Presentation Fin4Ag S27 by Gilles Vercammen

1. July 17th, 2014
Gilles Vercammen
Providing access to finance
for smallholder farmers
Fin4Ag Nairobi
Day 3, 08h45 – 10h30
S27 – Agricultural Investment Funds

2. Incofin IM: focus on rural & ag-finance
Incofin Investment Management
~ 550M USD
Retail funds
70M USD
Managed Accounts
130M USD
Institutional Funds
~ 354M USD
• Leader in rural and agricultural impact investing, strong presence in microfinance and pioneering
initiative in Fairtrade
• Our mission: Our mission is to invest in companies that increase financial inclusion, in order to
generate developmental impact, while generating an attractive return to our investors.
• Head Office located in Antwerp, Belgium; four regional offices based in Bogota, Colombia; Chennai,
India; Nairobi, Kenya and Phnom Penh, Cambodia
Rural focused funds Other funds
124M USD
RIF I
(2007)
40M USD
RIF II
(2010)
160M USD
FAF
(2012)
30M USD
agRIF
(2014)
200M USD
Strong focus on
rural & agricultural finance

3. Priority target:
Increasing access to ag-finance
• Agriculture as a main driver in emerging countries
• Financial inclusion is still below 10% in emerging countries
3
2
Increasing role
from
smallholders in
providing food
security
3
Powerful role
in poverty
reduction
* Financial inclusion mesasured as % of adults (+15year-olds) with a loan from a formal financial institution
Source: International Finance Corporation, World Bank - Financial inclusion data 2011
Region
%
borrowers
Lat-Am
Eastern
Europe &
Central Asia
Middle East &
North Africa
East Asia &
Pacific
Sub-Saharan
Africa
South Asia
Strong economic
contributor in
emerging countries
(GDP & Labor force)
1
Agriculture
8%
5%
5%
9%
9%
8%

4. Incofin’s flagship funds:
Rural Impulse Fund I & II
4
June 2013
*Including approved deals
Fund launch 2007 2010
Fund size 40 M USD 115 M EUR
Fund model
Hybrid – investing in equity investments & debt
investments
Geographical spread Global fund – developing countries
# Equity investments 3 21
Underlying IRR equity
investments
31,5% 9,8%
Avg equity size ~ 1,3 M USD ~ 2,7 M EUR*
# Cumulative Debt
investments
80 39
Underlying IRR loan
portfolio
8,3% 7,7%
Average Loan size ~ 1 M USD ~ 1,2 M EUR
Rural Impulse Fund I Rural Impulse Fund II
Fund
structure
Fund
Results

5. RIF I & II: strong outreach…
5Source: Internal reporting Incofin IM, Symbiotics MIV Survey Report 2012
2.100
2.439
2.892
2010 2011 2012
2.884
3.268
3.823
2010 2011 2012
1,275
1,424
1,606
2010 2011 2012
1600 branches of
RIF investees ...
... reach out to 3.8 M
clients ...
... of which 2.9M women
73%
75%
76%
+12%
+13%
+ % Annual growth % Women/Total Clients
+14%
+17%

6. …to the rural poor..
6
* Rural score defined as % of points of sales in rural areas
Sources: Internal Reporting Incofin IM, MIX market
Note: Average Loan size calculated based on Gross Loan Portfolio (USD) divided by total # clients
Average rural score* of MFIs in
RIF I & RIF II:
higher than average
Average loan size of MFIs in RIF I
& RIF II: lower than average
USD
68% 67%
0%
10%
20%
30%
40%
50%
60%
70%
80%
RIF I RIF II
% Rural 31-12-2012
687 675
2,069
1,896
RIF I
portfolio at
31/12/2012
RIF II
portfolio at
31/12/2012
Symbiotics
MIV Survey
2012
MIX avg
2012

7. .. to both farmers and rural enterprises
7
Rural MFIs: Microfinance Institutions that have a large portion of their points of sales in rural areas and less in urban
areas
29.0%
30.5% 30.9%
33.1% 32.9%
2008 2009 2010 2011 2012
 Average agricultural exposure of 30-33% in the Rural Impulse Fund
portfolio
 Rural is not necessarily translated into agricultural exposure
0%
20%
40%
60%
80%
100%
0% 50% 100%
RUralScore%
% Agriculture in portfolio

