Rural Impulse Fund
USD
1,037
1,037
1,037
1,037
FPM SA
USD
2,994
3,449
13,561
14,623
Fund portfolio
Participations portfolio
375
79
79
2,994
454
3,449
11,003
454
11,457
79
3,067
844
3,912
-509
-237
-746
Following a sustained depreciation of the ARS (Argentinian Peso) over recent years, Incofin cvso has decided to record an additional
impairment for FIE Gran Poder to the value of 237 k euro. The MFI has always been able to present very good results in previous
years, but last year this was no longer the case.
Incofin cvso Annual Report 2014 31
Financial report| Incofin cvso
Loan portfolio in k euro
MFI
Investment date Currency Country
> 1 year
< 1 year
Book value
12/2013
+/-
12/2014
12/2013
+/-
12/2014
12/2013
12/2014
MFI portfolio
18,999
-2,992
16,007
13,570
1,757
15,328
32,570
31,335
Existing loans
AB Microfinance Bank
Advans Congo
AZERCREDIT
Contactar
Coocique
Credit Mongol
Credo
Credo
Espoir
FIE Gran Poder
Finca Congo
Findev
HKL
Lapo
Manuela Ramos
Maquita
Proempresa
ProMujer
SEF International
TenGer Financial Group
Viator
New loans
Asian Credit Fund
Asian Credit Fund
Crystal
Kredit Cambodia
TRM
Vision Fund Cambodia
Vision Fund Mongolia
Renewals
FIE Gran Poder
FIE Gran Poder
Finca Ecuador
Finca Ecuador
Fundacion Alternativa
Fundacion Alternativa
HKL
HKL
HKL
HKL
Imon
Imon
Kamurj
Kamurj
Kompanion
Kompanion
SEF International
SEF International
SEF International
TPC
TPC
Repaid loans
Apoyo Integral Mexico
Asian Credit Fund
Eskhata
Finca Guatemala
Fodemi
Kazmicrofinance
Lapo
17,705
-13,131
4,574
645
12,487
13,131
18,349
17,705
1,448
1,131
813
1,188
1,478
627
1,151
766
766
379
726
752
1,131
464
237
942
408
713
763
1,087
735
-1,448
-1,131
-813
-1,188
-739
-627
-576
1,448
1,131
813
1,188
739
627
576
1,448
1,131
813
1,188
739
627
576
766
379
726
752
1,131
766
379
726
752
1,131
1,448
1,131
813
1,188
1,478
627
1,151
766
766
379
726
752
1,131
464
473
942
816
713
763
1,087
735
1,448
1,131
813
1,188
1,478
627
1,151
766
766
379
726
752
1,131
464
237
942
408
713
763
1,087
735
17/04/2012
1/08/2013
29/07/2012
2/07/2013
22/11/2013
30/09/2013
5/03/2013
7/06/2013
8/06/2013
29/07/2013
12/12/2013
17/06/2013
7/08/2013
9/09/2013
29/11/2013
2/08/2013
23/07/2012
24/07/2013
7/05/2013
27/12/2013
6/12/2013
NGN
USD
USD
COP
USD
MNT
USD
USD
USD
USD
USD
USD
USD
NGN
PEN
USD
PEN
NIO
USD
USD
USD
Nigeria
Congo, DRC
Azerbaijan
Colombia
Costa Rica
Mongolia
Georgia
Georgia
Ecuador
Argentina
Congo, DRC
Azerbaijan
Cambodia
Nigeria
Peru
Ecuador
Peru
Nicaragua
Armenia
Mongolia
Azerbaijan
25/07/2014
30/09/2014
30/09/2014
27/01/2014
24/12/2014
30/12/2014
18/12/2014
KZT
KZT
USD
USD
USD
USD
MNT
Kazakhstan
Kazakhstan
Georgia
Cambodia
East Timor
Cambodia
Mongolia
27/07/2011
28/07/2014
22/02/2012
22/02/2014
20/06/2013
19/12/2014
28/03/2012
28/02/2014
25/10/2012
27/10/2014
26/06/2013
26/06/2014
15/10/2012
15/10/2014
27/05/2013
27/11/2014
24/07/2012
23/07/2014
24/06/2014
20/12/2012
20/12/2014
USD
USD
USD
USD
USD
USD
USD
THB
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
Argentina
Argentina
Ecuador
Ecuador
