microfinance investment opportunity for the broad base of retail investors
DESCRIPTION
Satoru Yamamoto, Deputy General Manager - Daiwa Securities Co. Ltd. - JapanTRANSCRIPT
Microfinance investment opportunity Microfinance investment opportunity for the broad base of retail investorsfor the broad base of retail investors
TBLI CONFERENCE™ ASIA 2010
Satoru Yamamoto
Deputy General Manager
Head of Planning Section
Product Planning Dept.
Daiwa Securities Co. Ltd.
Workshop 10 - Microfinance
May 28th 2010
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This document has been prepared by Daiwa Securities Co. Ltd. (“Daiwa Securities”) based on information, the sources of which are believed by Daiwa Securities to be reliable, but Daiwa Securities makes no representation nor warranty as to the accuracy or completeness of such information. Recipients of this document must make their own decisions on whether or not to adopt the recommendations discussed in this document, based upon their specific situations and objectives. Any use, disclosure, distribution, dissemination, copying, or reproduction of this document without prior written consent from Daiwa Securities is prohibited.
About Daiwa Securities Group Business structure
Robust retail customer base Sales of foreign currency bonds
(Daiwa Securities)
0500
1,0001,5002,0002,5003,0003,5004,0004,5005,000
2008 Jan-Mar
2008 Apr-Jun
2008 Jul-Sep
2008 Oct-Dec
2009 Jan-Mar
2009 Apr-Jun
2009 Jul-Sep
2009 Oct-Dec
2010 Jan-Mar
($ million)
Sales of mutual funds(Daiwa Securities)
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
2008 Jan-Mar
2008 Apr-Jun
2008 Jul-Sep
2008 Oct-Dec
2009 Jan-Mar
2009 Apr-Jun
2009 Jul-Sep
2009 Oct-Dec
2010 Jan-Mar
($ million)
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This document has been prepared by Daiwa Securities Co. Ltd. (“Daiwa Securities”) based on information, the sources of which are believed by Daiwa Securities to be reliable, but Daiwa Securities makes no representation nor warranty as to the accuracy or completeness of such information. Recipients of this document must make their own decisions on whether or not to adopt the recommendations discussed in this document, based upon their specific situations and objectives. Any use, disclosure, distribution, dissemination, copying, or reproduction of this document without prior written consent from Daiwa Securities is prohibited.
Daiwa’s initiative in TBLIYear Name Issuer
Ratings(Moody's/S&P)
LeadManager
Currency Coupon TenorSettlement
DateAmount
(USD million)
Vaccine Bond IFFIm Aaa/AAA Daiwa ZAR 9.90% 2y 19-Mar-08 $211
World CO2LTM Bond World Bank Aaa/AAA Daiwa USD Floating 5y3m 26-Jun-08 $25
JBIC EnvironmentalSupport Bond
Japan Bank forInternational Cooperation
Aaa/AAMitsubishi
UFJJPY 1.51% 5y 27-Jun-08 $188
ZAR 6.26%
AUD 2.60%
NZD 2.65%
USD 1.00%
AUD 3.51%
AUD 4.36%
ZAR 6.85%
ZAR 0.50% 15y
Microfinance Bond International Finance Corporation Aaa/AAA Daiwa AUD 5.10% 3y 20-Nov-09 $275
Green Bond World Bank Aaa/AAA Daiwa NZD 5.23% 5y 3-Feb-10 $106
NZD 4.49%
ZAR 7.43%
BRL 8.00% 5y
AUD 4.83%
ZAR 7.43%
Vaccine Bond IFFIm Aaa/AAA Daiwa ZAR 7.15% 3y 24-Mar-10 $338
Clean Energy Bond African Development Bank Aaa/AAA Mizuho NZD 4.52% 4y 30-Mar-10 $78
ZAR 7.18% 3y
AUD 4.40% 2y
ZAR 6.68% 3y
AUD 4.27% 2y
AUD 4.68%
NZD 4.35%
ZAR 7.08%
AUD 5.23%
Microfinance BondEuropean Bank for
Reconstruction and DevelopmentAaa/AAA Daiwa ZAR TBD 3y 15-Jun-10 TBD
3y 28-May-10 $101Green Bond Kommunalbanken Norway Aaa/AAA
Water Bond
3y6m
Aaa/AAA
Aaa/AAA
Climate Awareness Bond European Investment Bank Daiwa
Asian Development Bank DaiwaAaa/AAA
Clean Energy Bond African Development Bank Mizuho
$200
$437
$144
$132
$207
$106
$625
$368
Aaa/AAA
28-May-10
21-May-10
16-Apr-10
4yHSBC 15-Mar-10
Nomura 3y
Nikko
Climate Awareness Bond European Investment Bank Aaa/AAA
28-May-09
Vaccine Bond 25-Jun-094y
2008
Daiwa
MitsubishiUFJ
HSBCAaa/AAA
Vaccine Bond 20-Feb-09Aaa/AAAIFFIm 3y
2009Vaccine Bond IFFIm Aaa/AAA 3y
IFFIm
2010
EnvironmentalSupport Bond
Nordic Investment Bank 3-Feb-10
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This document has been prepared by Daiwa Securities Co. Ltd. (“Daiwa Securities”) based on information, the sources of which are believed by Daiwa Securities to be reliable, but Daiwa Securities makes no representation nor warranty as to the accuracy or completeness of such information. Recipients of this document must make their own decisions on whether or not to adopt the recommendations discussed in this document, based upon their specific situations and objectives. Any use, disclosure, distribution, dissemination, copying, or reproduction of this document without prior written consent from Daiwa Securities is prohibited.
