SIDI - Annual Report 2010

10The activitiesof SIDI and

its partners20INTERNATIONALSOLIDARITYFOR DEVELOPMENT AND INVESTMENT

A brief guide to SIDI

Glossary

Review of the work carried out in 2010Solidarity financing in 2010A portfolio of 10.4 million euroinvested in 64 partners in 30 countriesInvestment in line with strategic priorities

Solidarity support in 2010Support that solves partners’ problemsTwofold support by the Solidarity Chain for Financing

Sharing risks fairly and patientlyInvesting in partners’ equityLending in local currency

Providing accessible and flexible supportPromoting supervision of the social dimensionSupporting partners experiencing difficulties

Adapting the range of services to the local contextPromoting value-added in rural areasPromoting solidarity credit unions

Creating support mechanismsInvesting in refinancing instrumentsNetworking and collaborating with other alliances

Ensuring the partners’ institutional viability and social purposeDefending a social vision within the structuresReinforcing governance

Financial Statements

Maps and List of partnerships at 31/12/2010

14

10

18

16

12

2

8

6

2

4

Table of Contents

ACP: Africa, Caribbean, PacificCEECs: Central and Eastern European CountriesCGAP: Consultative Group to Assist the Poor (www.cgap.org)DRC: Democratic Republic of CongoESD: Epargne Solidarité Développement, grouping of SIDI’s individualshareholdersJIF: Joint investment FundLFS: Local Financial ServicesMIX: Microfinance Information eXchange (www.themix.org)MFI: Microfinance InstitutionMFIC: Microfinance Institution engaged in a process of consolidationMFIP: Microfinance Institution with a high potentialLeverage effect: When each SIDI financial contribution is accompanied by financial contributions from other public or private sources.MUSO: Solidarity Credit UnionNGO: Non-Governmental OrganisationPO: Producers' Organisation PAVRA: Promotion of Added Value in Rural AreasPARMEC: Programme supporting the regulation of Solidarity Credit UnionsSCF: Solidarity Chain for FinancingSMEs: Small and Medium-sized EnterprisesTA: Technical AssistanceVSEs: Very Small EnterprisesUmbrella: so-called secondary level institution whose role is to support MFI

A brief guide to SIDISIDI, International Solidarity for Development and Investment, is asocial investor that falls under the category of solidarity company. It was crea-ted in 1983 and is now a subsidiary of a development NGO, CCFD -TerreSolidaire*. SIDI promotes a social and solidarity economy via the develop-ment of individual and collective economic activities, which are initiated locally,in the countries of the South.

Its activity consists of giving financial and technical support to its partners, theLocal Financing Services (LFS), which provide financial services tailored togroups excluded from traditional banking circuits. SIDI also supports initiativesdesigned to increase the income of small rural producers.

SIDI’s goal is to promote the development of these structures in order toguarantee the sustainability of services, such as savings, loans, training, mar-ket access and the sharing of risk, that SIDI provides to their beneficiaries andto contribute to development.

SIDI backs its partners via two additional means:• By offering tailored technical support to overcome problems relating togovernance, strategy, management, training, diversification, networking, etc.• By increasing their financial resources, in the form of equity financing,loans, guarantees and searches for additional resources from internatio-nal institutions.

In 2001, SIDI’s capital was invested in 64 partners in 30 countries; its sup-port and consultancy budget for partners amounted to 1.66 million euros.Its activities, managed by a team of 13 desk officers, assisted by 15 vo-lunteer experts, are intended to generate social value-added in order tofurther the wellbeing of populations in a sustainable way. SIDI is active in solidarity financing as well as mobilising individualsand institutions in the North who choose to give SIDI the financial meansto carry through its actions without setting as a priority a financial returnbut rather a human, social and environmental return. Therefore, SIDI’sshareholders take a share of the risk borne by the institutions in the Southin order to offer access to high-quality financial services. Furthermore, sa-vers in the Faim et Développement mutual investment fund share theirproceeds to enable SIDI to provide locals with accessible technical sup-port.

This Solidarity Chain for Financing enables SIDI to take sustainable ac-tion with its partners without the fear of innovation-related risks, so as topromote their self-sufficiency. *ccfd-terresolidaire.org

INTERNATIONALSOLIDARITYFOR DEVELOPMENT AND INVESTMENT

www.sidi.fr

Glossary

The activities of SIDI and its partners in 20102

22

Dear friends, dear solidarity shareholders,

We are midway through our 2009-2012 development plan.Once again, over the course of these two years, we haveseen not only the immense challenges of development, butalso the expression of human solidarity, which allowseveryone to make a progressive contribution to the effortsdesigned to bring about well-being for all. The evaluation of SIDI’s role as a solidarity investor duringthis period is based upon areas that determine the social

added value of its activity:n risk-sharing in an appropriate and patient manner;

n providing accessible and flexible technical support;n adapting the provision of financing to the local context and to partners’ needs;

n creating a leverage effect and mobilising complementary resources for the partners;n ensuring the institutional viability and the social purpose of our partners.All of these focal areas may be applied to the main objective of promoting the long-term improvement of income levels for rural producers. In order to achieve thisobjective, the SIDI team has reinforced the integration of the rural dimension withinits actions and has developed partnerships with new actors in this field (such asproducers’ organisations and small and medium-sized processing and marketingenterprises in rural areas).There was a need to simultaneously provide guarantees, monitoring activitiesand communication around the social added value and environmentalresponsibility of both SIDI and its partners. Within SIDI, a task force iscontinuously working on the “social added value” in order to support eachdesk officer.In this context, our commitment towards our shareholders and savers isdesigned to guarantee the balance and the long-term financial and socialcontinuity of SIDI by:n establishing a pool of partners that is sufficiently diversified in order toimplement a balanced investment policy;n further improving the instruments it uses to monitor financial and socialindicators;

n adjusting the policy it uses to manage its operating income on an annualbasis, both in terms of the portfolio and the realistic timeframe for the transferof shares, as well as the sometimes lengthy negotiation of co-financing withpublic and private financing bodies. However, there is one question that must be addressed: what can be done in order

to achieve these goals, which are both quantitative and qualitative, in the face of themany social, financial and even ecological crises? SIDI is well aware of the limitation of

its own financial means and has played a significant role in the creation of an investmentfund that is centred on these objectives. The FOPEPRO support fund for producers’

organisations in the Andes began its activities in January 2010 and the FEFISOL fund forAfrica, whose main priority is the financing of the rural world, will be created in 2011. These two

programmes place SIDI in the position of a high quality financial intermediation institution, which is able torespond to the needs of public donors and of other institutional investors.In 2011, SIDI will continue to pursue its mission as a solidarity investor and will continue to adopt a long-termvision in its work with its partners. The crisis currently being faced by the microfinance sector in some parts of theworld has shown, in particular, that certain abuses do exist: SIDI is convinced that it is not microfinance that isbeing called into question, rather it is the practices of certain “commercial” MFIs, whose aim is to maximise theirprofit at any price. In this general context, SIDI firmly believes that rather than being focussed, first and foremost,on reducing poverty, the real debate should centre upon the generation of wealth by allowing access to financingthat has been adapted to meet the needs of those who are excluded. SIDI must continue to act in areas whereothers do not go: in the lesser-favoured rural or crisis areas, in the financing of production… and in order to goeven further, SIDI and CCFD-Terre Solidaire wish to create an “Ecological Transition” financial instrument, in orderto provide support for partners who wish to focus their efforts on rural development that generates a high degreeof social and environmental added value.

