ANNUAL - SIDI · CREC Tier 4 MFI 110 446 KAYER PO 22 868 SEN'FINANCES Apex 200 096 UGPM PO *...

ANNUAL REPORT

2016

sidi.fr

Solidarité internationale pour le développement et l’investissement

OVE

RVI

EW

2

T hanks to the remarkable resilience of the solidarity-based finance chain that connects us to those excluded from traditional economic

channels in the South and East,

SIDI succeeded in fulfilling and even surpassing its objectives for the 2013-2016 Strategic Plan, and reinforced its position as leading social investor in Africa and Latin America.

Thanks to your commitment, the daily lives of millions have tan-gibly improved. Small entrepreneurs, farmers, and others lacking access to basic services were able to undertake income-generating activities and become agents of their own development.

During the year, SIDI's governance bodies and teams took the time to draw lessons from the previous Strategic Plan and define new objectives for 2017-2020. The process has led SIDI to deepen its in-volvement and commitment to the key issues that define today's social investment sector. It will redouble its efforts to accompany partners as they structure, consolidate and strive for sustainabi-lity, and an approach based on social and ecological transitioning will be central to all its activities. The effects of climate change in the regions where SIDI works must be grappled with; addressing them is an absolute necessity for guaranteeing the sustainability and relevance of our partners. SIDI will be particularly mindful of partners' innovations in this area, and will study opportunities to finance access to renewable energies and irrigation in areas struck by chronic drought.

SIDI's governance bodies have insisted on their desire to deepen the relationships created with its many partners, shareholders and alliances--such as FEFISOL for Africa--who share its vision of a so-lidarity-based economy. As a subsidiary of CCFD-Terre Solidaire, SIDI shares this organization's values and convictions. SIDI aspires to promote a solidarity-based economy and society through the emergence of local dynamics and actors who are agents of change in their own lives.

As we launch into this new strategic plan, let us continue to work together, providing solidarity-based financing that meets the subs-tantial needs of SIDI's partners.

Dominique LESAFFRE Managing Director, SIDI

3

ANNUAL REPORT

2016

SummaryOverview 5

What we do 5Where we work 6Review of the Strategic Plan 2013-2016 8

Social Report 12

Our activities 16Improving financial services in rural areas 16Supporting agricultural value chains 20Promoting community finance 24

Fefisol� 26

Governance and team 28

Business model 30Revenues 30

Expenses 31

Financial statements 32

Networks 34

ACTES: SIDI endowment fund for supporting activities promoting ecological and social transitioning APEX : a second-tier or wholesale organization that channels funding (grants, loans, guarantees) to multiple microfinance institution in single country or region (CGAP)CCFD-Terre Solidaire: Catholic Committee against Hunger and for Development Com. fin.: Community-based financingEST : Ecological and Social TransitionMFI: Microfinance Institution MUSO: Mutualist financial structure NGO: Non-Governmental Organization PO: Producers’ Organization SME: Small and medium enterprises DRC: Democratic Republic of Congo HR: Human Resources MFI Tier 1: Large MFIs with assets over $ 50 millionMFI Tier 2: Medium-sized MFIs with assets between $ 50 million and $ 3 millionMFI Tier 3: MFIs with assets between $ 3 million and $ 1 millionMFI Tier 4: Small MFI with assets under $ 1 millionPAR30 : portfolio at risk 30 days

Glossary

OVE

RVI

EW

5

ANNUAL REPORT

OVE

RVI

EW

2016

SIDI, Solidarité Internationale pour le Développement et l’Investissement, is a social investor created in 1983 by CCFD-Terre Solidaire, to help strengthen the income-generating activities of marginalized populations from the South and East.

SIDI supports local actors, such as financing institutions, producer organizations and rural businesses, that offer services in their communities to populations excluded from traditional economic channels.

SIDI operates on two levels: responding to requests for financing (debt, equity, guarantees) and support for institutional strengthening (governance, management, strategy, social performance, etc.).

SIDI thus contributes to improving the sustainability of its partners’ services by ensuring they foster an economic dynamic that is socially and ecologically sound.

SIDI’s shareholders are individuals and institutions that entrust it with resources to carry out activities in exchange for human, social and environmental returns.

A pioneer of solidarity-based finance in France, SIDI is recognized by the French government for its contribution to society, a certified «entreprise solidaire».

SIDI shares have been certified since 1997 by an independent committee of experts through Finansol.

4,332,800 end beneficiaries

104partners including 4 regional funds

€21.8 million invested (as of 31/12/2016)

2,355 days dedicated to our partners

€22million in capital

1,891 shareholders &

36 countries where SIDI works

nearly 2,500 socially-driven savers

OVE

RVI

EW

6 Solidarité internationale pour le développement et l’investissement

LATIN AMERICA AND THE CARIBBEAN

Continent FOPEPRO Regional fund 495 330 -

FOROLACFR Network - -

Bolivia ANED Com. fin. / Tier 2 MFI

62 335

Chile FINANCOOP Tier 1 MFI *

Colombia AGROSOLIDARIA Apex 14 038

CENCOIC PO *

CONSOLIDAR Tier 3 MFI 191 203

Ecuador BANCOSOLIDARIO Tier 1 MFI *

CAAP Apex 100 220

COPROBICH PO 165 355

FONSMSOEAM PO 297 747

JAMBI KIWA PO 161 435

Guatemala RED FASCO Apex *

Haiti COOPCAB PO 8 929

FECCANO PO 336 645

FRICS Apex *

INDEPCO PO 67 929

KOFIP Com. fin. -

Nicaragua FDL Tier 1 MFI 9 422

Panama SICSA Apex 83 438

Peru CAFE PERU PO -

CREDIFLORIDA Tier 2 MFI *

FORTALECER Apex 917 263

IDESI Tier 2 MFI 307 773

LA FLORIDA PO -

Uruguay SAINDESUR Tier 4 MFI 564 839

CONTINENT / REGION

Country PARTNER Type Portfolio as at 31/12/2016 Extent of support, TA, monitoring and prospection

* financed during 2016 time spent by the SIDI team

SUB-SAHARAN AFRICA

Continent FEFISOL Regional fund 3 200 000

RESEAU MAIN Network *

South Africa SEF Tier 2 MFI -

TEMBEKA Apex 380 940

Burkina Faso ASIENA Com. fin. / Tier 3 MFI

304 898

MOGTEDO PO 22 868

PAMF Burkina Tier 2 MFI 503 082

SINCO PO 100 000

SINERGI BURKINA FASO

Venture capital company

76 225

UBTEC Com. fin. / Tier 2 MFI

*

Burundi CAPAD com. fin. Com. -

COPED Com. fin. Com. -

ISHAKA MICROFINANCE

Com. fin. / Tier 3 MFI

43 842

Cameroon CECAW Tier 2 MFI -

Côte d’Ivoire COOPARA PO 112 050

Guinea CRG Tier 1 MFI 171 576

WOKO PO 86 364

Madagascar FANOHANA PO 41 000

NUTRIZAZA PO 100 529

PHILEOL PO 44 814

SIPEM Tier 2 MFI 272 927

TITEM Com. fin. / Tier 4 MFI

*

UCLS PO 111 000

VAHATRA Tier 3 MFI 19 637

Mali AOPP PO -

BMS SA Apex 552 469

NYESIGISO Tier 2 MFI *

Mozambique CAIXAS COMUNITARIAS

Tier 3 MFI -

IKURU PO 223 688

Niger FCMN-NIYA PO 419 969

FUCOPRI PO 199 708

KOKARI Tier 2 MFI 52 404

MASNAT PO *

SINERGI Venture capital company

125 770

TAANADI Tier 2 MFI 107 630

7

ANNUAL REPORT

OVE

RVI

EW

2016

MEDITERRANEAN BASIN

Egypt EACD Tier 3 MFI 109 968

Lebanon FTTL PO 125 158

Morocco AL AMANA Tier 1 MFI 163 823

Palestine ACAD FINANCE Tier 2 MFI 383 712

ASALA Tier 2 MFI 458 043

DAMAN Guarantee fund 104 497

Tunisia ENDA INTER ARABE Tier 1 MFI 796 713

ASIA

Laos FONDS COOPERATIF Tier 3 MFI 236 000

Vietnam ECOLINK PO 67 005

GLOBAL

KAMPANI Fund 75 000 -

EUROPE

Continent SEFEA Regional fund 211 000 -

Kosovo KRK Tier 2 MFI 1 539 977

Moldova MICROINVEST Tier 2 MFI 187 062

Sub-Saharan AfricaLatin America and the CaribbeanAsiaMediterranean Basin Europe

54%26%1%10%9%

PORTFOLIO BREAKDOWN (€ 21.8 million) BY REGION

SUB-SAHARAN AFRICA

Uganda ACPCU PO *

BIO UGANDA PO -

CENTENARY BANK

Tier 1 MFI 475 424

HOFOKAM Tier 2 MFI 403 563

KATERERA PO 53 984

RFCU PO 63 758

SEMULIKI PO 186 249

SMF EA Apex 999 292

DRC AIPR Com. fin. -

CCRD Com. fin. / Tier 4 MFI

17 645

COOCEC Apex -

GAMF Com. fin. -

GEADES Com. fin. -

RPMS Com. fin. -

SYNERGIE IPDEF Com. fin. -

Rwanda ABAKUNDAKAWA PO * -

KOPAKAMA PO 111 300

Senegal CGRH NIANING PO *

CREC Tier 4 MFI 110 446

KAYER PO 22 868

SEN'FINANCES Apex 200 096

UGPM PO *

Tanzania MUCOBA Tier 2 MFI 144 856

MVIWAMBI PO 113 186

RUCODIA PO *

YETU Tier 2 MFI 435 779

Togo FECECAV Tier 2 MFI 96 355

UCMECS Tier 2 MFI 304 898

WAGES Tier 2 MFI 251 541

Zimbabwe UNTU Tier 2 MFI 335 860

Solidarité internationale pour le développement et l’investissement 8

OVE

RVI

EW

In light of an increasingly competitive environment, SIDI decided in 2012 to focus its activities in areas where it had comparative advantages (in terms of flexibility, cost, risk-taking ability), thanks to the nature of the solidarity-based finance chain. It reaffirmed its intention to target Africa and rural areas in general, while directing its activities towards:

• the development of sustainable financial services adapted to populations excluded from traditional financial systems;

• support for agricultural value chains, in view of ecological and social transition (EST)

• support for community finance

• technical assistance to MFIs to improve their social performance.