Ecuador
Ecuador
Cambodia
Cambodia
Cambodia
Cambodia
Tadjikistan
Tadjikistan
Armenia
Armenia
Kyrgyzstan
Kyrgyzstan
Armenia
Armenia
Armenia
Cambodia
Cambodia
21/10/2013
23/11/2012
13/11/2013
28/06/2011
28/03/2011
8/11/2012
24/08/2012
MXN
KZT
USD
USD
USD
KZT
NGN
Mexico
Kazakhstan
Tadjikistan
Guatemala
Ecuador
Kazakhstan
Nigeria
576
766
-766
-379
-726
-752
-1,131
464
-237
237
237
942
-408
-713
-763
408
713
763
408
713
763
735
735
1,087
-735
4,814
4,814
4,814
324
346
785
735
204
1,642
778
324
346
785
735
204
1,642
778
324
346
785
735
204
1,642
778
6,619
6,619
372
403
730
790
395
1,603
1,294
739
8,423
-6,226
346
-346
2,197
8,423
346
754
754
378
-754
727
-378
756
-756
756
767
-767
767
1,527
1,527
386
-1,527
1,470
-386
1,549
-1,549
1,549
826
-826
826
372
372
727
727
378
403
403
730
730
790
790
1,470
1,470
386
395
395
1,603
372
736
372
736
1,218
1,218
-1,294
1,603
372
736
1,133
-1,133
1,133
4,503
-4,503
5,798
558
282
1,494
701
711
-558
-282
-1,494
-701
-711
758
-758
558
282
1,494
701
711
1,294
758
1,218
1,294
-1,294
Fund portfolio
250
-250
Existing loans
Incofin IM
250
-250
250
250
-250
250
19/11/2012
EUR
Belgium
8,815
250
Total loan portfolio
19,249
-3,242
16,007
13,570
1,757
15,328
32,820
31,335
Loan portfolio
19,249
-3,242
16,007
13,570
1,757
15,328
32,820
31,335
As was the case in 2013, the quality of the loan portfolio was very good during 2014, so there were no specific impairments. Over the
past year, however, the countries of the former Soviet Union (NIS) were monitored with appropriate vigilance by credit risk management. All loans in foreign currency were hedged against possible exchange rate losses.
Incofin cvso Annual Report 2014 |Financial report
32 Incofin cvso
Compliance in k euro
Fund policy
·· In accordance with fund policies, the following rules for diversification were established to avoid concentration risk: the book
value per country and per MFI must not exceed 15% and 10% respectively of Incofin cvso’s total assets.
·· Incofin cvso limits its participations in MFIs and other funds to a maximum of 75% of its equity.
Compliance
Exposure per country
Portfolio risk spread
See charts
Book value of participations portfolio
12/2014
NAV Incofin cvso
29,288
Max. equity exposure
21,966
Current equity exposure
14,544
Book value k euro
Stock dividends k euro
% Balance sheet total
Max. exposure
Balanstotaal
Boekwaarde k€
7,000
6,000
Current equity exposure (%)
5,000
50 %
4,000
3,000
2,000
1,000
East Timor
Burkina Faso
Tanzania
Kazakhstan
Nicaragua
Haiti
Colombia
Tadjikistan
Costa Rica
Argentina
Kyrgyzstan
Congo, DRC
Nigeria
Armenia
Azerbaijan
Mongolia
Georgia
Ecuador
Peru
Bolivia
Cambodia
0
Exposure per MFI
Book value k euro
Stock dividends k euro
% Balance sheet total
Max. exposure
Balanstotaal
Boekwaarde k€
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
The maximum book value in Banco FIE
was exceeded as a consequence of the
stock dividends received in the sum of
3,339 k euro. The acquisition value of
Banco FIE still lies beneath the 10%
threshold.