Thank you very much indeed for placing your trust in us. Yours, in solidarity Christian Schmitz

Chairman of the Board

The activities of SIDI and its partners in 2010 3

The 5 dimensions of SIDI’s social added-value

SUPPORTGOVERNANCE

TAILORED SERVICES

LEVERAGE EFFECT

RISK

SIDI generates its social value-added from the activities it carries out as a social investorthrough the Solidarity Chain for Financing. This value-added encompasses the following five dimensions: risk, support, tailored services, the leverage effect and governance. In thefollowing pages, the social responsibility report,which is detailed in the following pages, seeks to elucidate these dimensions.

Chairman’s Message

Reviewof the work carried out

in 2010

The microfinance sector pursued its path of growth in 2010,with more investment and around 190 million clients served,of whom 128 million were poor, according to figures fromCGAP and MIX. On the other side of the coin, the sector’sreputation was tarnished by several crises demonstrating thatmicrofinance does not automatically generate well-beingamong the populations, in particular when the operators aremotivated solely by profit. In addition, the number ofdelinquent clients in the zones under consideration increased,

indicating a problem of excessive debt and, more broadly, adecline in the quality of service.

Against this backdrop, SIDI used its Solidarity Chain forFinancing model and its patient and supportive financing todevise ways to intervene that are tailored to each context andthus focus on its partners’ long-term financial, social andinstitutional viability, especially in rural areas.

Figure 1 - Destination byregion of the portfolioin 2010

Figure 2 - Destination bytype of investment


Solidarity financing in 2010Under its strategic plan, SIDI devoted the bulk of itsinvestment to structures that together improve ruralincome and it boosted its presence in regional fundsthat generate a leverage effect for rural financing.

A portfolio of 10.4 million euros invested in 64 partners in 30 countries.At 31 December 2010, SIDI held a portfolio of 10.4 millioneuros, an increase of 10% over 2009. This increase is attri-buted to new and larger commitments of 3 million euros in2010 compared to 2.2 million in 2009, although this figureis 25% below forecasts owing to the delay in launching theFEFISOL investment fund, which will begin its activities inmid-2011 (see p. ).

Two new partners received financing in 2010: the rural MFIISHAKA in Burundi and PHILEOL, a castor oil processingplant in Madagascar, in addition to the Ugandan rural MFIOMIPA that was already a SIDI partner but had not beenreceiving financing for several years. These three partnersaccount for 5% of the year’s investments, the remainderbeing devoted to 17 partners who had already received fi-nancing in 2009. Disinvestment in 2010 amounted to 2.1 million euros, i.e.76% of the amount forecast. SIDI withdrew financially fromfour organisations: JEMENI in Mali, ETC in Niger, TIMPACin Togo and ALAOTRA/SILAC in Madagascar.The average amount invested per partner increased to162,000 euros.

Investment in line with strategic prioritiesOf the twenty partners financed in 2010, 19 work in ruralareas. At the end of 2010, support for rural areas ac-counted for 64% of SIDI’s portfolio and, more specifically,agriculture and fisheries accounted for 37%.

Sub-Saharan Africa is still the leading investment zone,

with 44% of the portfolio, a four-point relative decreasecaused by the delay in the launch of FEFISOL.

SIDI seeks to contribute stable resources that provide so-lidarity to its partners. To that end, its portfolio was inves-ted as follows:52% in equity financing (45% in 2009). This sharp in-crease is attributed to new opportunities in Africa (SMFEA, SINERGI, etc.), to the strategy to set up the FOPE-PRO fund and to conversions of loans into capital. 54% in local currencies; this percentage fell 6 points inone year owing to the increase in investment in regionalfunds that are denominated in hard currencies.

Lastly, SIDI devoted 60% of its investments to institutionsundergoing consolidation, i.e. institutions that fulfil one ormore of the following: A level of activities designed to promote development

that has yet to cross the threshold of profitability; An effort to provide the necessary sustained techni-

cal assistance Potential for institutional development and growth in

the identified activity; In certain cases, an economic, social or political

context that objectively hampers the institution’s de-velopment.

SIDI’s financial commitments are in keeping with its soli-darity financing remit. Nevertheless, disproportionate risk tocapital investment by the shareholders should be avoidedin order to ensure the durability of SIDI’s mission over thelong haul. SIDI is therefore well aware that a modicum ofbalance must be achieved in its financial commitments andto that end has done the following: 32% of its portfolio is invested in MFIs with strongeconomic and social potential, six of which paid out divi-dends in 2010; 36% is invested in funds or umbrella organisations(21% in 2009), ensuring a local leverage effect at mini-mum risk;

CEECs

9%

Africa

43%Latin America

32%

Mediterranean

Basin 9%

Asia

6%

Caribbean

1%

Equity financing

in hard currencies

13%

Loans in hard

currencies

24%

Securities

10%Equity financing

in local currencies

39%

4

Loans in local

currencies

14%


No one country receives more than 10% of total in-vestment; No partner, excepting funds, receives more than 8%of the portfolio. Lastly, SIDI’s support to its financed partners produces in-depth knowledge of the latter’s intervention context, theiractivities and their difficulties. This reassures SIDI that itscapital will be under minimum risk.

Thanks to this balance, knowledge of its investments andthe good performance of several partners, SIDI was ableto turn a profit of some 300,000 euros in 2010. The sha-reholders agreed to allocate all of that amount to its re-serves, which enabled SIDI to take on a certain level ofrisk in difficult contexts without posing major risks to itsactivities.