For each area, SIDI set objectives in terms of targeting, portfolio and technical support.

TARGETING: REAFFIRMING THE FOCUS ON RURAL POPULATIONSSIDI established 12 new partnerships with MFIs during the plan. The objective to prio-ritize rural areas was met: seven of these new partners have rural or mixed urban-ru-ral operations and the others were selected for their ability to target the most vulnerable people in urban and peri-urban areas.

SIDI also directed its support to producer organizations that market most of their pro-duction in local markets. This is the case for 7 of 19 new partnerships. As per established criteria, SIDI’s export-oriented partners pro-duce and market cash crops (coffee, cocoa and tea) that can not be grown in the desti-nation countries.

Lastly, during this plan, SIDI worked to re-fine its approach to supporting ecological and social transitioning. In conjunction with CCFD - Terre Solidaire, it has reinforced its approach and financed more than fifteen or-ganizations involved in a transition process.

Between 2012 and 2016 the number of beneficiaries grew

from 31,000to more than

157,000.

GROWTH OF MFI PARTNERS’ AGRICULTURE PORTFOLIO

(WEIGHTED AVERAGE BY PORTFOLIO SIZE)

GROWTH IN THE NUMBER OF BENEFICIARIES OF PO AND RURAL SME

Review of the Strategic Plan 2013-2016

19% 23%

2013 2016

92016ANNUAL REPORT

OVE

RVI

EW

FINANCIAL SUPPORT: GROWTH IN LINE WITH TARGETS At the end of 2016, investment objectives had been met, with the exception of community finance targets: the projections at the beginning of the strategic plan were based on the development of a structured MUSO refinancing activity by several SIDI partners, which proved unnecessary for most of them.

INVESTMENT OBJECTIVESBY AREA (EXCLUDING FUNDS):

106%

126%

22%

Financial inclusion

Agricultura lsectors

Community finance

Portfolio growth has enabled SIDI to increase outreach to MFI partners, who in turn have been able to reach more borrowers.

SIDI’S OUTREACH (MFIs)

2016

1.8 million

2012

SIDI also met its objective of financing Africa, dedicating 54% of its portfolio to the conti-nent at end-2016 (or 46% not including the FEFISOL portfolio).

INVESTMENT OBJECTIVE IN AFRICA

2012

54% of the SIDI portfolio

1.3 million

borrowers


OVE

RVI

EW

ACCOMPANYING PARTNERS: TANGIBLE PROGRESSIn four years, the operational team and volunteer consultants devoted nearly 10,000 days to supporting partners (prospection, monitoring and technical assistance combined)-- a marked increased compared to the previous strategic plan (5880 days over 3 years ).

From 2013-2016, SIDI’s support and TA function was restructured, and a coordination cell was set up to expand and better mobilize the network of some 20 volunteer consultants (whose work represents approximately 20% of total days dedicated to partners). This restruc-turing also made it possible to make better use of two TA financing mechanisms at SIDI’s disposal: FEFISOL TA facility and the SIDI endow-ment fund (ACTES).

SIDI has continued to play an active role in its partners’ governance, maintaining an active presence on the Boards of around thirty struc-tures over the period. This has allowed it to oversee their institutional development as well as safeguard their social mission.

SIDI systematically maintained partner support in times of crisis, whether from internal or external factors (such as Ebola in Guinea). In all, SIDI stood by almost 20 partners in difficulty, in some cases playing a decisive role in resolving the crisis (CCRD in DRC, KRK in Kosovo, CafePerú in Peru)

SIDI successfully participated in several institutional transformation projects, playing an important role in the creation of ACAD Finance and Daman in Palestine, Ikuru in Mozambique and in the Sen’Finance project in Senegal.

In terms of social performance, SIDI helped 15 partners advance in this area, and conducted two cross-cutting projects (the social audit of FEFISOL and a study on the Moroccan microfinance crisis). A doctoral student has also joined the team, and has been studying for two years now SIDI’s work in this area, by participating in projects carried out with partners.

With regards to producer organizations, SIDI support has mainly fo-cused mainly on management, accounting and strategy. These are areas where POs often struggle to find support, even though their long-term effectiveness depends on the quality of their internal orga-nization.

Regarding MUSOs, SIDI has embarked on three major cross-cutting projects (impact study, capitalization of past experiences, drafting of a new MUSO guide) whose outcomes will clarify its approach.

Despite the extent of missions and projects undertaken over the past four years, the TA and support component of SIDI’s mission decreased, mainly due to limited human and financial resources, but also strategic decisions that led the team to prioritize other activities. The 2017-2020 strategic plan takes into account this observation, and plans to take measures to deepen partner relationships.

10,000 days dedicated to partners

112016ANNUAL REPORT

OVE

RVI

EW

In the last four years, SIDI has considerably extended the scope of its work. Given the progress made during the last strategic plan, and the challenges still to be met, SIDI has set the following objectives for the next four years:

• Build into each and every one of SIDI’s activities, beyond POs alone, an approach that promotes ecological and social transitioning, to create a more environmentally sustainable and equitable world;

• Reaffirm a dynamic approach to the social dimension of SIDI’s activities; one that considers not only improved practices, but also outputs and outcomes observed at all levels of the solidarity-based finance chain;

• Confirm the strategy of being a patient social investor, ready to go where the others do not go;

• Strengthen the TA and support component that is so central to SIDI’s mis-sion and effectiveness, which will lead it to identify, carry out and document the progress of 40 projects in 4 years and deepen its expertise.

SIDI 2020


SOCI

AL R

EPO

RT

Targeting populations underserved by financial services

SIDI’s shareholders and solidarity savers entrust it with considerable resources and the mandate of strengthening partners and increasing their outreach. Every year, SIDI presents a social report, to demonstrate that it is using these resources in a way that is appropriate to its mission as a social investor.

This social report aims to demonstrate how SIDI meets its strategic objectives through :

• targeting vulnerable and marginalized populations,

• a solidarity-based approach to investment and technical assistance

• fostering partner sustainability and outreach.

SIDI intervenes in areas underserved by financial services, with a focus that is primarily rural. It also seeks to di-rectly support agricultural value chains developed by producer organizations.

SIDI makes a point of focusing efforts on regions neglected by other financial players, due to high operating costs associated with remote and geographically dispersed populations, the risks inherent to agriculture and the fragility of the economic fabric in these zones.

TARGETING 2016

Countries in SIDI's portfolio where over 50% of the population is rural (World Bank data)

19 of 3648% of the portfolio

MICROFINANCE

Countries in SIDI's portfolio where less than 30% of the pop. is banked

24 countries , i.e., 73% of the portfolio

Women clients 57%

Rural clients 52%

PO 57%

Average surface area of farms

1,7Ha

PO partners certified organic

56%

PO partners certified fair trade

56%

Social report

AREAS OF OPERATIONS OF PARTNER INSTITUTIONS

Rural (>50% rural clients) 76%Urban (<20% rural clients) 10%Mixed (20% to 50% rural clients) 14%

132016

SOCI

AL R

EPO

RT

ANNUAL REPORT

Means : socially driven and patient investments Fostering long-term commitment is at the heart of SIDI’s approach. SIDI enters partnerships ready to commit for the long haul, sharing risk and becoming shareholders as soon as possible. Because it works with patient capital, SIDI can also be flexible when it comes to investment amounts, time frame and guarantees.

This risk sharing mandate allows SIDI to finance socially-driven institutions with medium-term prospects for deve-lopment, but which are not yet profitable. It also makes it possible for SIDI to intervene in areas hit by crises. Gi-ving priority to partners in difficult contexts translates into a portfolio at risk at 90 days of 9.18% (as of 31/12/2016), of which more than half represents partners working in crisis zones.

* Countries in crisis in 2016: BURUNDI, EGYPT, ECUADOR, HAITI, LEBANON, MALI, NIGER, PALESTINE, DRC, ZIMBABWE

RISK SHARING (average portfolio over the year) 2016 (funds not included)

Investments in crisis zones* 21% of the portfolio (35 partners)

Local currency loans 58% of the portfolio

Equity investments 44% of the portfolio (30 partners)

Investment in emerging institutions 56% des partenaires (soit 29% du portefeuille)

PATIENCE

Active loans with terms >24 months 58%

Average duration of financial relationship with existing partners

6 years

MFI Tier 1 7MFI Tier 2 22MFI Tier 3 7MFI Tier 4 4APEX institutions 11

TYPES OF MICROFINANCE PARTNERS


SOCI

AL R

EPO

RT

SIDI seeks to effectively and sustainably improve the economic, institutional and social viability of of its partners. To do this, the team takes the time to understand local contexts and build relationships based on trust, in order to adapt its offerings to the specific needs of each partner.