Incofin cvso
Annual
Report 2014
Financieel Verslag|
Incofin
Jaarverslag
2014 33
Number of MFIs in the portfolio according to MFI’s average loan amount
13
Low average
loan amount
(€500 - €1,000)
10
9
5
High average loan
amount
(> €2,000)
Medium average
loan amount
(€1,000 - €2,000)
Very low average
loan amount
(< €500)
Number of MFIs in the portfolio according to MFI’s size
24
Large MFIs
(Portfolio > €20 m)
10
3
Medium MFIs
Small MFIs
(Portfolio €5 m - €20 m) (Portfolio < €5 m)
Number of MFIs in the portfolio according to MFI’s
number of clients
25
Large number
of clients
(> 20,000 clients)
7
5
Low number
of clients
(< 10,000 clients)
Medium number
of clients
(20,000 > clients >
10,000)
MFI portfolio per product
74
Loans
%
26%
Participations
Incofin cvso Annual Report 2014 |Financial report
34 Incofin cvso
Valuation rules
Without prejudice to the specific valuation rules mentioned below, the valuation rules that apply are those that were established
pursuant to the provisions of the Royal Decree of 30 January
2001 in implementation of the Companies Code, more particularly Book II, title I, chapter II relating to valuation rules. Unless
stated otherwise, the article numbers refer to the corresponding
articles in the Royal Decree of 30 January 2001.
Assets
Without prejudice to the specific valuation rules mentioned below, each asset item is valued separately at its acquisition cost
and recognised in the balance sheet at that amount, after deduction of the depreciation and impairments on the asset item in
question (Article 35, first paragraph).
Amounts receivable at more than one year and within one year
Without prejudice to the provisions of Articles 67, paragraph
2, 68 and 73, receivables are recognised at their nominal value
(Article 67, paragraph 1) on the final day of the financial year.
Under Article 68 impairments are applied where repayment of
all or part of the receivable on the repayment date is uncertain.
To make allowance for the special credit and currency risk that
arises from extending credit to high-risk countries with unstable
economic and political climates, global depreciation of 1% is
applied annually to the receivables in the outstanding investment portfolio, weighted by the ECA risk scores published for
each country. This depreciation is applied in accordance with
Article 47 of the Royal Decree, given the similar technical and
legal characteristics of these receivables.
The level of this depreciation can be adapted on the basis of historical loss data.
Intangible fixed assets
Intangible fixed assets are valued at their acquisition cost, exclusive of additional costs. They are amortized over the economic
lifetime of the asset, and over five years in the case of software.
Investments and cash and cash equivalents
Tangible fixed assets
Liabilities
Tangible fixed assets are valued at their acquisition cost, exclusive of additional costs. They are amortized over the economic
lifetime of the asset, as follows:
·· Office equipment5 years
·· Computers
3 years
·· Furniture 10 years
Provisions for risks and expenses
These are recognised at the lesser of their acquisition cost or the
realisable value at the reporting date (Article 74).
Provisions are set aside to cover losses or expenses of a clearly
defined nature that are probable or certain at the balance date,
but the amount of which is not known (Article 50, Royal Decree
of 30.01.2001).
Amounts payable at more than one year and within one year
Participations and shares
Participations and shares are valued at their acquisition price, exclusive of additional costs (Article 41, paragraph 2). Impairments
are recognised in the event of sustained loss of value, as evidenced by the status, profitability, or prospects of the company
in which participations or shares are held (Article 66, paragraph
2 of the Royal Decree of 30 January 2001). Participations and
shares that are recognised under financial fixed assets are not
revalued (Article 57, paragraph 1). Once a participation has
been impaired, it will be revalued at no more than the original
acquisition value, if the status, profitability or prospects of the
company so justify in the judgment of the Board of Directors.