Microfinance in Japan (2009)
No MFI
No MIV
Growing interests in TBLI among retail investors
IFFIm Vaccine Bonds (March 2008, February 2009, March 2010)
World CO2LTM Bond (June 2008)
World Bank Green Bonds (January 2010)
ADB Water Finance Bonds (April 2010)
EIB Climate Awareness Bonds (June 2010)
Others
Household financial asset of $15.5 trillion can be an important source offunds for MFIs in developing countries
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This document has been prepared by Daiwa Securities Co. Ltd. (“Daiwa Securities”) based on information, the sources of which are believed by Daiwa Securities to be reliable, but Daiwa Securities makes no representation nor warranty as to the accuracy or completeness of such information. Recipients of this document must make their own decisions on whether or not to adopt the recommendations discussed in this document, based upon their specific situations and objectives. Any use, disclosure, distribution, dissemination, copying, or reproduction of this document without prior written consent from Daiwa Securities is prohibited.
SRI Market Size
2,711
3,889
505
80
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
US EU13 Canada Japan
(billion dollars)
Retail led SRI market
Primary sources: European SRI Study 2008
(as of the end of 2007)
United States
InstitutionalInvestors
93%
IndividualInvestors
7%
EU13
InstitutionalInvestors
94%
IndividualInvestors
6%
Canada
InstitutionalInvestors
96%
IndividualInvestors
4%
Japan
InstitutionalInvestors
12%
IndividualInvestors
88%
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This document has been prepared by Daiwa Securities Co. Ltd. (“Daiwa Securities”) based on information, the sources of which are believed by Daiwa Securities to be reliable, but Daiwa Securities makes no representation nor warranty as to the accuracy or completeness of such information. Recipients of this document must make their own decisions on whether or not to adopt the recommendations discussed in this document, based upon their specific situations and objectives. Any use, disclosure, distribution, dissemination, copying, or reproduction of this document without prior written consent from Daiwa Securities is prohibited.
Deep pockets prefer safety
Billions of dollars, as of the end of FY2008
Japan* United Kingdom* Germany* France* United States
(%) (%) (%) (%) (%)
Total Financial Assets 15,555 100.0 5,356 100.0 6,168 100.0 4,829 100.0 41,706 100.0Currency and deposits 8,680 55.8 1,718 32.1 2,429 39.4 1,498 31.0 7,902 18.9Life insurance and pension fund reserves 4,342 27.9 2,758 51.5 2,082 33.8 1,924 39.8 11,622 27.9Shares and other equity 934 6.0 436 8.1 481 7.8 693 14.3 13,174 31.6Mutual funds and securitis other than shares 999 6.4 267 5.0 1,120 18.2 496 10.3 7,498 18.0Others 601 3.9 177 3.3 56 0.9 218 4.5 1,509 3.6
Total Financial Liabilities 4,189 26.9 2,107 39.3 2,142 34.7 1,695 35.1 14,218 34.1
Net Financial Assets 11,367 73.1 3,249 60.7 4,026 65.3 3,134 64.9 27,488 65.9
Primary sources: United States: Federal Reserve Statistical Release, Flow of Funds Accounts, December 10, 2009. United Kingdom: Office for National Statistics, Financial Statistics No 572, December 2009. Germany: Deutsche Bundesbank, Financial Accounts for Germany 1991 to 2008. France: Banque de France, Financial Accounts and Financial Balance Sheets, October 1, 2009. Japan: Bank of Japan, Flow of Funds Accounts , September 17, 2009
* converted into US dollars based on the year-end exchange rates of GBPUSD=1.46, EURUSD=1.40, USDJPY=90.60
19%
31%
18%
4%
28%
56%
6%
6%4%
28%
32%
5% 3%
8%
52% 39%8%
18%1%
34%
31%
14%
10%5%
40%
Japan United Kingdom
Germany
France United States
Currency and deposits Life insurance and pension fund reserves Shares and other equity Mutual funds and securitis other than shares Others
Currency and
deposits
Currency &
deposits
Insurance& PensionShares
Mutual funds
Others
Financial Assets and Liabilities of Households
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This document has been prepared by Daiwa Securities Co. Ltd. (“Daiwa Securities”) based on information, the sources of which are believed by Daiwa Securities to be reliable, but Daiwa Securities makes no representation nor warranty as to the accuracy or completeness of such information. Recipients of this document must make their own decisions on whether or not to adopt the recommendations discussed in this document, based upon their specific situations and objectives. Any use, disclosure, distribution, dissemination, copying, or reproduction of this document without prior written consent from Daiwa Securities is prohibited.