SIDI actively participates in the the governance of our shareholdings. Playing an active role allows us to to safeguard the social mission and founding principles of the institution, as well as contribute to the definition and monitoring of the strategy, growth objectives and risk levels.

Means : Fostering professionalism, upholding social objectives

DIRECT SUPPORT TO PARTNERS 2016

Total days dedicated to partners 2,355

Days dedicated to Tier 2, 3, 4 institutions [validate 57%

Partners receiving direct support 63%

GOVERNANCE AND SOCIAL OBJECTIVES

Board seats 27

Days dedicated to social performance 19

FINANCIAL SUPPORT MOBILIZED

Amounts negotiated by SIDI (excluding FEFISOL) € 3.5 million (9 partners)

Days dedicated to FEFISOL 454

Leverage effect of FEFISOL 2.9 million (10 partners)

Prospecting new partners and financial monitoring, tasks inherent to any investor, require a sustained effort given where SIDI works and the fragile nature of some of its partnerships. The rest of the time spent on partnerships is specific to SIDI and its man-date as a social investor.

TA / Support 46%Financial monitoring 27%Prospection 27%

BREAKDOWN IN TIME DEDICATEDTO PARTNERSHIPS IN 2016 (IN DAYS)

COMPLEMENTARITY OF FUNDING / SUPPORT

32521384

partners financed

65 partners receiving support

152016

SOCI

AL R

EPO

RT

ANNUAL REPORT

Results : Increasing financial access

PORTFOLIO BY SECTOR OF MFI PARTNERS

Trade / craft 56%Agriculture / livestock / fishing 29%Housing / health / education 9%Consumption 6%

1,886,000 active

borrowers

2,567,000 voluntary savers

91,500MUSO

members

4,083,500end beneficiaries

MICROFINANCE SERVICES: OUTREACH

• 49% rural beneficiaries• Median Loan: € 622

SUPPORT TO SMALLHOLDERS: OUTREACH

• Average purchase per producer: € 729• Average surface area of farms: 1.7 ha

157,000beneficiaries of PO

services

77,000 producer-suppliers

Results:Financial and social performance

FINANCIAL SUSTAINABILITY 2016

Growth in partners' equity (consolidated) 17%

Partners with a positive net result 53%

Average PAR30 of MFIs 11%

ACTIVITY

Average annual growth of MFI portfolio 16%

Average annual growth of PO turnover 14%

RESPONSIBLE PRACTICES

MFIs with a social performance management tool 55%

MFIs offering non-financial services (financial education, health training, etc.)

62%


OU

R A

CTIV

ITIE

S

Strengthening microfinance institutions is SIDI’s main activity, with a focus on primarily rural institutions that offer services adapted to farmers. SIDI’s objective is to help build sustainable institutions in a context where savings and credit services to rural populations are largely insufficient to meet the needs. The priority of strengthening financial services in rural areas, reaffirmed in the 2017-2020 strategic plan, accounted for 58% of investment flows (excluding the regional funds) and 42% of SIDI’s support to partners.

Acquiring a minority stake in partner institutions remains SIDI’s preferred form of intervention, insofar as it provides stable re-sources at a reasonable cost and allows SIDI to participate in the governance of institutions, and thus defend its values as a social investor.

In 2016, SIDI’s involvement in the governance of microfinance ins-titutions and networks represented 223 days of work with 16 ins-titutions. On average, SIDI devoted 14 days per partner to gover-nance -- confirmation of its active role (see box). As a member of the Board or Board committee, SIDI’s role is three-fold: ensure so-cial objectives are achieved; participate in the definition and mo-nitoring of strategic priorities and the business plan; ensure that the rules of good governance are respected in terms of balancing power relations, providing transparent information and ensuring competent management.

In 2016, SIDI made several new equity investments. Thanks to a partnership with Italian social bank, Cassa Padana, it was able to shore up the equity of Peruvian apex FORTALECER, created to refinance its 42 member microfinance institutions.

In Chile, SIDI increased its stake in the savings and credit coo-perative FINANCOOP which has 42,000 members. With this in-vestment, SIDI now has two out of seven seats on the Board of Directors, with the aim of reorienting and clarifying the coopera-tive’s social mission in a country that may be rich but where social inequalities persist.

After several years of administrative efforts, SIDI was also able to convert, as planned, two loans into equity. In converting a € 435,000 loan to YETU into equity, SIDI has been taken 5% of the capital (and a seat on the Board of directors) of this Tanzanian ins-titution, which after 20 years, successfully transformed into a com-munity bank in 2016. The other loan, worth nearly $ 1 million, has allowed SIDI to enter the capital of Nicaragua’s first microfinance institution, FDL.

4,083,508

borrowers and / or savers of whom 49%

are rural

51 partners of which

42 financed

759 days dedicated to support

172016

OU

R A

CTIV

ITIE

S

ANNUAL REPORT

K osovo is a very fragile country with many factors hampering its recovery: low levels of human development, only partial recognition by the international community and huge lack of investment (due to an opaque legal and regulatory framework). In this context, SIDI’s involvement with the Rural Credit of Kosovo (KRK), created in 1999

from a microfinance program whose mission was to rebuild Kosovar agriculture after the war, is extremely relevant, maintains Patrick Du Saint, a volunteer consultant and SIDI representative on the Board of Directors of KRK.

In 2016, as part of its strategic objective to develop new partnerships, SIDI was able to start a financial relationship with four institutions, as well as launch a technical assistance project with CECAW in Cameroon.

PAMF is a small rural institution in Burkina Faso that operates throughout the southern half of the country, with points of service in all of the major agricultural production regions. It has 51,000 clients to whom it makes loans, mostly using group methodology, given its clientele’s lack of guarantees.

Financed by FEFISOL since 2015, PAMF requested a large short-term loan from SIDI to finance highly seasonal agricul-tural loans (77% of its portfolio is in rain-fed agriculture). SIDI granted PAMF a loan of € 500,000 (in FCFA) in mid-2016 for 8 months, which enabled the institution to meet its many loan requests (in 2015, it only met a quarter of them).

In Uganda, SIDI made a two-year loan of € 400,000 (in Ugan-dan shilling) to an institution working in the western part of the country, HOFOKAM, whose mission is to serve the

SHARING EXPERIENCE: Participating in the governance of a microfinance institution

For an MFI like KRK, reconciling economic performance and a social mission can sometimes prove to be a real challenge. How does the Board juggle these objectives, which sometimes contradict each other?

It’s a real issue. Indeed, it is sometimes difficult to find the right balance. Between 2015 and 2016, the Board of Directors chose to focus on achieving a certain degree of economic and financial stability after several difficult years for KRK (crisis in 2010, the breakdown of a proposed merger between KRK and another entity). The Board of Directors thus set out to mobilize teams around a new development plan which has resulted in the opening of new branches, recruiting new loan officers and expan-ding the product range. This dynamic was accompanied, of course, by intensified risk supervision, which came in form of improved reporting and extending internal audits across all departments. While social and environmental issues faded somewhat into the background, they re-mained omnipresent. For example, the Board ensures that the KRK continues to focus on financing Kosovo smallholder agriculture by ensuring that the majority of the portfolio is allocated to agricultural activities, and that a significant portion of the portfolio consists of small loans. In 2016, the Board decided to focus on the social dimension by conducting an audit of KRK’s social perfor-mance. This overview will enable it to define an action plan to strengthening practices in this area.

What is the value added of a social investor like SIDI in the governance of an institution like KRK?

Within KRK, SIDI is a particularly credible partner, be-cause of its history with the institution. SIDI took a stake in KRK very early on, in 2003. Since then, despite its minority position (18%), SIDI has become the steward of the insti-tution’s social mission. As such, it regularly makes propo-sals in this area, even while fully sharing concerns about sound financial management with the other shareholders.

In the future, what does SIDI consider would be the ideal positioning of KRK?

After some difficult years for KRK, we are pleased to see that it has regained both financial health and profitability, and is able to manage its risks. SIDI, like the rest of the Board members, would like to see KRK consolidate its po-sition so that financial support granted in the future can benefit the institution’s development. For this, it is impor-tant that KRK evolves in line with the country’s growing urbanization and the financing needs of new productive sectors, while maintaining its initial trademark: support to small-scale agriculture. In the medium term, KRK needs to be able to offer new services (savings, transfer, mobile banking, etc.) and therefore change its legal status, and work in partnership with a range of actors in the banking sector. Again, this transformation needs to happen wit-hout leaving behind smaller customers.


OU

R A

CTIV

ITIE

S

financially excluded with a «village bank» methodology that promotes self-help groups and offers group lending. HO-FOKAM, which has 17,000 clients, is in the process of trans-forming into a legal form that will enable it to collect sa-vings. The institution has been refinancing itself for 10 years with another SIDI partner in the region, the SMF EA fund. HOFOKAM sought out SIDI to accompany its growth and potentially take an equity stake once the legal transforma-tion is complete, with the expectation that SIDI would play an active role in governance alongside existing institutional shareholders (dioceses).