Solidarity support in 2010SIDI supported 88 partners in 33 countries in 2010.More specifically, 67 partners received technical assis-tance provided during field missions, which amountedto 1,283 work days.Support that solves partners’ problemsApart from monitoring of the structures in which it invests,SIDI provides technical assistance services to its partners sothat they may develop, improve and continue to provide ser-vices into the future.

In 2010, this support, provided by the internal team assistedby 15 volunteers, financial experts, banks and companies,was equal to 2,334 work days i.e., on average 24 days perpartner, broken down as follows: identification of new partnerships and monitoring ofexisting partnerships, 32%; participation in decision-making bodies such as boardsof directors, shareholder meetings, etc., 13%; support for long-term viability problems such as gover-nance, strategy, innovation and institutionalisation, 21%; support for internal organisation in accountancy, IT sys-tems, human resources and training, 14%; support for negotiations to attain additional resourcesfrom local or international bodies, 12% support for portfolio analyses and products, 7%; specific support for the reflection on Social Value-Added,2%.

Finally, employees and volunteers devoted 921 additionaldays of work to horizontal themes, focusing mainly on stra-tegy, organisation, alliances with SIDI and subjects requiringa well thought-out and concerted approach such as the So-cial Viability initiative (p. 8), support for Solidarity Credit Unions(p. 11), the reflection on Fair Trade and the Promotion ofValue-Added in Rural Areas (p. 10).

Twofold support by the Solidarity Chainfor FinancingSIDI’s partners benefit from a la carte backing in manyareas (see above), which is provided cost-free to the part-ners. SIDI’s economic policy is founded on the SolidarityChain for Financing (see fig. page 16), which serves tomobilise funds in the North and support partners in theSouth in the following ways: First, CCFD-Terre Solidaire financed SIDI’s technicalassistance mission to the tune of 1.2 million euros, equalto 73% of support expenditure, in particular thanks to sha-red income from the Faim & Développement mutual fund. Next, SIDI successfully negotiated with eleven do-nors the amount of 429,640 euros in cofinancing, a sharpincrease over 2009 (see p. 12).SIDI’s other income was generated by the following in-vestment activities: The SIDI portfolio (loans and equity financing) gene-rated income of 638,000 euros in 2010, compared to496,000 euros in 2009, thanks mainly to the boost in di-vidends, which accounted for 65% of this income, and tointerest collected from loans. Income from the cash account (439,000 euros), a37% increase over the previous year.Financing of SIDI’s partners is guaranteed until 2012,owing to the latest capital increase of 4-million euros. SIDIis looking into a change of status that would enable it to bemore flexible in future when raising capital.

As a result of extensive work over the past five years tomobilise several institutional investors, 2010 saw the start-up of the FOBEPRO investment fund. This fund, along withthe FEFISOL fund that is slated to be created in mid-2011, will mean that SIDI, which created these two fundsalong with Alterfin/Belgium and Etimos/Italy (for FEFI-SOL), will be able to achieve significant leverage effect,with 60 million euros expected by the end of 2012. ◆

Figure 3 - Destination by category of the portfolio

PAVRA 9%

Funds22%

PO 1%

MUSO 1%

Figure 4 - Destination of TAdays by region in 2010

Eastern Europe 3%Caribbean 5%

Asia 4%

Africa

70%

Latin

America 12%

Figure 5 - Destinationby typology (in volume) of SIDI’sportfolio at the end of 2010

MFIP33%

MFIC20%

Funds22%

PME0%

UMBRELLA14%

PAVRA9%

Network0%

Med.

Basin

4%

UMBRELLA14%

MFIC 20%

MFIP33%

SMEs0%


Investing in partners’equityCCRD in RDC, CONSOLIDAR in Colombia, CREDIFLO-RIDA in Peru, SMF EA in Uganda, FOPEPRO in LatinAmerica, FORTALECER in Peru, ISHAKA in Burundi, MICROINVEST in Moldavia and SINERGI in Niger.

Acquiring a stake in the capital of local financing structuresis SIDI’s preferred means of intervention because it providessustainable and low-cost development of their activities. Untilan institution receiving this kind of financing has achievedconsiderable financial independence, SIDI tries to maintain adurable stake in the capital and encourages a fair sharing ofthe value-added.

Over the year, SIDI has boosted its equity stake in severalstructures. In Niger, it took part in the capital increase of theprivate equity firm SINERGI that provides technical and fi-nancial support to small and very small enterprises in the for-mal and informal economies across all sectors of activity. InCentral Africa, SIDI converted a loan to SMF EA into capital,thereby nearly tripling its stake in this regional fund that sup-ports MFIs in Uganda, Kenya, Tanzania and Southern Sudan(see inset p. 13). Similarly, in the DRC, SIDI converted a loaninto a stake in CCRD, which refinances solidarity creditunions in North Kivu. In Colombia, SIDI bought 30% of theshares held by Cordaid in the CONSOLIDAR institution inorder to facilitate its withdrawal without compromisingCONSOLIDAR’s social vision. In Moldavia, the shareholders

of MICROINVEST joined together to remedy the institution’schallenging situation by increasing its capital, in which SIDIparticipated. This change in the underwriting group dilutedSIDI’s share, although it continues to sit on the board as anobserver at the invitation of other shareholders and the ma-nagement team. In Peru, SIDI carried out two investments in2010. First, it increased its participation in FORTALECER, anational network of 37 social MFIs, of which it was also elec-ted director, and SIDI invested in the capital, via a loan conver-sion, of the rural MFI CREDIFLORA, which was created in2005 by a co-op of coffee growers with the support of SIDIand today is a profitable concern. Lastly, SIDI responded tocapital mobilisation by the investment fund FOPEPRO forAndean farmers, which began its activities in 2010.In 2010, SIDI also took part as a founding shareholder in theinstitutionalisation of the microcredit programme of a localNGO in Burundi, COPED, which has been backed by SIDIsince 2008. The MFI thus created, called ISHAKA, which in-tervenes in rural zones in the south of the country, will havean easier time pursuing its development in an environmentwith few microfinance players.

At the end of 2010, 52% of SIDI’s portfolio was invested inequity financing. SIDI is a shareholder in 26 structures ofwhich it holds, with few exceptions, less than 20% of the ca-pital, in keeping with its aim to be a minority but significantshareholder.

6

Sharing risks

fairly and patiently

As a solidarityinvestor, SIDIcontributes long-termresources underconditions tailored toeach partner. SIDIagrees to share someof the risk inherent intheir activities, inaccordance with theremit that theshareholders haveassigned to SIDI.