8. agRIF : combining different financing
channels to serve farmers
8*Target of the Fund is to reach size of 200M USD
Rural Impulse
Fund
2007
(40M USD)
Debt + Equity
Rural Impulse
Fund II
2010
(160M USD)
Debt + Equity
Fairtrade
Access Fund
2012
(30M USD)
Debt
agRIF
expected 2014
(200M USD*)
Debt + Equity
• Micro-finance institutions • Micro-finance institutions • Producer groups • Financial institutions
such as microfinance
institutions, small
business banks,
commercial banks,
leasing companies etc.
• Producer groups such as
producer organizations
• SMEs active in the
agricultural value chain
Financing
channels
Target
group
• Rural entrepreneurs • Rural entrepreneurs • Smallholder farmers • (Smalholder) farmers and
actors active in the Agri
VC
Need to focus on a wider range of financing channels in order to reach out
to (smallholder) farmers and other actors in the agri VC

9. Aggregators of
smallholders
agRIF: widening scope from MFIs to all
FIs involved in ag-finance + POs
9
agRIF investment scope
Financial institutions
Banks serving rural
clients or offering
agricultural products
Regulated MFIs
offering agricultural
products
Unregulated MFIs
agricultural products
Other FIs serving
agri clients such as
leasing companies
15% 45% 30% 5%
Expected allocation
Overlap with RIF I/II
Producer groups
(coops, P.O.s,
plantations)
5%

10. Achieving strong catalytic role
13
2
5
1
10
Fund
Size
(M USD)
Life Stage
Fund
# Equity
stakes
1st time
Int’l investor
RIF
RIF II
40.0
160.0
Fully
invested
End of
Investment
period
3
20
67
75
%
# 1st Int’l investor
Graph legend:

11. Importance of Technical Assistance
• The Rural Impulse Funds have benefitted from significant Technical Assistance
Facility to build capacity at the level of the investee
• The first EIB RIF II Symposium took place, a learning platform for microfinance
institutions to share best practices and lessons learnt: 20 MFIs and their 40
representatives benefited of the training sessions.
11
Fund allocation per geographic area
ACP
60%
South
East Asia
27%
LAC
9%
CEE/
NIS
4%
Fund allocation per area of intervention
Product
development
32%
Operational
strengthening
& HR
24%
Transformatio
n
14%
Greenfield
11%
Risk Mgmt &
Internal
control
9%
MIS and New
Delivery
Channels
9%
SPM &
Governance
1%
EOY 2013 EOY 2013

12. Major achievements from the RIF II TA
facility
• Up to end of 2013, 31 TA assignments were conducted with another 8 in the
pipeline for RIF II
• 20 MFIs benefitting of Capacity development services (of which 10 equity deals)
• 4 MFIs have a new Human Resource Framework
• 4 MFIs have a new risk management framework under implementation
• 5 MFIs are piloting/rolling out new products
 i.e. savings products, SME loans, loans targeting women, individual loan targeting value chain
actors, etc.
• The first EIB RIF II Symposium took place, a learning platform for microfinance
institutions to share best practices and lessons learnt: 20 MFIs and their 40
representatives benefited of the training sessions.
12

13. Lessons learnt from Technical
Assistance Facility
• Ownership: Capacity building is most likely to lead to change when top
management and the BoD value these services
• Demand Driven Approach: The need assessment should be lead by the MFI. The
external support to identify priority areas can be helpful. The executive management
has to be involved in the formulation phase of the TA Project
• Accountability for Results: Development of a result-based approach. Definition of
Objective Verifiable Indicators (OVIs) and milestones for each TA project
• Donor Coordination: external funding continues being important for most of MFIs
in SSA. Creating and building new alliances with Donors and other MIVs in order to
leverage the funds; avoid overlapping and develop comprehensive TA interventions.
• The Final Beneficiaries are MFI clients. Capacity Development services should
support MFIs to provide the financial services that support the multiple goals of rural
households.
• Organize TA support in one TA facility with one set of rules. RIF II has
different donors which has lead to a wide set of procedures and coordination can be
a challenge
13

14. agRIF
Technical Assistance
14
 One TA facility to be raised with target size of 3M USD in order to strengthen
the capacity of agRIF’s investments
 The Fund shall make an annual contribution during first 5 years of the
Fund’s lifetime (0,10% of aggregate commitments) to the TAF, out of this fund
TA interventions in investees can be financed
 TAF services will be conducted by external experts and consultants, they will
be covered by donor funds raised and by the Fund’s Technical Assistance
Contribution
 Strong focus will be placed on the following areas of intervention:
• Agricultural/ Rural product development
• Risk Management tools on how to serve agricultural clients
• Delivery methods for reaching out to rural and agricultural clients