In 2016, SIDI considerably revised its approach to Sou-th Africa. Its historic partner in the country, TEMBEKA, a fund dedicated to refinancing and supporting local MFIs, had to cease its activity (dissolution of the TEMBEKA fund) following changes to the sector which led to the closure of many institutions. SIDI decided to stay present in the country by approaching SEF, the leading microfinance ins-titution with 83% market share. SEF operates in five of the country’s nine provinces, with almost 140,000 clients, of which 99% of women. Through group loans that support in-come generating activities, SEF is able to reach the poorest, as demonstrated by the very low average loan size of € 170 (less than 3% of gross national income per inhabitant). SEF requested joint support from SIDI and FEFISOL to finance its growth. The request was approved at the end of 2016 and funding will start in 2017. The partnership allows SIDI to maintain a presence among the poorest populations of one of the most unequal countries in the world.

Finally, SIDI established partnerships in two new countries this year.

The first is Zimbabwe, a country that has recently faced a grave monetary crisis that has seriously diminished most MFIs, despite the needs of the local population. SIDI has chosen to work with UNTU, an institution created post crisis that is dedicated to financing income-generating activities. UNTU stands out in the Zimbabwean sector for its indepen-dence in a country where microfinance is primarily in the hands of large banking groups. UNTU serves 3,200 clients and has managed to grow while securing its business mo-del of financing small entrepreneurs. In 2016, it requested joint support from SIDI and FEFISOL for a three-year loan to strengthen its position vis à vis its competitors, as well as to achieve a capital adequacy ratio that will allow it to collect savings.

In Cameroon, SIDI responded to a request from CECAW, a cooperative created in 1998 by the artisans of a poor neighborhood in Douala; CECAW is now 32,000 members strong. CECAW’s management and members would like to study the feasibility of transforming into a limited company to finance growth but also to clarify the ownership structure, to support CECAW’s development and maintain a strong social vision. SIDI therefore launched a technical assistan-ce project on the issue, which will continue into 2017, and could open the door to an equity stake.

REGION PARTNER TYPE SUPPORT AMOUNT IN €

Africa FEFISOL Regional fund

Equity 591,611

Latin Ame-rica

SICSA Apex Loan 468,867

Burkina PAMF Burkina MFI Tier 3 Loan 503,082

Chile FINANCOOP MFI Tier 1 Equity 434,503

Kosovo KRK MFI Tier 2 Loan 1,700,000

Nicaragua FDL MFI Tier 1 Equity 891,740

Uganda HOFOKAM MFI Tier 2 Loan 403,563

Peru Fortalecer Apex Equity 105,050

Tanzania YETU MFI Tier 2 Equity 435,800

Togo UCMECS MFI Tier 2 Loan 304,898

Tunisia ENDA MFI Tier 1 Loan 500,000

Zimbabwe untu MFI Tier 2 Loan 335,860

TOTAL 6,674,974

FINANCIAL SERVICES IN RURAL AREAS: INVESTMENT FLOWS IN 2016

192016

OU

R A

CTIV

ITIE

S

ANNUAL REPORT

SEN’Finances: support to an institution in transition

Since the mid-1990s, the Sen’finances Foundation has supported the development of financial services for marginalized and disadvantaged populations, by

serving as a second-tier lender to microfinance institu-tions in Senegal. Some 50 MFIs across the country have already benefited from support. Most operate exclusively in rural areas (75%) and reach more than 50,000 people (70% women).

Despite the important role played by Sen’finances in the fight against financial exclusion, the Foundation has been facing difficulties for several years now, due to changes in the microfinance sector and the economic environment in general. It is struggling to mobilize sufficient resources to meet MFI demands and achieve the level of turnover needed to be sustainable. Since early 2015, Sen’Finances has been reflecting on how to overcome these challen-ges. SIDI has accompanied the Foundation in these re-flections, dedicating 36 days to the organization in 2016, thanks to the involvement of a volunteer consultant.

A detailed diagnosis of Sen’Finances’ institutional and strategic situation has made it possible to make some recommendations. It has been proposed that the Foun-dation develop non-financial services and capacity buil-ding of MFIs, and transfer its financing activities to a priva-tely-owned subsidiary. The creation of this public limited company is underway, and will enable Sen’Finances to mobilize long-term capital from national and international investors driven by the same social vision. With a higher

level of equity, Sen’Finances SA will be able to increase its financial support to local MFIs and reach breakeven. The Foundation will continue its mission of providing technical assistance to MFIs, which will be financed with subsidies from national microfinance support programs and reve-nues from the new subsidiary.

Throughout 2016, SIDI actively participated in elaborating the business plan of the new subsidiary, Sen’Finances SA. Extensive dialogue between the Sen’Finances team and the members of its governance was necessary to define the objectives of this new structure and develop projec-tions for its lending activities.

At the end of 2016, Sen’Finances SA was established. Sen’Finances must now complete the process of articula-ting the two entities, by developing a new business plan for the Foundation and setting up the Board for the new financial company, which will be made up of largely local investors and a blocking minority of social investors.


OU

R A

CTIV

ITIE

S

SIDI provides support to structure and reinforce agricultural value chains, by working with producer organizations in view of securing and increasing farmers’ incomes. It combines appropriate financing (seasonal loans, capital expenditure loans) with support to improve the quality of services provided to members (organic and / or fair trade certifications, training, negotiation skills, export development, etc.).

In the longer term, SIDI aims to encourage partners to participate in an ecological and social transi-tion that entails adapting their agricultural practices and farm systems to preserve the environment and boost their resiliency to the effects of climate change, soil depletion, etc. In collaboration with CCFD-Terre Solidaire, SIDI wants to participate in finding solutions that will enable rural populations to secure their living conditions in the long term, without harming the planet.

Often, SIDI’s added value lies in its ability to finance the crop year in a timely fashion, which allows producer organizations to buy inputs and pay farmers at harvest time, so they don’t have to sell at a loss to meet their immediate needs. SIDI granted crop loans to 18 partners in 2016.

SIDI also aims to provide longer term funding, as soon as pos-sible, to enable organizations to finance their development, and even open up to equity when the legal framework allows for it.

In 2016, three capital expenditure loans were granted to partners. SIDI disbursed the last tranche of a loan to SINCO, a company providing rural electrification solutions in Burkina Faso. SINCO used the loan to build a solar power plant in the north in 2016; it also initiated a partnership with two African cooperatives to support the development of production.

In Rwanda, KOPAKAMA produces and exports high-quality fair trade coffee, soon to be organic certified. Thanks to the cooperative, its 616 members have upgraded both the qua-lity and quantity of coffee produced over the last 15 years. In addition, they have collectively acquired two coffee-was-hing stations, as well as a plantation where 170 women in the district (notably widows or single mothers) are able to come together and generate a small income supplement. To pro-cess coffee through the final stage, KOPAKAMA, already financed by FEFISOL, contacted SIDI. The four-year loan of $ 264,000 enabled it to purchase land and a drying plant, so that members will no longer need to go to Kigali to process their coffee (resulting in high costs, pollution and unreliable processing times). The processing plant--the only one in the region--has the capacity to process coffee from other coo-peratives, which will make it possible to repay the loan and ultimately finance other projects.

Finally, in Côte d’Ivoire, SIDI received a request from COOPA-RA, a cooperative of nearly 1,000 cocoa farmers, for a capital expenditure loan to purchase vehicles that will allow it to in-crease the volumes collected from producers (see box p.23).

In terms of equity investments in local businesses, in addition to an increased stake in CAFE PERU (see box), SIDI acquired 22.5% of IKURU, an agricultural SME created with producers from northern Mozambique, in order to strengthen the value chains they have developed. An entry bonus, converted into capital, was also paid and passed on to the producer groups, to give them a bigger role in the shareholding structure. In addition to shoring up equity, SIDI issued a guarantee of € 100,000, enabling IKURU to have the necessary liquidity to purchase maize, groundnut, cashew and sesame harvests, as well as inputs and certified seeds.

39 partners, of which 29 are financed

157 719

smallholders supported


212016

OU

R A

CTIV

ITIE

S

ANNUAL REPORT

In addition to COOPARA and KOPAKAMA, SIDI financed three new partners in 2016. In Guinea, it disbursed a $ 75,000 crop loan to the cooperative WOKO, whose 500 members produce the renowned robusta coffee «Ziama Macenta» in the country’s forests. This first loan from SIDI enabled the cooperative to finance three containers of coffee destined for a French importer who guaranteed in advance the volume and the price of the order.

In Uganda, SIDI has started a relationship with the country’s first union of cocoa farmers, which counts 3,000 members from western Uganda. SEMULIKI produces and sells locally dried and fermented beans, provides training services (with field schools) and certification (more than half of the producers have been certified fair trade through their cooperatives), allowing it generate good volumes of production and sales. SIDI granted SEMULIKI a flexible credit line of nearly € 360,000 (in Ugan-dan shillings), particularly adapted to the cocoa production cycle, with its two annual harvests and the 15-20 day delay needed between the cherry harvest and the sale of the raw beans.

In Rwanda, SIDI financed ABAKUNDAKAWA, a 2000-member cooperative, 40% of whom are women, who produce coffee in mixed farming systems in a particularly poor part of the country. Thanks to the fair trade premium that it has received since 2005, the cooperative has developed mutual health insurance schemes, roads and water supply systems. It is also in the pro-cess of organic certification, which could increase members’ average income, currently about $ 200/year. The ten-month loan of $ 150,000 supplements financing from the Rwandan Development Bank, to enable the cooperative to pay its members at harvest.