Lending in local currencyMOGTEDO in Burkina Faso, NIAKO in Mali, KOKARI inNiger, OMIPA in Uganda, CGRH, CREC, ESCALES,MEC PROPEM and UGPM in Senegal, FECECAV andUCMECS in Togo, AMRET in Cambodia, FONDS CO-OPERATIF in Laos, HIEP THAN in Vietnam, EACD inEgypt, AL AMANA in Morocco and FONHSUD in Haiti.

At the end of 2009, according to a CGAP study, microfi-nance investment funds devoted more than 5 billion dollarsto the sector, mainly in the form of loans. These loans, whichare the primary financing source for MFIs in the South, werenearly all denominated in euros or dollars. As a result, thelender avoids exchange rate risks but requires the MFI totake on that risk, at a cost. SIDI now wants to share this risk.That is why it has set up a guarantee fund endowed withtwo million euros, called the Development Incentive Fund,the income of which covers exchange rate losses. At the endof 2010, 36% of these loans were denominated in local cur-rencies.

Of these active loans, three were disbursed in 2010. SIDIrenewed its annual loan to the Burkina Faso rice growers’co-op, MOGTEDO, for the purchase of inputs (23,000 eurosin CFA francs). It also granted the equivalent of 152,000euros in local currency to UCMECS, a rural MFI in northernTogo (see inset). Thirdly, SIDI granted a loan of 50 millionUgandan shillings (18,000 euros) to OMIPA, a rural MFI andSIDI partner since 2002. ◆

Financing institutions in theprocess of consolidation: UCMECS and FECECAV in TogoDespite a recent recovery, Togo is faced with a difficult economic context asa result of an environmental policy which, for more than 15 years, has had adamaging impact upon the economy and, notably, upon the agricultural sec-tor, which provides employment for more than half of the population. Ne-vertheless, the microfinance sector is very active, although it does continueto be concentrated in the south of the country and its client base is essen-tially to be found in urban areas. In this context, SIDI has chosen to focusits efforts on the provision of support to two institutions, which have beenchosen for their work in rural areas and which have both expressed the needfor consolidation, namely UCMECS and FECECAV.UCMECS is a network of eight mutual funds that operate in the northernrural and disadvantaged region of Togo. Its mission is to support the villagebanks, which have been created and are managed by the local communi-ties. Today, the network has 7,561 members, including more than 1,000groupings. In 2010, SIDI decided to increase its support for UCMECS. It approached thenetwork’s historical partner, Louvain Développement, in order to exchangeinformation and to establish a coherent, partnership-based, approach. To-gether, the two structures introduced new partners to UCMECS: respectively,Alterfin (financial support) and the Belgian Raiffeisen Foundation (technicalsupport). SIDI also assisted in the establishment of the new business planand, in this context, responded positively to a request for financing for anamount of 100 million CFA francs, thereby increasing its financial supportfollowing the repayment of two loans (for a total of 60 million CFA francs) in2009 and 2010. Finally, it has signed an agreement with UCMECS and theother partners regarding the development of new products for people inrural areas and on the measurement of the institution’s social performance.The long-term aim is to ensure the financial autonomy of UCMECS throughthe opening of banks that are more profitable, in order to guarantee that thenetwork is able to continue to carry out its activities in difficult areas in thelong-term.

FECECAV is a mutual institution that has a two-tier structure composed ofan umbrella body and a network of 12 local banks. It operates primarily inrural areas (45% of the portfolio) in the south of the country and has some50,000 customers. The umbrella organisation refinances the local banksand provides them with management and internal auditing services. SIDI has been supporting FECECAV since 2008, notably with a view to im-proving its management tools and the systems it uses to guide its activities,but also through the provision of two loans over the course of three years,which were granted in 2008 and 2009 for a total of 75 million CFA francs. In2010, this support was further reinforced by a mission to provide technicalassistance regarding the improvement of internal auditing and the definitionof a human resource policy. SIDI also introduced FECECAV to Alterfin in2010 and worked with them on the issue of a guarantee that would makeit possible to negotiate a loan at the local level: SIDI and Alterfin were suc-cessful in obtaining a guarantee from BNP and Fortis for a total amount of100 million CFA francs, which enabled a local bank, the BTCI, to grant a loanof 300 million CFA francs to FECECAV. In this way, SIDI was able to devisean innovative financial package capable of responding, with a leverage ef-fect, to the financial needs of a partner faced with the challenge of pursuingthe development of its activities in order to achieve financial equilibrium.

RISK 2010 2009

Share of SIDI’s portfolio in local currency 54% 60% in equity financing 52% 45% in crisis zones* (political conflicts or natural disasters) 20% 24% in Sub-Saharan Africa 43% 49% for financing rural areas 65% 62% for financing agricultural and fishing activities** 21% 36% for financing developing institutions*** 60% 57%

* Guatemala, Haiti, Niger, Madagascar, Palestine, Guinea, Colombia, DRC and Lebanon.

** This figure does not take into account the volumes of the partners’ portfolio and the share of SIDI investment

in the total amount of capital and loans mobilised by the partners for their activities.

*** See p.4

Social responsability report

RISK


Promoting supervision of the social dimensionSIDI gives priority to partnerships that have structures with astrong social vision. The partnerships’ provision of financialand non-financial services must not be an end in itself, but ra-ther a means to contribute to the wellbeing of the benefi-ciary populations. It is therefore important to bring theirpractices on the ground into line with this social vision. Thatis what the Social Viability Initiative, started in 2001 by SIDI,is all about. It helped define an intervention framework in thefollowing ways: by supporting partners’ definition and clarification of

their social goals; by setting out a work plan in keeping with these goals; by supporting them in their application and follow-up of

this plan.What is most important for SIDI is that each partner take aninterest in overseeing the social dimension, which is useful ingauging the sustainable improvement in the wellbeing of thebeneficiaries and, as a result, the relevance of their work.

In 2010, SIDI made progress in formalising its approach byensuring the ongoing monitoring of initiatives led by expertsand research workers in this field. SIDI also set up a me-thodological guide of existing tools, enabling the team toprovide responses to the partners that are adapted to theirdifficulties.

To that end, SIDI continued to provide assistance for the de-finition of criteria used to measure social goals and took partin the work of the South American network of the MFI FO-ROLACFR designed to set up a system for the Certifica-tion of Social Performances to be adopted by all itsmembers. In Peru, SIDI participated in the reflection on so-cial performance criteria, led by the country’s social MFI as-sociation, FORTALECER. SIDI also led the final workshopthat validated criteria and indicators, which was held at theend of 2010 and brought together 20 rural MFIs. Lastly, inCambodia, SIDI responded to a request from HATTHAKAKSEKAR concerning the definition of a social perfor-mance analysis. The institution will be carrying out a socialrating at the start of 2011.

