Supporting the “finance”in microfinance

October 9th, 2008

Thomas SealeCEO, European Fund Administration

Vice Chairman, Association of the Luxembourg Fund Industry

Microfinance Investment Vehicles (MIVs) provide funding to microentrepreneurs via the financing of MFIs

InterestsMicrocredits

Low amount

Short term

Local currency

Microfinance Institution

Microbank

Financing (mainly debt)

MIV

Micro-entrepreneursMicro-entrepreneurs

Source: ADA

Large amount

Long term

Hard currency

Private investors

Institutional investors Public/non-

profit investors

hedging

Investment Return

Return

2

Microfinance overview

• 3,500 Microfinance Institutions (MFIs) worldwide- 48% Asia-Pacific- 17% Latin America + Caribbean

• 200-300 MFIs have access to commercial funding

• 91 Microfinance Investment Vehicles (Dec 07)

• 5.4 billion USD in microfinance funding

• Growth 71% since 2006.

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MIVs have shown significant growth in numbers …

Source: MicroRate, CGAP, ADA

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0

500

1000

1500

2000

2004 2005 2006

Outstanding Fund asse ts Outstanding asse ts in microfinance

… and in assets

1407

1898

712

1204

417

237% Growth inMF assets

911

US

D m

n

Source: MicroRate

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Yet overall microfinance market dynamics show enormous untapped growth potential

Source: Microcredit Summit Campaign Report 2006

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Luxembourg is strongly positioned in the “finance” of microfinance

• 5 of the top 10 MIVs are domiciled in Luxembourg• Multiple fund structures (UCI Part II, SICAR, SIF)• Special purpose vehicles • Overall, 21 Luxembourg MIVs control assets exceeding $1.25 billion

Name Country Total assets (million USD)

1.OikoCredit Netherlands 201.32.European Fund for Southeast Europe Luxembourg 179.93.Dexia Micro-Credit Fund Luxembourg 107.04.Blue Orchard Loans for Development Luxembourg 99.15.responsAbility Global Microfinance Fund Luxembourg 86.06.Blue Orchard Microfinance Securities USA 81.37.Global Commercial Microfinance Consortium

USA 71.0

8.XXEB Microfinance Securities Luxembourg 60.09.Triodos-Doen Netherlands 49.710.Gray Ghost Microfinance Fund USA 44.9Top 10 total 980.2

Top ten MIV investments in microfinance (end 2006)

Source: MicroRate, cf. Minocha, Radhika S., MicroRate “A Survey of Microfinance Investment Vehicles – 2007” presentation, 2007

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Financing of microfinance is limited by uneven information flows• Increasing demand for capital by MF institutions

• Growing number of MIVs

• Investor demand for socially responsible investments

• Need to assist investors in their choice

• Investor confusion

Luxembourg response: LuxFLAG

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Purpose of LuxFLAG

LuxFLAG is an independent organisation that strives to provide confidence to micro-finance investors by awarding a distinctive label to eligible microfinance investment vehicles.

The award of a LuxFLAG label does not constitute a recommendation to investors or a guarantee of investment performance.

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LuxFLAG Microfinance Label

The LuxFLAG Microfinance Label is granted to microfinance investment funds that meet certain criteria. The criteria are selected to ensure that the fund is predominantly invested in microfinance.

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Labelled Funds since 2007

• Dexia Micro-Credit Fund

• European Fund for Southeast Europe

• ResponsAbility Global Microfinance Fund

• Dual Return Fund-Vision Microfinance

• Responsibility SICAV (Lux)

• Rural Impulse Fund SA

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Thank you.

www.luxflag.org

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