C afé Perú SAC is a company that provides trai-ning, marketing and processing services to smallholders in Peru, to facilitate their access

to local and international markets. As a community bu-siness, it is mainly owned by local cooperatives. SIDI became a shareholder in 2008 in order to bolster the company’s financial position over the long term and oversee the strengthening of the social mission. Howe-ver, the past five years have been particularly difficult for Café Perú. The company has had to face a double crisis of production and governance that has severely jeopardized its developmen.

Like many countries in Central and South America, Peru has been deeply affected by the orange rust epi-demic, which has affected one-third of the country’s coffee fields and 53,000 coffee farmers. Café Perú has not been spared by the epidemic, which has led to a dramatic drop in coffee production and quality. For most of the member cooperatives, this has resulted in deteriorated market conditions and an increase in debt, which has led to a degradation of their relationship with Café Perú. This production crisis, still felt today, has been compounded by a governance crisis. In 2015, strong dissensions emerged between Café Perú’s ma-nagement and two cooperatives who together hold the majority of its capital. The conflicts have accentuated the company’s problems, by paralyzing the Board of Directors and disrupting the supply of coffee cherries. This double crisis has had serious consequences, which are reflected in the company’s results: turnover fell from € 19.4 million to € 4.2 million between 2011 and 2016.

After many negotiations, a resolution finally started taking shape in early 2016, with the SIDI takeover of a large number of shares held by the two disputing coo-peratives, in order to reduce their indebtedness. This acquisition has made SIDI the largest shareholder, with a 49% stake. This position is expected to be temporary, and SIDI plans to resell its shares to newly integrated cooperatives in the future.

SIDI played an important role in resolving the crisis and has undertaken heavy responsibility as the majority shareholder of the company. It has thus committed to supporting Café Perú’s management by advising the team on various issues. Considerable efforts have been invested by one of SIDI’s volunteer consultants to deve-lop new relationships with European and Asian buyers, to secure new market channels. Efforts have also been made to diversify funders both locally and international-ly, to find financing for future harvests, and identify new cooperatives to take a stake in the company.

CAFE PERU: accompanying a partner though a multidimensional crisis


OU

R A

CTIV

ITIE

S

In 2016, SIDI continued to pursue two projects being carried out jointly with CCFD-Terre Solidaire, focused on promoting its Ecological and Social Transition (EST) ap-proach.

Firstly, thanks to a € 1 million loan from CCFD, SIDI has increased its portfolio dedicated to EST, which now repre-sents € 2.4 million invested with 16 partners. This confirms SIDI’s strong strategic orientation in this area, where it now devotes about half of its portfolio to agricultural sectors (which also account for half of the partners in the field).

This strategic shift has been accompanied by more tho-rough analysis of each partners’ progress in terms of EST, to better understand and highlight what each institution does, in view of better targeting producers’ organizations in the future. In 2016, SIDI adopted a scorecard to highlight progress made by producers’ organizations in six areas: local community life, economic activity, respect for local ecosystems, production diversity, inclusion of women and youth, and, more generally, stakeholder relationships to support social, political and economic changes. Among the most remarkable innovations among SIDI partners: the development of manufacturing units to produce or-ganic inputs by the Colombian coffee cooperative CEN-COIC; the voluntary diversification into passion fruit and coconut by the coffee cooperative FONMSOEAM; the nomination of a young person and woman to the Board of the Ugandan cocoa PO SEMULIKI.

Secondly, the Support Program for Environmental and Social Initiatives (PAIES), managed by SIDI, CCFD-Terre Solidaire and two local actors (COPAGEN in the Sahel and INADES in the Great Lakes region) and co-financed by the Agence Française de Développement, was launched in early 2016.

The program aims to support local pilot projects and in-novations tested by twelve partners of CCFD and SIDI, to contribute to the ecological and social transformation of rural areas. More specifically, it enables the financing of agroecology programs and training and research to improve the agronomic, administrative and financial skills of the organizations involved. For example, in 2016, the program allowed CAPAD to train over 500 producers in seed certification and soil erosion protection techniques. FCMN-NIYA received support to develop nurseries for hedges and fruit trees. UBTEC carried out a feasibility study of an ecological «bonus-malus» project.

REGION PARTNER TYPE SUPPORT AMOUNT IN €

World KAMPANI Continental Funds

Equity 37,500

Burkina SINCO SME Loan 100,000

Colombia CENCOIC PO Loan 113,186

Côte d'Ivoire COOPARA PO Loan 118,910

Equator COPROBICH PO Loan 141,483

Ecuador FONMSOEAM PO Loan 88,660

Guinea WOKO PO Loan 86,364

Haiti COOPCAB PO Loan 124,680

Haiti FECCANO PO Loan 69,131

Madagascar FANOHANA PO Loan 41,000

Madagascar UCLS PO Loan 271,000

Madagascar PHILEOL SME Loan 14,920

mozambique IKURU PO Equity 123,688

mozambique IKURU PO Guarantee 100,000

Niger NIYA FCMN PO Loan 490,096

Niger FUCOPRI PO Loan 199,708

Uganda ACPCU PO Loan 109,851

Uganda KATERERA PO Loan 137,458

Uganda RFCU PO Loan 63,758

Uganda SEMULIKI PO Loan 363,848

Peru CAFEPERU PO Equity 534,574

Rwanda ABAKUNDAKAWA PO Loan 87,881

Rwanda KOPAKAMA PO Loan 111,300

Tanzania MVIWAMBI PO Loan 204,870

TOTAL 3,733,868

SUPPORT TO AGRICULTURAL VALUE CHAINS: INVESTMENT FLOWS 2016

232016

OU

R A

CTIV

ITIE

S

ANNUAL REPORT

T his year marked the return of SIDI to Côte d’Ivoire, with a new partnership with COOPARA, a cooperative of cocoa farmers located one hour’s drive north of Abidjan. Established in 2000 by a group of cocoa producers in the region, COOPARA facilitates access to international markets for over 1150 small-scale producers in the

area (952 of which are members), ensuring market channels at harvest time.

COOPARA’s main activities are the collection and marketing of cocoa. COOPARA buys fermented and dried beans directly from producers, before packaging and delivering them to buyers in Abidjan, who export them (COOPARA is not accredited to export).

The cooperative also provides members a number of services aimed at improving production volumes and quality: inputs supply, training in good farming practices, UTZ certification, shared equipment, etc. Since 2015, the organi-zation has UTZ-certified 512 of its members, who have been trained in farming practices to improve the quality of their cocoa, giving them access to a premium paid by buyers. Each year, COOPARA renews the UTZ certification of its members, who receive additional training in order to comply with the regularly evolving requirements. COOPARA plans to gradually increase the number of certified members so more producers can benefit from buyer premiums. COOPARA is also contributing to the gradual renewal of farmers’ plantations through the creation of a nursery that distributes new cocoa plants each year. A pilot agroforestry project has been launched to optimize soil yields by plan-ting trees that allow better water conservation in soils, thus protecting cocoa plants from drought. At the end of 2016, COOPARA started a pilot project to centralize the fermentation and drying of cocoa beans to improve production quality.

Finally, since 2014, COOPARA has been working with NGO FERT to develop a program to help young cocoa farmers get started. The program has two objectives: ensure the renewal and retention of COOPARA membership base and increase the income of young people in rural areas. The program is expected to help 70 young farmers set up opera-tions. They will receive technical support from COOPARA for securing their land title and training in farming practices and farm management.

To support the cooperative’s growth targets in terms of volumes processed, SIDI granted two additional loans to COOPARA this year: a seasonal loan of € 91,000 to finance the purchase of cocoa at harvest and an investment loan of € 27,000 for the purchase of a new tractor and truck to boost the cooperative’s collection capacity. It also responded to a technical assistance request by mobilizing a volunteer consultant to help develop an accounting procedures manual prior to the crop season in the fall of 2016.

COOPARA: accompanying the consolidation of a cooperative


OU

R A

CTIV

ITIE

S

Ensuring the appropriation of the tools needed for com-munity finance systems requires heavy involvement on the part of SIDI, who must closely monitor partners in this area. This year again, more than 170 days were devoted to ac-companying a dozen partners. SIDI continued to promote the MUSO methodology in the Kivu region of the Demo-cratic Republic of Congo (DRC), where it accompanies four partners thanks to the financial support of CCFD-Terre Solidaire and the Belgian Gilles Foundation. SIDI pursued work with CCRD to strengthen its MUSO monitoring and facilitation activities. Together they were able to improve the reports sent to governance bodies of the organization and carry out workshops to reinforce leadership and train MUSO group facilitators. Activities in Mali picked up this year, with MUSO training workshops to promote the appro-priation of the methodology within the AOPP Federation (see box). In Haiti, SIDI participated in a training workshop organized by its partner KOFIP, taking advantage of the oc-casion to remind participants of the importance and utility of the MUSO methodology in this context.