Typical structure of MIV
Microfinance InstitutMicrofinance Institutionsions
(MFIs)(MFIs)
Microfinance InstitutMicrofinance Institutionsions
(MFIs)(MFIs)Micro-lendersMicro-lendersMicro-lendersMicro-lenders
DonorDonorDonorDonor
FoundationsFoundationsFoundationsFoundations
IFIsIFIsIFIsIFIs
Private Private InvestorsInvestorsPrivate Private
InvestorsInvestors
Institutional Institutional InvestorsInvestors
Institutional Institutional InvestorsInvestors MezzanineMezzanineMezzanineMezzanine
JuniorJuniorEquityEquityJuniorJuniorEquityEquity
Senior debtSenior debtSenior debtSenior debt
Microfinance Microfinance Investment Investment Vehicle Vehicle
(MIV)(MIV)
Micro-depositorsMicro-depositorsMicro-depositorsMicro-depositors
Local banksLocal banksLocal banksLocal banks
Commercial / Private
Social / Public
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This document has been prepared by Daiwa Securities Co. Ltd. (“Daiwa Securities”) based on information, the sources of which are believed by Daiwa Securities to be reliable, but Daiwa Securities makes no representation nor warranty as to the accuracy or completeness of such information. Recipients of this document must make their own decisions on whether or not to adopt the recommendations discussed in this document, based upon their specific situations and objectives. Any use, disclosure, distribution, dissemination, copying, or reproduction of this document without prior written consent from Daiwa Securities is prohibited.
IFC Microfinance Bonds
First microfinance investment product in Japan*
$275 million equivalent raised (fully subscribed)
Distributed to 12,000 retail investors in 10 business days
Average investment amount of $18,000 equivalent
Received great public responses
*settlement date basis
Japanese investorsJapanese investors
IFC
MFIsMFIs
Entrepreneurial poor in developing countries
MFIsMFIs
MIVs
Cash flow Summary terms
Issuer : International Finance Corporation
Rating : Aaa/AAA
Amount : AUD 300 million
Settlement Date : 20-Nov-09
Maturity Date : 26-Nov-12
Coupon : 5.10% per annum (semiannual payment)
Denomination : AUD 1,000
Lead Manager : Daiwa Capital Markets Europe Limited
Investor : Japanese retail and institutional investors
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This document has been prepared by Daiwa Securities Co. Ltd. (“Daiwa Securities”) based on information, the sources of which are believed by Daiwa Securities to be reliable, but Daiwa Securities makes no representation nor warranty as to the accuracy or completeness of such information. Recipients of this document must make their own decisions on whether or not to adopt the recommendations discussed in this document, based upon their specific situations and objectives. Any use, disclosure, distribution, dissemination, copying, or reproduction of this document without prior written consent from Daiwa Securities is prohibited.
Investor Forum
Daiwa Microfinance Forum 2009
Date: October 27th, 2009
Venue: GranTokyo North Tower 18F Conference Room
Speaker: Sir Fazle Hasan Abed, Founder and Chairperson of BRAC
Mr. Masahiro Kan, Former Professor of Hokkaido University Public Policy School
Mr. Mark Berryman, Investment Officer/Microfinance Specialist, International Finance Corporation
Mr. Morihiko Hiramatsu, Goodwill Ambassador of One Village One Product Movement
No. of Audience: 196
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This document has been prepared by Daiwa Securities Co. Ltd. (“Daiwa Securities”) based on information, the sources of which are believed by Daiwa Securities to be reliable, but Daiwa Securities makes no representation nor warranty as to the accuracy or completeness of such information. Recipients of this document must make their own decisions on whether or not to adopt the recommendations discussed in this document, based upon their specific situations and objectives. Any use, disclosure, distribution, dissemination, copying, or reproduction of this document without prior written consent from Daiwa Securities is prohibited.