Fixed-interest securities
Fixed-interest securities are valued at their acquisition price. The
difference between the acquisition value and the redemption
value is recognised in the income statement on a straight-line
pro rata basis.
Without prejudice to the remaining provisions of Articles 77, 67,
paragraph 2 and 73, amounts payable are recognised at their nominal value (Article 67, paragraph 1).
Foreign currency translation (Article 34)
Transactions in foreign currency are recognised at the exchange
rate applicable on the transaction date.
All amounts receivable or payable in foreign currency are hedged
against possible exchange rate differences via cross-currency
contracts or forward contracts. These amounts receivable or payable are valued at the contractually agreed hedging rate.
Other financial assets and liabilities in foreign currency are
translated at the closing rate on the balance date. Gains and
losses arising from foreign currency transactions and from the
translation of monetary assets and liabilities in foreign currency
are recognised in the profit and loss account. Non-monetary
items valued at their acquisition price in a foreign currency are
Incofin cvso Annual Report 2014 35
Financial report| Incofin cvso
translated at the exchange rate applicable on the date on which
the acquisition price was determined.
Positive and negative exchange rate differences are entered in
the financial results on a net basis.
Risk management
Risks inherent in offering and holding shares
Risks inherent in investing in shares
There are economic risks inherent in an investment in Incofin cvso
shares, as in any investment in equities: when considering an investment decision, investors must remember that they could lose
their entire investment in shares.
Limited liquidity of Incofin cvso shares
There is no secondary market on which Incofin cvso shares
are traded. Although it is possible for a shareholder to withdraw in accordance with the procedure set out in the Articles of
Incorporation, there is relatively limited liquidity. In addition,
the funds raised by Incofin cvso are reinvested as efficiently as
possible in its core activities. These resources are employed by
MFIs under a series of contracts for a fixed time as working capital for financing the micro-entrepreneurs, and are thus not immediately available for withdrawal.
Under Article 10 of the Articles of Incorporation, partners may
only withdraw or seek a partial repayment of their shares in the
first six months of the financial year, after approval by the Board
of Directors. Finally, shares may only be transferred with the
Board of Director’s prior consent.
Risks of future dividend changes
Past gains offer no guarantee for the future, and no guarantee is
given as to future gains. The dividend may rise or fall to a maximum of 6% as set out in the Act of 20/7/1955 for cooperative
partnerships recognised by the National Cooperation Council
(NRC). Incofin cvso makes no forecasts or estimates of dividend
yields.
Risks inherent in the business of Incofin cvso
Incofin cvso is a specialist player in the microfinancing sector.
Incofin cvso invests directly and indirectly in MFIs in developing countries, which offer microloans and financial services to
small local entrepreneurs. Incofin cvso’s investment decisions
are taken by the Investment Committee, which is made up of a
qualified team of experts with broad financial and legal expertise. They have experience of the microfinancing sector and are
well able to assess the risks of an investment. The Investment
Committee closely monitors the evolution and management of
all of these risks.
Directive 2011/61/EU of the European Parliament and of
the Council of 8 June 2011 on Alternative Investment Fund
Managers and amending Directives 2003/41/EC and 2009/65/
EC and Regulations (EC) No 1060/2009 and (EU) No 1095/2010
(“the Directive”) has been transposed into Belgian law in the
form of the “AICB” law.
Following rigorous analysis of the AICB law and consultation
with the FSMA it was concluded that Incofin cvso is covered by
this legislation. However, the impact of this legislation on the activities of Incofin cvso is limited, for the following two reasons:
·· Incofin cvso benefits from the de minimis rule as set out in
article 106 of the AICB law; and
·· Incofin cvso is a development fund in the sense of Article 2,
1° of the law of 1 June 2008 and therefore falls within the
exceptional regime under the AICB law as specified in its
Article 180 §2 2°.