In 2016, SIDI continued to draw lessons learned from its experiences with MUSOs. A new study on the effects and impact of MUSOs was carried out, to complement the first study of this kind, carried out in 2014-2015 in DRC. The stu-dy analyzes work done with CCRD in DRC and ASIENA in Burkina Faso. Juxtaposing these two experiences makes it possible to compare the methodologies used in two very different contexts. The objective is to determine the effects

and impact of MUSOs on their members. To do this, bene-ficiaries were surveyed in early 2017. The ultimate goal of the study is to further refine the methodological approach used to promote MUSOs. The study was carried out with support from the development network, F3E, which helped define of the study’s methodology and provided co-finan-cing. The SIDI endowment fund ACTES, FEFISOL and ASIENA also contributed with financing.

SIDI had to cope with the upheaval of one of its long-stan-ding partners in Madagascar, TITEM, which benefited from considerable funding and assistance over many years to bolster its credit activities and develop its community gra-nary program in the remote rural areas of Madagascar. The rapid deterioration of TITEM’s financial situation led to in-solvency this year, and left the institution unable to fulfill its commitments to a local bank, which were guaranteed by SIDI. SIDI had to settle the debt and rescheduled its loan to avoid the discontinuation of activities.

REGION PARTNER TYPE SUPPORT AMOUNTIN €

Madagascar TITEM Com fin. / Tier 3

Loan 82,669

TOTAL 82,669

Ensuring access to financial services in remote or risky areas where microfinance can not develop is a major challenge. SIDI aims to meet this challenge by supporting the emergence of community finance systems. For nearly two decades SIDI has refined and disseminated the Mutual Solidarity (MUSO) methodology, which is based on the creation of self-managed solidarity-based savings and credit groups that enable members to pool their resources to finance projects, help each other and to acquire a savings and credit culture.

PROMOTION OF COMMUNITY FINANCE : INVESTMENT FLOWS 2016

13 partners of which 3 financed

8,432 groups supported,

representing 154,391 persons


252016

OU

R A

CTIV

ITIE

S

ANNUAL REPORT

T he first producer federation in Mali, the Asso-ciation of Professional Producer Organizations (AOPP) brings together 250 actors active in the

agricultural sector. AOPP is the spokesperson of a million farmers, engaging in national and international advocacy for rural development based on efficient family farming, agroecology and rural entrepreneurship. AOPP has also expanded its range of services to meet the needs of pro-ducers.

SIDI has been a faithful, longtime partner of AOPP, ha-ving accompanied it from the early 2000s to set up an im-proved seed program and, from 2009 onwards, to launch of a network of MUSOs. The MUSO tool initially attrac-ted support from the target population, but has not ex-panded due to lack of resources. Although some regions benefited from external donor support, most had to rely on their own will and resources to promote the tool. To-day 115 MUSO operate in Mali, a number still far short of the needs expressed by AOPP members.

In 2016, cooperation between SIDI and AOPP was re-vived, in the form of two training sessions aimed at revita-lizing MUSO promotion within the Federation. In autumn, a three-day session was held in Bamako for AOPP regio-nal representatives, to introduce them to the MUSO tool and benefits, leading them to discuss the possibilities of developing MUSO programs within each region. A se-cond two-day training session was held in the Sikasso re-gion. It enabled the identification of some twenty women

leaders who will raise awareness and support groups in the start-up of their MUSO, to encourage appropriation of the tool in the region. This training was funded with the support of the SIDI endowment fund.

In 2017, new training sessions are planned to sensitize the leaders and facilitators of several farmers’ unions and groups, who could play a key role in disseminating the tool.

AOPP: renewing interest in MUSO within a federation of producer organizations


FEFI

SOL

SIDI has managed FEFISOL from the beginning. It holds a seat on the Board of Directors and the Investment Committee and provides about half of the funding requests. SIDI also monitors investees (31 have been introduced by SIDI, of which 18 are currently financed).

Several of these partners are co-financed by SIDI-FEFISOL, in-cluding ASIENA in Burkina Faso, SIPEM in Madagascar and AL AMANA in Morocco. These arrangements allow SIDI’s African partners to benefit from additional financial resources as well as the FEFISOL technical assistance facility.

In 2016, FEFISOL mobilized 1121 days of SIDI staff time:

• 546 days spent on fund management, portfolio manage-ment and risk monitoring, • 121 days on managing the technical assistance facility, • 454 days on client prospection, analysis and monitoring.

The fund’s goal is to finance institutions operating in the most underserved areas of Africa. FEFISOL has the following ob-jectives:

• Focus on sub-Saharan Africa and the Indian Ocean, with at least 75% of the portfolio in the region,• Target MFIs providing financial services to mostly rural mi-cro and small entrepreneurs with limited access to banking services • Target POs and rural SMEs (20% of the portfolio), particu-larly those working in fair trade and organic exports, • Propose appropriate financial services in the form of me-dium-term loans (3-5 years), of which at least 80% must be in local currency, and equity investments

As of 31 December 2016, its portfolio amounts to € 20.6 mil-lion, invested in 35 MFIs and 14 POs in 20 African countries. The investments made are in line with the fund’s objectives. As of 31 December 2016 : • 87% of the portfolio was invested in sub-Saharan Africa and the Indian Ocean • 50% is invested in rural institutions,• 82% is invested in MFIs (71% in Tier 2 and 3 MFIs) and 18% in POs• 72% of these investments are made in local currency

FEFISOL was endowed with a technical assistance facility financed by the European Investment Bank and the Fund for Investment and Support to Businesses in Africa (AFD / PROPARCO) to reinforce clients’ sustainability. The facility’s envelope increased this year: FISEA granted an additional subsidy of € 130,000 euros, while the Ministry of Finance of Luxembourg injected € 100,000 for a specific call for projects. These new contributions bring the total envelope to € 1.6 million euros.

Since its creation, the facility has financed 43 FEFISOL clients in 19 countries, for a total of € 1,137,281. The facility makes it possible to provide tailored assistance to FEFISOL’s MFI and PO clients, in the form of training, support for setting up tools, audits and peer exchange visits in a range of areas: strategic planning, management, governance, HR, social performance, information system, etc.

This year, the technical assistance facility made it possible for the Togolese MFI WAGES to receive support to strengthen middle managers and reinforce its internal control and ac-counting procedures. AMSSF, a Moroccan MFI, benefited from support that enabled its clients to participate in training courses on organic and urban agriculture, as well has how to manage a SME. AMSSF also received technical assistance to manage portfolio growth risk.

For more than five years, FEFISOL - the fund created by SIDI and two other European social investors (Alterfin and Etimos) - has helped grow rural finance in Africa. Created in 2011, with the support of a dozen institutional investors, the fund has invested more than € 47.4 million in 72 partners in 24 African countries.

272016

FEFI

SOL

ANNUAL REPORT

27

Established in 2004, ECOOKIM was created by merging several cooperatives in the cof-fee, cocoa and cashew nut sectors in Côte

d’Ivoire. ECOOKIM and its 22 cooperatives employ 200 people, bringing together nearly 10,000 producers. FEFISOL partner since 2011, ECOOKIM has been granted a loan each year to bolster the working capital of the Union, so that it can purchase producers’ cocoa as soon as it is harvested. Beyond this recurrent financial sup-port, ECOOKIM has benefited from two technical assistance projects through the FEFISOL TA faci-lity: one for the geolocation of plots and a second to improve and standardize financial information.

To better support its producer members, ECOOKIM needed to have reliable information on cocoa plantations. And yet, the vast majority of its smallholder members had only a rough idea of the actual surface area of their farms. This led ECOOKIM to initiate a geolocation project: it was not only a question of collecting data but also of centralizing it in a Geographical Information Sys-tem. A pilot project was launched in early 2014 for the geolocation of 270 plots. This pilot phase ultimately enabled the geolocation of 340 plots (whose surface area was largely overvalued by the farmers). ECOOKIM decided to extend the pro-ject to all member cooperatives, in order to better plan for potential production volumes, adapt fi-nancial resources for purchasing, and develop ac-tivities to increase productivity and renew plants.

ECOOKIM also benefited from TA to improve the transparency and financial management of its member cooperatives. A complete organi-zational audit of a dozen cooperatives was car-ried out. Its findings pointed to a lack of internal control procedures and difficulties in providing management reports and financial statements on time. The causes of these weaknesses have enabled ECOOKIM to help these cooperatives upgrade their practices. The process resulted in recruitment of accountants, installation of new ac-counting software, capacity building sessions for management teams, and the development of a strategic plan.

These two technical assistance projects have improved the information available, reinforced management practices and consolidated the member cooperatives.