Work on the social dimension also continued with the follo-wing partners who have made headway towards the crea-tion of their tools: At a workshop with SIDI in attendance, RED FASCOin Guatemala completed the process to define common so-cial performance criteria for Maya community associations,of which RED FASCO is the financial backer; eight of theten associations incorporated the criteria into their monito-

ring tools. CAC la FLORIDA along with SIDI began a zone-by-zone vulnerability diagnosis of the families of coffee growerswho are members of the co-op in the wake of the surveyconducted in 2009. The goal set for 2011 is to enable eachzone to plan its social activities on the basis of this diagno-sis. Lastly, SIDI initiated a reflection on how to secure linksbetween the farmers and the partners who work for the Pro-motion of Value-Added in rural areas. A reflection alongthese lines is already underway with PHILEOL in Mada-gascar (see p. 11) and with BIOSUSTAIN in Tanzania.

Supporting partners experiencing difficultiesSIDI intervenes with partners who, by their very nature, e.g. struc-tures going through consolidation (see p. 4) or because of theirintervention context, which may include economic crises or ex-cessive debt of customers, might encounter problems that jeo-pardize their growth and even their existence. For that reason,SIDI seeks to specifically support troubled local financing struc-tures in order to discover the causes of their problems and tryto come up with durable solutions.

In 2010, this particular task first focused on partners grapplingwith a sharp increase in their risk portfolio, i.e. unpaid debts. InKosovo, the economic crisis and a problem of fraud in severallocal associations seriously weakened KRK’s portfolio. SIDI, aschairman of the board of directors, worked with other share-holders and the management team on a series of recovery mea-sures and devised the following long-term solutions to itspredicament: technical assistance for recovery procedures, achange in the loan-granting procedure to be handled henceforthby KRK instead of by local associations and strengthenedhuman resources. The board had to deal with a negative 2010accounting period but the portfolio is no longer deterioratingand is on the mend. In Moldavia, SIDI took part in the rescue planfor the MICROINVEST institution alongside other shareholders.The plan includes an increase in capital (see p. 6) and enhan-ced technical assistance.

SIDI also faced serious difficulties in the Senegalese solidarityrestaurant chain, ESCALES JAPOO, which experienced a de-ficit in 2010 owing to a fall in the country’s tourism and to apoorly adapted expenditure structure. SIDI therefore recom-mended a cost-cutting programme, including the closure of arestaurant, and took on a share of the losses. It got JAPOO DE-VELOPPEMENT deeply involved in the revamping of the struc-ture, which is an NGO of local development people for whomthe Escales Japoo are a source of employment.

In Senegal, the MEC PROPEM fishermen’s savings and loan

Providingaccessible and flexible support

8

SIDI strives to respondin an individualisedway to its partners’expectations. It tailorsits services and thevolume of its supportto each partner’sacknowledged needs.This entails forgingsustainablepartnerships, takingtime to understandthe local contexts,building a relationshipof trust with itspartners as well asappreciating andpromoting the socialvalue-added of thepartners vis-a-vis thebeneficiaries.

This is the subsidyfacet of the SolidarityChain for Financing,whose shared incomefrom the Faim &Développementinvestment fund is themain pillar (seedetails on p. 5) thatmakes flexibleintervention possible.This enables SIDI toadapt the financialconditions of itstechnical assistance tothe means and needsof its partners in thefirst instance and,secondarily, to thecost.


mutual became involved in a networking project with other fi-shermen’s savings and loans and, as the leader of the network,MEC PROPEM began in 2010 to refinance other savings andloans. Because of the weakness of several of these entities, thetime was not ripe for refinancing, which caused some difficul-ties for MEC PROPEM. A SIDI evaluation mission was sent outto find solutions with the partner. The networking project wastemporarily suspended without, however, questioning its rele-vance and SIDI agreed to renegotiate the terms of the existingloan.

In DRC, the CCRD, a solidarity mutual refinancing institution(see p. 11) in North Kivu, experienced problems due to hastygrowth that overstretched its management capacities, in parti-cular owing to a lack of adequate leadership. SIDI contributedsignificant support for the creation of IT systems and a reorga-nisation of the structure. SIDI also agreed to transform the re-payment of its loan into supplementary shares, a move that isexpected to support capital growth by giving a greater stake toSIDI and consequently reducing significantly CCRD’s debt.

In Haiti, the earthquake of 12 January 2010, caused seriousdamage to the workshops of the seamstress’ federation, IN-DEPCO, as well as the loss of their premises and many sewingmachines. While the $100,000 loan granted by SIDI in October2009, helped to finance the purchase of cloth and other mate-rial, INDEPCO nevertheless experienced repayment difficulties.Following a field mission, during which it became clear that IN-DEPCO was enjoying a vigorous recovery, SIDI agreed to re-

schedule the debt and in December granted a new loan of$50,000 for the purchase of raw material. With the support offoreign donors and SIDI, which is the sole lender, INDEPCOwas able to resume its activities and fill large orders for uniformsfor schools and large companies, which will provide jobs for 600workshops that are members of the federation and located incities or in the countryside. ◆

The UGPM (Union des Groupements Paysans de Méckhé) has beendeveloping the “Jariñoo Jant Bi” (“let’s use the sun” in Wolof) programmein Senegal since 2010. This programme is designed to provide accessto photovoltaic solar energy in rural areas through the development oflocal skills and appropriate financing solutions. The programme’s aimis to: 1. improve living and production conditions for people in rural areasthrough the installation of solar systems that provide energy for pro-duction, enjoyment, communication and lighting;

2. proactively introduce forms of renewable energy as a vector of long-term development, whilst at the same time protecting the environ-ment;

3. develop economic opportunities and local skills around solar energyso as to promote the growth of an economic fabric that is capable ofgenerating wealth and employment for young people living in the ruralareas.