In accordance with Article 107 of the AICB law Incofin cvso has
duly notified the FSMA. Incofin cvso will fulfil its obligations
to process the registration documentation in accordance with
Article 107 § 2 of the AICB law.
There is no further impact on the operations of Incofin cvso,
nor on the relationship with Incofin Investment Management
as fund advisor.
Credit risks
Incofin cvso invests in microfinance institutions, which in turn
grant loans to people who are often unable to provide any real security. Incofin cvso also works together with such microfinance
institutions and with microfinance funds. It cannot be ruled out
that the microfinance institutions in which Incofin cvso invests
or with which Incofin cvso collaborates could at any given moment become insolvent, as a result of which Incofin cvso’s investment could be lost. Incofin cvso manages this risk by:
·· conducting a rigorous financial analysis;
·· evaluating their business plans;
·· evaluating their management and directors;
·· calling for regular reporting of developments in their activities;
·· regular on-site follow-up.
Country-specific risks
Incofin cvso invests in developing countries, which are subject to
country-specific risks. These risks include political risks (e.g. war
or civil war) and transfer risks (the inability to repatriate funds
invested in the country owing to foreign exchange shortages or
cvso Annual Report 2014 |Financial report
16 Incofin
Incofin cvso
3
other government measures). To cover these risks, Incofin cvso
has concluded an insurance policy with the Credendo Group,
the Belgian export credit insurer, which insures Incofin cvso’s
entire investment portfolio against these risks (with an excess
of 10%).
Incofin cvso diversifies its investment portfolio (consisting of
equity investments and loans) and spreads its risks in a prudent
manner based on the risk distribution policy established by the
Investment Committee. This policy states that the exposure to
any one country or MFI should not exceed 15% and 10% respectively of Incofin cvso’s total assets.
Market risks
The investments are also exposed to market and environmental
risks, which cannot be hedged from an insurance perspective.
These risks include economic environmental factors, legal certainty and the quality of the local regulation of microfinance
institutions. Incofin cvso analyses these issues carefully and also
applies a sound geographic spread in the portfolio composition,
to limit this risk as much as possible.
Despite the fund manager’s experience in the microfinancing
business, there is no guarantee of the identification of adequate
attractive investments or of an optimal spread in the portfolio.
Each contract is the result of negotiation, and the agreement of
both the Investment Committee and the MFI in question is required to complete a transaction.
Exchange rate risks
Incofin cvso actively manages its currency risk using hedging
techniques (such as cross currency swaps, forwards etc.). The
exchange rate risk on investments in local currency is not actively hedged. In these cases, it is expected that the return on
investment will off-set the possible depreciation of the currency
concerned.
Interest rate risk
On the one hand Incofin cvso draws debt financing, and on the
other it places loans with MFIs in foreign currencies. Over time,
the interest rates at which these operations take place are subject to market influences. Incofin cvso will always ensure that
the margin between debit and credit interest rates remains large
enough to allow Incofin cvso to continue to grow. The fund
manager manages this risk by (i) applying fixed rates to both incoming and outgoing transactions and (ii) determining a “minimum” return for all loan transactions.
Liquidity risk
The liquidity risk of the fund is relatively low given the high
liquidity and maturity of the loan portfolio. The cash available
(including available credit lines) and the outstanding loans
which will reach maturity during the coming year will always be
amply sufficient in order to meet the financial obligations and to
absorb any loan defaults.
39
MFI portfolio per region
Africa
11
%
South Asia
18
%
Caucasus and
Central Asia
26
%
COLOPHON
Latin America
and the Caribbean
45
Publisher
Loïc De Cannière
CEO Incofin Investment Management
Design, layout, copywriting and co-ordination
Cantilis (www.cantilis.be).
%
Printing
This magazine is printed on
Amber Graphic, paper certified by the
Forest Stewardship Council.
Photography
Incofin cvso and Cantilis.
3
Incofin cvso Annual Report 2014