FEFISOL PORTFOLIO BY COUNTRY AS OF 31/12/2016 (IN EUROS)

COUNTRY AMOUNT IN €

% of portfolio

Angola 88,4877 4.3%

Benin 79,2583 3.8%

Burkina Faso 2,155,912 10.5%

Cameroon 1,090,562 5.3%

Côte d'Ivoire 2,789,019 13.5%

Ghana 731,486 3.5%

Kenya 2 000 696 9.7%

Madagascar 1,727,334 8.4%

Malawi 4,49,403 2.2%

Mali 304,746 1.5%

Morocco 1,130,383 5.5%

Niger 815,602 4.0%

Uganda 1,349,308 6.5%

DRC 147,395 0.7%

Senegal 670,631 3.3%

Sierra Leone 214,876 1.0%

Tanzania 708,221 3.4%

Togo 461,027 2.2%

Tunisia 1,467,882 7.1%

Zambia 738,101 3.6%

TOTAL 20,630,044 100%

Risk managementFinance and managementSupport to POs HR and organization Governance and strategy Social performance Information systems Markets and products

14%3%23%26%6%10%15%3%

TECHNICAL ASSISTANCE: AMOUNTS COMMITTED AS OF 31/12/2016

ECOOKIM: strengthening of a cooperative union

49 partners

€ 20.6 million invested

20 African countries


GO

VER

NAN

CE A

ND

TEA

M

Support functions

Laurent CHEREAU

Axel DETAMMAECKER

Stéphane DURVILLE

Morgane NZELEMONA

MalikaOUARAB

Dominique PASSARIELLO

Christine RICHEROL

Esther KPODEKON

Head of Communication

Operations Assistant Portfolio Manager Communications Officer

Accounting Operations Assistant Executive Assistant PhD Student

FEFISOL

Anne-Sophie BOUGOUIN

Silvia CORNACCHIA

Iness NOUIRA

Camille FRAZZETTA

Fund Manager Portfolio Manager Administrative Manager

Technical Support Manager

Investment officers

Catherine BELLIN-SCHULZ

Jean-Marie CAVARROC

Frédéric FOULON

CamilleFRAZZETTA

Pierre GACHES

Quentin LECUYER

Estelle MARCOUX

Justine MAYTRAUD

Jeanne METAYER

Manon PLOUCHART

Gabrielle ORLIANGE

Julie TORRES-SZANTYR

Emmanuel VUILLOD

Management

Dominique LESAFFRE

Following the departure of two members of SIDI’s operational team, Pierres GACHES and Manon PLOUCHART came to rein-force the ranks of the permanent team. At the beginning of the year, Julie TORRES-SZANTYR was appointed to the position of Head of Partnership Development and Anne-Sophie BOUGOUIN as Head of SIDI’s Financial Strategy.

To strengthen monitoring and support to partners, SIDI now relies on several local liaisons: professionals in the field able to quickly respond to partners’ needs. In 2016, SIDI called on the services of seven local liaisons, who supported partners for a total of 86 days. As part of SIDI’s new strategic plan, reliance on these liaisons will be intensified to meet the increasing needs of partners.

SIDI's local liaisons

292016

GO

VER

NAN

CE A

ND

TEA

M

ANNUAL REPORT

Management Committee In charge of endorsing the commitment proposals prepared by the SIDI team

• Dominique LESAFFRE, Chairman of the Management Committee• Geneviève GUENARD, Manager• Jean-Baptiste COUSIN, Manager

Supervisory Board Composed of non-sponsor sharehol-ders, the Supervisory Board oversees the company’s management. It meets at least once a year and prepares an annual management report presented to shareholders at the General Meeting.

•Jacques DEMONSANT, President,•Caisse des Dépôts et Consignations: Mohamed ALI MZALI • Congrégation des Filles de Jésus: Sœur Marie-Yvonne FONTAINE • Congrégation des Filles du Saint-Esprit: Sœur Françoise BEAUMONT • Congrégation des Sœurs de Sainte Clotilde: Sylvie ROUSSET • Crédit Coopératif: Laurence MORET• Paul DERAM, Vice-President• Épargne Solidarité Développement: Jean-Yves CARADEC• François LEGAC• Marc RAFFINOT• Hocine TANDJAOUI• Christian WEEGER

Steering committee Provided for in SIDI’s statutes, this com-mittee monitors compliance with SIDI’s ethical charter and participates in deve-loping the strategic plan.

• CCFD – Terre Solidaire : Guy AURENCHE and Pierre-Yves CROCHET-DAMAIS• Congrégation des Filles de Jésus de Kermaria: Sœur Marie-Yvonne FONTAINE • Congrégation des Filles du Saint-Esprit: Sœur Françoise BEAUMONT • Congrégation des Sœurs Auxiliatrices: Sœur Elisabeth OBERSON • Congrégation de la Xavière: Sœur Christiane VANVINCQ• Épargne Solidarité Développement: Jacques DEMONSANT and Philippe LOIRET• SIDI-Gestion: Martial LESAY

To better achieve its mission, SIDI relies on the support of two groups of volunteers committed to solidarity-based finance.

Consultants

Professionals from the financial, agricultural and development sectors share their expertise with SIDI’s operational team and contribute to its monitoring and technical assistance activities. They enable SIDI to considerably strengthen its TA capacity. In 2016, 19 volunteer consultants provided 560 days of effort, or about a quarter the total number of days dedicated to partner support.

Members of the network Finance Solidaire

CCFD-Terre Solidaire and SIDI nurture a dynamic network of 63 volunteers interested in social finance. This network aims to foster awareness around solidarity-based practices and to disseminate them to the public, by organizing educational events across France. In 2016, the network organized over 30 events.

SIDI is a limited shareholding company: among its shareholders, several have been entrusted to ensure the preservation of our social mission. The general partner is SIDI Gestion, chaired by Martial LESAY.

SIDI’s governance is constituted of three bodies :


BUSI

NES

S M

OD

EL

The support component of SIDI’s mission has been partly financed since inception by the socially-driven savers who opt to invest in the mutual fund «Faim et Développement», a solidarity-based savings product created by Crédit Coopératif and CCFD - Terre Solidaire. The shared revenues of this fund have enabled CCFD to provide a total of € 1.1 million to SIDI, thereby constituting a sustainable resource base that allows SIDI to provide valuable technical assistance and to guarantee its independence.

In early 2016, SIDI launched its endowment fund, ACTES, with an initial allocation of € 140,000. It has already financed a number of projects: a series of MUSO workshops with the AOPP Federation in Mali, an accounting support for PO FUCOPRI in Niger and an impact study on MUSOs in the Great Lakes region.

An admirable increase in SIDI capital

The year 2016 was marked by strong growth in SIDI’s capital, with an increase of nearly € 2 million net! At the end of 2016, SIDI’s capital amounted to € 22,021,608, contributed by 1891 shareholders.

Individual shareholders played a particularly important role in this growth, and at the same time consolidated their pre-sence in SIDI’s capital: they now represent 44% of the share capital (versus 40% in 2015) and 94% of SIDI shareholders. In doing so, these shareholders reaffirm their role as guarantors of SIDI’s financial health and social mission.

In 2016, a new religious congregation, the Italian ethical bank Cassa Padana, and a new solidarity savings fund «Actions Solidaires» managed by La Financière Responsable joined SIDI as institutional shareholders.

The increase in resources has made it possible to meet the growing demands of SIDI’s partners.

NUMBER OF SHARES HELD BY SHAREHOLDER GROUPS

IndividualsCongregations and religious institutionsNGOsCorporationsFunds and banks CCFD and allies Public institutions

44%10%

2%1%

14%24%5%

312016

BUSI

NES

S M

OD

EL

ANNUAL REPORT

TA / SUPPORT BY AREA

As of 31 December 2016, SIDI’s portfolio amounted to € 21.8 million, up 13% from 2015.

The year was characterized by significant flows, with € 10.4 million in investments to 40 partners, seven of which are new. SIDI divested in 54 partners for a total of € 8.1 million. 13 no longer have a financial relationship with SIDI as of 31/12/2016; for 4 of these, this divestment is definitive.

The average investment per partner is € 291,000.

PORTFOLIO BY TYPE OF INVESTMENT

Personalized support Identifying external support Long/medium term sustainabilityInternal organizationProfessionalizationSocial performance management

33.7%22.0%19.1%12.0%10.0%

3.3%

Searching for a balanced portfolio

While SIDI is prepared to assume the risk inhe-rent in its mission as a social investor, it must ne-vertheless secure its financial health, so as not to jeopardize its operations in the long term. It the-refore carefully monitors its portfolio to ensure it is meeting its mission in a way that respects prin-ciples of risk diversification. Thus, at year end:

• Only four countries concentrate investments equal to or over € 1 million (Burkina Faso, Koso-vo, Uganda, Peru),• Apart from the euro, the dollar, and FCFA (whose parity with the euro is monitored closely), no local currency exceeds 2% of SIDI’s portfolio• Apex institutions notwithstanding, no institu-tion concentrates more than 7% of the portfolio• Finally, the average investment per partner respects the risk level of each partner category, as detailed in the graph.

Human resources dedicated to partnerships

SIDI employees and volunteers dedicated 2355 working days to partnerships: prospection, monitoring and support of SIDI and / or FEFISOL partners, 1901 days were allocated to SIDI partners, of which 46% went to support 65 partners (perso-nalized support, active participation in governance and technical assistance). This is an average of 13.5 days per partner.

AVERAGE INVESTMENT BY TYPE OF PARTNER

Regional fund APEX MFI with high potential Emerging MFI POCom. fin.