The introduction of the “Jariñoo Jant Bi” programme has led to the crea-tion of a workshop, employing three technicians and a supervisor, whichis responsible for the promotion, installation and maintenance of theequipment, as well as the development of a new financial product (thesolar credit, which is refinanced by SIDI) at the Coopérative Ruraled’Epargne et de Crédit (CREC), thereby permitting the purchase of solarequipment through microfinance at a reduced rate.After four years of activity, almost 4,000 people have benefitted, either di-

rectly or indirectly, from this programme. The customer satisfaction levelregarding the quality of the equipment is very high and the loan defaultrate is very low (<3%). As a response to the success of the workshopand in order to ensure that its actions may continue in the long-term, theUGPM has decided to create KAYER, an enterprise that specialises insupplying products and services that are required to access energy. This institutionalisation project has received a great deal of support fromUGPM’s partners, Fratelli dell’Uomo, Italy, the General Council of theMidi-Pyrenees region and Enea Consulting, as well as from SIDI, whichseconded a project officer to work on this project at the local level for ayear. This enhanced form of technical assistance, combined with theUGPM’s own resources, made it possible to carry out a market survey(in 2009), to formulate a business plan and to look for new potential in-vestors and donors. In particular, this led to the decision taken bySchneider Electric’s Energy Access fund to invest in the capital of KAYER. The KAYER enterprise was finally established in September 2010. It po-sitions itself as a social and environmental enterprise by its vocation andwishes to contribute to efforts being made to ensure access to cleanenergy for everyone, as a factor of development. SIDI will continue to provide its support to KAYER. Furthermore, it wouldlike to draw upon the experience gained in this area in order to developsimilar initiatives with its partners, notably in Mali and Togo. Indeed, withthis in mind, several meetings have already been organised at the locallevel with members of the KAYER management team.

SUPPORT 2010 2009

Total number of days of support (including 22% volunteer consultancy vs. 23% in 2009) 2,315 2,222

Percentage of days devoted to technical assistance 55% 56%

Percentage of technical assistance for partner beneficiaries 67% 53%

Percentage of days devoted to technical assistance for developing partners 72% 86%

Percentage of days devoted to technical assistance in the field in support of the social dimension 2% 8 %

Number of days devoted to horizontal reflection (TA excl.) 683 529

Average length of (current) partnerships 7 years 7 years

Average length of financial relationships with (current) partners 6 years 6 years

Making a development programme sustainable through electrification: KAYER in Senegal

SUPPORT



Promoting value-addedin rural areasADAPS and PHILEOL in Madagascar, BIOSUSTAIN inTanzania, MOGTEDO in Burkina Faso, AOPP in Mali, ETCand SINERGI in Niger CGRH NIANING, ESCALES, JAP-POO DEVELOPPEMENT and UGPM in Senegal, MAPTOin Togo, FENACOOP in Nicaragua, ANED in Bolivia, CO-RECAFE and FAPECAFES in Ecuador, CAFEPERU andCAC LA FLORIDA in Peru and LAO FARMERS PRO-DUCTS in Laos.A recurring problem for producers in the South is their lowcapacity to turn a profit from their own production. Far-mers suffer from raw materials price instability and havedifficulty finding local or export outlets. As a result, it is achallenge to bring about lasting change solely through thecontribution of financial services because an increase inproduction will not always mean a similar increase in re-venue. That is why SIDI decided to work on the Promotionof Value-Added in Rural Areas, known as PVAR. It speci-fically targets producer organisations and businesses wor-king with rural areas to develop their processing andmarketing capacities in an environmentally-friendly way.More specifically, SIDI’s support seeks to do the following: Identify local marketing circuits or quality importers, such

as organic circuits and fair trade, among others, who maybe interested in products, introduce them to producersand support the process;

Conduct searches for subsidies for organic conversion orcertification and grant pre-financing;

Support agricultural processing projects; Back producers who create financial services for their

members or who bring them into contact with MFIs (Ma-dagascar, Morocco, Lebanon, Tanzania and others).

Back organised producers in the creation of financial ser-vices for their members or who bring them into contactwith MFIs

In 2010, SIDI devoted 26% of its time to this approach, wor-king with the following existing partners:

Adapting the range of services

to the local context

Microfinance is particularly well adapted to medium-risk activities andto short-term loans. For that reason, some 80% of the beneficiaries ofloans are located in urban areas. But microfinance services and thoseoffered by conventional banks are still out of synch. Small and verysmall enterprises and producer organisations have a hard time gettingfinancing, despite the fact that local banks are awash in cash. That iswhy SIDI has decided to respond to these requests for financing thathave high social interest by focusing on rural areas. The aim is not toexpand beyond SIDI’s field of expertise, but rather to make financingavailable to entities outside the realm of MFIs.

SIDI’s work with producer organisations and provision of inputfinancing, as well as its experience in supporting rural microfinance,have enabled it to formalise in rural areas its Promotion of Value-Added, whose goal is to locate local players of any status in order toincrease and secure farmers’ income.

Finally, SIDI also backs the development of solidarity mutuals that,because they are self-managed and decentralised, have establishedthemselves in far-flung rural areas.

10

KAYER in Senegal, a business now being created to supply solarenergy to farmers (see p. 9).BIOSUSTAIN in Tanzania, an organic cotton export and proces-sing company, which managed to buy its own cotton gin and dou-ble its production. SINERGI, a Nigerian investment firm that supports small com-panies, in whose capital SIDI has increased its stake.FAIR TRADE LEBANON, an association that markets fair tradeproducts, finds outlets for beneficiary co-ops and provides training,technical support and helps improve quality. SIDI took part in dis-cussions on how to transform it into a company in a way thatwould help it develop its activities. SIDI would like to become afounding shareholder of the new company.

ADAPTING OUR RANGE OF SERVICES 2010 2009

Amount of loans granted during the year (in Euros) 1,327,784 829,152 of which % dedicated loans (by number, otherwise 24% in amount) 44% 63%Share (by number)* of new loans devoted to:

Medium-term financing (> 3 years) 40% 14%Financing of productive investment 60% 27%Financing of rural businesses 20% 26%Financing of organic farming 0% 7%Financing of renewable energy 10% 0%Financing of fair trade 10% 26%

*In 2010 – but not in 2009 - there may have been loans allocated to several areas and therefore

the total is higher than 100%.

TAILOREDSERVICES



SIDI has also set up the following new partnerships: With PHILEOL, a company that processes and marketscastor oil produced in the south of Madagascar (see inset). With the NGO APFFH in Algeria, which is seeking to im-prove employment, recognition and status of women workingin income-generating activities, such as in a couscous co-opand stock breeding with fodder provided when a sale is made,a sewing workshop, etc., and in 2010 SIDI supported its pro-fessionalization of financing searches management. Further-more, SIDI negotiated a subsidy from the French Embassy forvocational training schemes. With COPROBICH in Ecuador. This rural company loca-ted in the poorest region of Ecuador has done well in the pro-duction, collection and marketing (organic and fair trade) ofquinoa for the benefit of local member communities. To furtherdevelop this activity, the company applied for an $80,000 sea-sonal loan from SIDI to replenish its working capital. The appli-cation was approved in December 2010.