Factors that attract 12,000 investors
Social & sustainable impact
IFC will direct an amount equal to the net proceeds of the bonds to MFIs and MIVs
Simple scheme
Plain vanilla issue under known issuance program
Triple-A credit quality
Sound return
5.1% p.a. fixed coupon paid semiannually in Australian dollars
Low maintenance cost
Outsourcing of administration to IFC
screening and monitoring of MIVs and MFIs
annual reporting of IFC’s microfinance activities
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This document has been prepared by Daiwa Securities Co. Ltd. (“Daiwa Securities”) based on information, the sources of which are believed by Daiwa Securities to be reliable, but Daiwa Securities makes no representation nor warranty as to the accuracy or completeness of such information. Recipients of this document must make their own decisions on whether or not to adopt the recommendations discussed in this document, based upon their specific situations and objectives. Any use, disclosure, distribution, dissemination, copying, or reproduction of this document without prior written consent from Daiwa Securities is prohibited.
Pros and cons
IFC Microfinance Bonds MFI-issued notes
Credit rating
Documentation
Funding capacity
Currency hedging
Secondary market
Direct involvement
Diversification effect
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This document has been prepared by Daiwa Securities Co. Ltd. (“Daiwa Securities”) based on information, the sources of which are believed by Daiwa Securities to be reliable, but Daiwa Securities makes no representation nor warranty as to the accuracy or completeness of such information. Recipients of this document must make their own decisions on whether or not to adopt the recommendations discussed in this document, based upon their specific situations and objectives. Any use, disclosure, distribution, dissemination, copying, or reproduction of this document without prior written consent from Daiwa Securities is prohibited.
Moving forward
IFC Microfinance Bonds successfully opened the door
Next step is setting up microfinance mutual funds in order to
achieve more direct involvement (social return aspect)
gain portfolio diversification effect (financial return aspect)
Challenges
Liquidity
NAV calculation
Maintenance
Optimal fund size
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This document has been prepared by Daiwa Securities Co. Ltd. (“Daiwa Securities”) based on information, the sources of which are believed by Daiwa Securities to be reliable, but Daiwa Securities makes no representation nor warranty as to the accuracy or completeness of such information. Recipients of this document must make their own decisions on whether or not to adopt the recommendations discussed in this document, based upon their specific situations and objectives. Any use, disclosure, distribution, dissemination, copying, or reproduction of this document without prior written consent from Daiwa Securities is prohibited.
Voices from customers
What kind of involvement in microfinance do you consider ?What kind of involvement in microfinance do you consider ?
What kind of microfinance products are you interested in ?What kind of microfinance products are you interested in ?
Source: Questionnaire at Daiwa Microfinance Forum 2009, October 27Source: Questionnaire at Daiwa Microfinance Forum 2009, October 27 thth
*multiple answers allowed
*multiple answers allowed
26
17
13
13
15
16
Mutual funds
MFI-issued notes
Structured products
Private equity
Similar to IFC Microfinance Bonds
Any if social index is developed
23
7
14
16
12
25
As an investor
As an asset manager
As charitable activities
Alliance/JV with MFIs
Establishing MF operations
No plan so far
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This document has been prepared by Daiwa Securities Co. Ltd. (“Daiwa Securities”) based on information, the sources of which are believed by Daiwa Securities to be reliable, but Daiwa Securities makes no representation nor warranty as to the accuracy or completeness of such information. Recipients of this document must make their own decisions on whether or not to adopt the recommendations discussed in this document, based upon their specific situations and objectives. Any use, disclosure, distribution, dissemination, copying, or reproduction of this document without prior written consent from Daiwa Securities is prohibited.
Important notice
Regarding Fees and Risks
Regarding expenses and costs including fees and commissions
・ Only the price value is to be paid to purchase bond
・ Trading foreign currency securities requires submission of application document for opening a foreign securities trading account and charges a maximum of ¥3,150 (including tax) of custody fee other than the purchase price
Regarding risks in investment
・ Sale price of bond may fall below the par value in case of the sale before maturity date,
as the price of bond fluctuates due to the change in interest rate and other factors.
・ Investment in foreign currency-denominated bond may fall below the par value of investment as the yen value of the bond fluctuates due to the change in yen value of coupon and proceed from redemption against the foreign currency.
・ Investment in bond may fall below the par value of investment due to the change in the bond issuer’s management and financial status and the change in the third party’s evaluation on those factors
Regarding other notices in investment
・ Risks and expenses and costs including fees and commissions differ in each product, so please be sure to carefully read the document provided prior to the execution of agreement, prospectus and other documents.
Corporate name: Financial instruments firm: Memberships:
Daiwa Securities Co. Ltd.chief of Kanto Local Finance Bureau (Kin-sho) No.108Japan Securities Dealers AssociationJapan Securities Investment Advisors AssociationThe Financial Futures Association of Japan
Thank you
Daiwa Securities Co. Ltd. | 1-9-1, Marunouchi, Chiyoda-ku, Tokyo, 100-6752, Japan | www.daiwa-grp.jp/ir/english/index.cfm