Com. Venture capital company

In euros

Equity in local currency Loans in local currencyGuarantee in local currency Equity in hard currencyLoans in hard currency Guarantees in hard currency

30%21%

0.5%23.6%

24%0.9%

200000 600000 1000000


FIN

ANCI

AL S

TATE

MEN

TS

ASSETS Year ending EXERCICE2015

PASSIF EXERCICEau 31/12/2016

EXERCICE2015

FIXED ASSETS

SHAREHOLDERS' EQUITY

INTANGIBLE ASSETS

Software - - Capital 22 022 20 078

TANGIBLE ASSETS Reserves

Office space, equipment 36 42 Legal reserves 2 008 1 852

Office and computer equipment 6 11 Other reserves 2 350 1 463

-

LONG TERM INVESTMENTS - Profit for the year 922 1 051

Equity 11 299 8 203

Loans 9 768 9 376

Other financial assets 155 155

Accrued interest on loans 104 36

TOTAL (I) 21 369 17 824 TOTAL (I) 27 301 24 445

CURRENT ASSETS PROVISIONS

Provisions for litigation 48

Provisions for risk

Other provisions 156 123

RECEIVABLES TOTAL (II) 156 171

Clients 130 100

LIABILITIES

Co-funding: FEFISOL TA 445 407 Shareholders - CCA 312 12

Others: state 58 - Shareholder - SIDI GESTION 10 10

Other miscellaneous debtor 45 505 CCFD - Rural Investment Fund 1 1 000 1 000

FID - Guarantee Fund 2 2 211 2 282

CCA - Corporations 874 874

CCA - Individuals 335 335

Loans from solidarity savings funds

1 459 2 414

Borrowings 2 303

Subtotal long-term liabilities 6 202 7 228

Treasury Supplier payables and related accounts

45 75

Investment securities 10 714 12 156 Tax and social liabilities 580 638

Investments to be made in year N + 1

877 41

Liquid assets 3 162 2 448 Other liabilities 55 -

Cash 5 12 Subtotal current liabilities 1 556 754

ACCRUALS ACCRUALS

Prepayments 22 21 Deferred income 735 875

Unrealized losses from foreign exchange

TOTAL (II) 14 582 15 649 TOTAL (III) 8 493 8 857

TOTAL (I-II) 35 950 33 473 TOTAL (I to III) 35 950 33 473

In thousands of euros

SIDI’s financial assets consists of:

• the FID and its accumulated income (€ 3 million)• term deposit for FINANCOOP in Chile (295 K €)• BNP guarantee (700 K € for financing guarantees)• FEFISOL technical assistance fund (259 K €)• current accounts in France and abroad, euros, dollars, local currency (€ 1.7M)

The remainder, including the capital raised not yet invested (€ 1 million over the last six months of 2016) is invested in risk-free savings products to be ready to meet partners’ needs (at the end of 2016, € 1.7 million are already committed)

> 1 - Loan dedicated to funding ecological and social transition initiatives

> 2 - The guarantee fund from the «Fonds d’Incitation au Développement» is matched by CCFD-Terre Solidaire and a Congregation and is used to cover high risk payments and defaults

> After deduction of provisions on investments (€ 591 K)

332016

FIN

ANCI

AL S

TATE

MEN

TS

ANNUAL REPORT

2016 2015

OPERATING REVENUE

CCFD services 1 119 1 125

Cofinancing 36 43

Cof. - FEFISOL TA 351 338

Services - FEFISOL 231 205

Other services - 0

Subtotal: total revenues 1736 1 711

Portfolio income 85 59

Activities income 63 51

Recovery of provisions & transfer of charges 34 138

Total revenue 1 918 1 959

Operating expenses

Current operating expenses 714 734

Personnel expenses 1 689 1 756

Depreciation and amortization 13 12

Allowances for losses 33 10

Losses (MAIN / FOPEPRO) 112 -

Grants 34 42

Services - FEFISOL 351 338

Other expenses 46 61

Total expenses 2 992 2 953

Net income -1 074 -994

Financial revenue

Portfolio income (debt and equity) 1 356 1 039

Investment income 61 108

Income from FID 43 57

Exchange gains 183 663

Earnings from exchange associated with the portfolio

189 -

Reversal of provisions 411 39

Others products 2 4

Total revenue 2 245 1 910

Financial expenses

Depreciation for financial risk 5 74

Depreciation for financial risk, equity 77 441

Subtotal depreciation Prov. R&C financières 82 515

Interest on loans 40 46

Interest on current account 2 5

Loan losses - 30

Losses on equity - SEFEA 24 24

Sale of shares - marketable securities 6 26

Exchange losses 8 39

Exchange losses associated with portfolio 131 -

Total expenses 293 684

Financial profit 1 951 1 225

Non-recurring income 49 1 561

Non-recurring expenses 5 741

Non-recurring income 44 820

Income taxes - -

Net profit 922 1 051

BAKER TILLY SOFIDEEC SA, auditor, member of the CRCC in Paris, represented by the auditor Jean-Yves MACE, certified without reservations SIDI’s annual accounts, closed 31 December 2016.

> Contribution of CCFD-Terre Solidaire (including income from mutual fund «Faim et Développement») to finance support to partners

> Steadily increasing over the last few years, thanks to the increase of capital that enables portfolio growth.

> Amounts committed in 2016 for support carried out by FEFISOL

>FEFISOL co-financing registered as income

> Fund management mandate for FEFISOL, carried out by SIDI

> Of which €1925 K are expenses dedicated to partner support

In thousands of euros

ASSETS Year ending EXERCICE2015

PASSIF EXERCICEau 31/12/2016

EXERCICE2015

FIXED ASSETS

SHAREHOLDERS' EQUITY

INTANGIBLE ASSETS

Software - - Capital 22 022 20 078

TANGIBLE ASSETS Reserves

Office space, equipment 36 42 Legal reserves 2 008 1 852

Office and computer equipment 6 11 Other reserves 2 350 1 463

-

LONG TERM INVESTMENTS - Profit for the year 922 1 051

Equity 11 299 8 203

Loans 9 768 9 376

Other financial assets 155 155

Accrued interest on loans 104 36

TOTAL (I) 21 369 17 824 TOTAL (I) 27 301 24 445

CURRENT ASSETS PROVISIONS

Provisions for litigation 48

Provisions for risk

Other provisions 156 123

RECEIVABLES TOTAL (II) 156 171

Clients 130 100

LIABILITIES

Co-funding: FEFISOL TA 445 407 Shareholders - CCA 312 12

Others: state 58 - Shareholder - SIDI GESTION 10 10

Other miscellaneous debtor 45 505 CCFD - Rural Investment Fund 1 1 000 1 000

FID - Guarantee Fund 2 2 211 2 282

CCA - Corporations 874 874

CCA - Individuals 335 335

Loans from solidarity savings funds

1 459 2 414

Borrowings 2 303

Subtotal long-term liabilities 6 202 7 228

Treasury Supplier payables and related accounts

45 75

Investment securities 10 714 12 156 Tax and social liabilities 580 638

Investments to be made in year N + 1

877 41

Liquid assets 3 162 2 448 Other liabilities 55 -

Cash 5 12 Subtotal current liabilities 1 556 754

ACCRUALS ACCRUALS

Prepayments 22 21 Deferred income 735 875

Unrealized losses from foreign exchange

TOTAL (II) 14 582 15 649 TOTAL (III) 8 493 8 857

TOTAL (I-II) 35 950 33 473 TOTAL (I to III) 35 950 33 473


NET

WO

RKS

SIDI is a member of the following networks:

The European Microfinance Platform is a leading network of organizations and indivi-duals active in the field of microfinance and financial inclusion in developing countries. Today, it brings together more than 130 members who seek to strengthen access to af-fordable, high-quality, sustainable and inclusive financial services through knowledge sharing and innovation.

FEBEA is the European Federation of Ethical and Alternative Banks, an international non-profit organization set up in Brussels in 2001 with the aim of developing ethical and solidarity-based finance in Europe through advocacy, communication and the participa-tion of European citizens.

The association FINANSOL, created in 1995, aims to promote solidarity-based savings and social finance. Through sensitization and communication, Finansol raises awareness on the role each person can play in creating useful, fair and reasonable financial sys-tem. It is also a national collective, bringing together financial institutions with a soli-darity-based approach (banks, management companies, mutual insurance companies), solidarity-based businesses and NGOs whose activities have high social or environmental impact.

INAISE (International Association of Investors in the Social Economy) is a global network of organizations whose objective is the financing of social and environmental projects. Created in 1989 at the initiative of SIDI and six other financial organizations in the social economy, INAISE enables social investors from all over the world to ex-change experience, disseminate information and show that money can actually be used to achieve positive social and environmental change.

The MAIN (Microfinance African Institutions Network) is an international non-profit association created in 1995 in Abidjan by several institutions with extensive experience in microfinance and / or the promotion of micro-enterprises in Africa. The MAIN includes MFIs, national networks, NGOs working in microfinance, cooperatives, farmers’ organiza-tions, banks and resource organizations (universities, social investors, etc.).

The Social Performance Task Force is a non-profit multi-stakeholder organization engaged in inclusive finance, with more than 3,000 members worldwide. SPTF and its members aim to develop and promote standards and good practices for social perfor-mance management in an effort to make financial services safer and more beneficial for clients.

352016ANNUAL REPORT

ANNUAL REPORT 2016

Production : SIDI - 12 rue Guy de la Brosse - 75005 Paris - Tel : 01 40 46 70 00

Editorial Director : Dominique Lesaffre | Editorial coordination : Laurent Chéreau | Writers : Laurent Chéreau and Morgane Nzelemona | Graphic Editing : Morgane Nzelemona | Cover Photo : Fair Trade Lebanon | Illustrations : Freepik and Agence Galilée | Printing : Typoform

Follow us on :

sidi.fr

12 rue Guy de la Brosse - 75005 Paris - FRANCETel : +33 (0) 1 40 46 70 00

ANNUAL - SIDI · CREC Tier 4 MFI 110 446 KAYER PO 22 868 SEN'FINANCES Apex 200 096 UGPM PO *...

Documents

Transcript of ANNUAL - SIDI · CREC Tier 4 MFI 110 446 KAYER PO 22 868 SEN'FINANCES Apex 200 096 UGPM PO *...