Promoting solidarity creditunionsWest Africa (Senegal, Mali and Burkina Faso), CentralAfrica (DRC, Rwanda and Burundi), Haiti and Madagas-car.The Mutuelle de Solidarité (MUSO) is a unique organisationset up by Senegalese farmers in 1995, and subsequently ex-tended by SIDI to other countries.

MUSO is a grouping of people from the same area who havedecided to join together to manage a simple, flexible and sup-portive system revolving around three separate funds: a greenfund that collects contributions for setting up the credit fund.These savings are recoverable, e.g. upon retirement. Next ared fund collects non-recoverable contributions and is usedas an emergency fund in the event of fires, disease, etc. Thirdly,a blue fund can receive funds from abroad and provides otherservices.

Rules for the safety of funds (creation of funds via companymeetings, the holding of accounts, separation of roles, creditunions and keys) are inviolable. All other decisions are takenby the shareholders’ meeting, such as the frequency andamount of contributions, allocation of loans, sharing of ex-penses, use of the red fund, etc.

SIDI is working on training, an IT system, strategy and finan-cing with around a dozen organisations that promote solida-rity credit unions, particularly in far-flung rural areas. In 2010,SIDI’s effort focused mainly on the organisation of a workshopfor the exchange of experiences, bringing together all those in-volved: SIDI, the promoters from the eight concerned countriesand CCFD-Terre Solidaire and its researchers. The workshoptook stock of good practices, regulatory issues, the problem ofrefinancing solidarity mutuals, relations between SIDI andCCFD for technical support and the subsidising of promoters,training and monitoring software. The goal of the workshop,after 15 years of development, is to make progress in coordi-nating those involved in order to ensure that the promoters at-

Supporting the development of a ruralenterprise: PHILEOL in MadagascarThe population in the south of Madagascar live in highly vulnerable conditions due,amongst other things, to the recurring natural and climate-related constraints, as well asthe absence of asphalted roads (which, in turn, makes trade difficult), the lack ofschools…PHILEOL was created in this context in 2008 by a chemist and two agricultural engi-neers from Madagascar, out of a desire to develop the local production of castor oil witha view to selling it to industry, in full respect of the local farming communities and the en-vironment.PHILEOL has based its business on the purchase of locally produced castor beans,which it then processes, in its own factory, into high quality caster oil destined for saleto industry. Furthermore, it provides the farmers with seed (and small-scale equipment)free of charge and also provides them with training activities on how to grow castorbeans, thanks to a subsidy obtained by the French investor, I&P. This partner, which was introduced to SIDI by I&P (one of its founding shareholders), hasprovided SIDI with the opportunity to respond to the issue of finding outlets for the ac-tivities carried out by farmers in this difficult area. Moreover, the company has a welldeveloped sense of social and environmental responsibility (one example of this is to befound in its reforestation initiative). That is why SIDI entered into a technical assistancerelationship with PHILEOL in 2010, based on contractual relations between the com-pany and the producers. SIDI also provided the company with a loan of 40,000 Eurosto purchase processing equipment. Finally, it supported PHILEOL during the economicdifficulties it experienced as a result of the drought, by keeping a close eye on its cashflow situation and also by providing a 100% guarantee (for a total of 70,000 Euros) for abridging loan granted by a local bank. This innovative approach has been carried out in close cooperation with CCFD-TerreSolidaire, particularly with regard to the company’s social and environmental responsi-bility.

Today, PHILEOL has become well established at the local level: it purchases its raw ma-terials from more than 6,000 producers and processes it in its own factory before sel-ling the oil to a French importer. It has also diversified its activity through the purchaseof other oil-producing crops in the area and has the intention of developing the pro-duction of similar crops in order to guarantee food security for the local community.

tain financial and institutional independence.

SIDI also achieved progress in the following projects:The identification or the structuring of networks of solidarity cre-dit union promoters in the Great Lakes region. One example isthe RPMS network in South Kivu that consists of 15 promoters.It provides training for leaders and managers in the region andit applies for support from important donors interested in thenetwork. In future, the goal of its members will be to use thisnetwork as their own technical assistance tool.Securing support for FNGN, the federation of farmers’ groupsin the north of Burkina Faso for the start up of 12 pilot solida-rity credit unions, monitored by the federation’s network of sa-vings and loans (UBTEC). The advantage of the arrangement isthat solidarity credit unions complement the development toolsset up by the FNGN, in particular for women in areas far fromthe UBTEC savings and loans.

Today, SIDI has recorded more than 5,000 solidarity creditunions bringing together around 100,000 members in eightcountries: Senegal, Burkina Faso, Mali, Rwanda, Burundi, DRC,Madagascar and Haiti. ◆


Investing in refinancinginstrumentsTEMBEKA in South Africa, SMF EA and FEFISOL in Africa, BMS in Mali, SINERGI in Niger, RED FASCO in Guatemala, FENACOOP in Nicaragua, FORTALECERin Peru, FOPEPRO and ACEROLA in Latin America,Guarantee Fund in Palestine, FRICS in Haiti, SEFEA inEurope

SIDI invests in refinancing funds, thereby generating a leve-rage effect to provide support for the LFS (see Focus).Amongst the actors identified by SIDI, it accords priority, no-tably, to the instruments created by the local institutions them-selves, since they have first hand knowledge of theiroperating environment and are capable of working together.RED FASCO is a network of rural community associations,which has been able to become a shareholder in a local bank(BANRURAL) thanks to a loan provided by SIDI. Its positionas a shareholder allows RED FASCO to take part in the go-vernance of the bank and to facilitate the disbursement ofloans to its members. It is able to achieve this, on the onehand, through the knowledge that the network has gainedof the BANRURAL and on the other, because the grantedloans are guaranteed by its participation in the bank. In 2010,SIDI granted a further loan to RED FASCO in Guatemala of$125,000 over a five year period, in order to establish a fundto finance the associations that are not yet eligible for bankfinancing, but which need to develop their microcredit provi-sion.SIDI has also continued its work with the KNFP in Haiti in theaftermath of the earthquake, through the establishment ofthe FRICS, a financing fund for rural activities. It has incor-porated the dividends received from FORTALECER in Peruinto the capital of the structure. It has continued to providemanagement assistance to the BMS in Mali, which is now aprofitable institution that is recognised for its financing of thecountry’s MFIs. SIDI wishes to develop the links between thebank and the POs and has, in particular, favoured the finan-cing of the AOPP, which is a network of 170 POs, represen-ting one million farmers, by the BMS. Together with SIDI, theCCFD has transformed a subsidy granted to the AOPP forthe development of the cultivation of cowpeas into a gua-rantee lodged with the BMS and this has enabled 200 pro-ducers, who had previously been dependent upon aid, tofinance their activities on a long-term basis. Furthermore, FOPEPRO, the fund for rural producers in LatinAmerica, which was created by SIDI and Alterfin, began itsactivities in 2010, with a starting capital of $2.5 million, whichwas provided by its creators and Fogal. A second call for in-vestors has now been completed and this has led to a furthercapital injection of $2 million, provided by DID and BID-FOMIN. Loans for a total of $4.5 million had already beenapproved by the end of the year (see focus).

Finally, the call for investors for the creation of FEFISOL, theinvestment fund for Africa, has been completed and the threefounders (SIDI, ETIMOS, ALTERFIN): the European Invest-ment Bank, DID/Canada, Crédit Coopératif, Caritas Foun-dation/France, SEFEA, NMI/Norway, the Frenchdevelopment agency and its subsidiary Proparco. FEFISOLwill be in a position to begin its activities by mid-2011, in ac-cordance with its policy to provide support, in particular, toinstitutions that target Africa’s poorest populations, notablysmall rural producers. The dual originality of the fund is to befound in the fact that it wishes to finance not only MFIs in theprocess of consolidation, but also POs and rural enterprises,as well as providing these structures with technical assis-tance services.

Creatingsupport

mechanisms

12

LEVERAGEEFFECT

As an actor of socialdevelopment, SIDIactively seeks tomobilise the efforts ofother institutions, bothto promote its ownvision of solidarityfinancing and toacquirecomplementaryresources for itspartners. Indeed,whilst its ownresources are solid andstable, on their ownthey are not sufficientto respond to theneeds expressed bythe partners.Furthermore, SIDIwould like to reaffirmthe need to supportthe local developmentactors, particularly therural actors who,despite their socialusefulness andpotential, require bothfinancing andsubsidies in order tostrengthen theiractivities, whilst manydonors and financinginvestors areinterested primarily inprofit-makinginstitutions.

LEVERAGE 2010 2009

Number of partners who have benefitted from leverage generated by SIDI 5% 8%Mobilisation of capital, loans, guarantees or subsidies acquired through SIDI

Amount of subsidies obtained as a result of SIDI’s intermediation € 429 640 € 125 332Amount of loans mobilised as a result of SIDI’s intermediation amongst allies in the North € 530,000 € 1.3 M Number of days devoted to the search for complementary funding for the partners 269 210Share of SIDI in partners’ debt 42% - Amount of new guarantees committed by SIDI € 506,325 € 760,000Amount mobilised from banks at the local level € 658,774 € 1,020,000For a leverage effect of 1.35 (1.30 in 2009)

Number of end clients of the umbrella organisations and funds 817,226 751,216Number of active end borrowers 1,280,067 1,330,840Number of producers who are members of partner Producer Organisations and other beneficiaries of rural enterprises 36,694 37,301



Networking and collabo-rating with other alliancesCCFD-Terre Solidaire, Frères des Hommes Italie, Mise-reor, AFD, SICAV Nord/Sud, Epargne Sans Frontières,Fondation Gilles, Merkur Bank, Cordaid, SOS Faim, Mi-nistère des Affaires Etrangères, Feu Vert pour le Déve-loppement, F3E, Conseil Général de Midi-Pyrénées…CCFD-Terre Solidaire, Fratelli dell’Uomo, Italy, Misereor, AFD,SICAV Nord/Sud, Epargne Sans Frontières, Fondation Gilles,Merkur Bank, Cordaid, SOS Faim, Ministry for Foreign Affairs, FeuVert pour le Développement, F3E, General Council of the Midi-Py-renees Region…In 2010, SIDI continued its efforts to work together with partnersin the North: its allies, who share its vision of development, nota-bly the CCFD-Terre Solidaire, and donors who work with specificpartners. SIDI and the CCFD-Terre Solidaire are continuing thedevelopment of joint partnerships, in keeping with the desire ex-pressed by the two institutions to work in a more complementaryfashion in the field, by adopting an approach that combines fi-nancing, technical assistance and subsidies, with a view to pro-moting fair development: in 2010, 26 partners benefitted fromjoint support provided by SIDI and CCFD-Terre Solidaire.Furthermore, in 2010, the work devoted to the mobilisation of thedonors for the benefit of the partners represented 12% of thetime spent by SIDI on technical assistance. As a result of these

efforts, SIDI was able to negotiate the granting of 429,640 Eurosfor its partners, essentially for the MAIN network, which benefit-ted from subsidies for its training courses for managers and loansofficers, and for KAYER, which received financing to subsidisethe installation of solar platforms in the villages (focus page 9).SIDI has maintained its involvement in several networks, enablingit to hold exchanges regarding its practices, to meet other actorsand even to develop joint projects. In 2010, SIDI - provided substantial support to the MAIN network in its effortsto look for financing (making it possible to complete the members’subscriptions for the provision of training services), notably throughthe checking of an application to the AFD, which was acceptedat the beginning of 2011;- took part in several board meetings as the only non-Africanmember;- finally, it promoted an exercise designed to transfer competenceto the accounts department of MAIN;- participated in the work carried out by FOROLACFR, a networkof close to 400 social MFIs in Latin America, regarding the de-finition of social performance indicators. - maintained its active presence within the structures of INAISE,the worldwide network of actors in the social and solidarity eco-nomy, the European Federation of Ethical and Alternative Banks(SEFEA is a project promoted by the members of this federa-tion) and of Epargne Sans Frontières. ◆

SIDI has decided to finance regional, or so-called“secondary level”, funds (or investment compa-nies) since they enable it to effectively extend itsactions on a coherent basis, together with its otherpartners in the field: they general a leverage effect through the mo-bilisation of funds from other donors they make risk-sharing possible they provide for a better identification of theactors in the target area they make it possible to support the structuresor countries to which SIDI does not provide directsupport.FOPEPRO, which began to provide financing in2010, has already financed several SIDI partners,such as ANED in Bolivia, FAPECAFES in Ecuadorand CAFEPERU and CREDIFLORIDA in Peru,which now benefit from supplementary resources.FOPEPRO has also undertaken its own initiativesto identify potential beneficiaries and is financingseveral POs in the coffee and cocoa sectors (APA-VAM and TOCACHE in Peru, ASOCAFE in Bolivia,FCCEG in Guatemala, for example), as well asbean producers in Bolivia. SMF EA provides refinancing to MFIs in five cen-tral and eastern African countries, namely Uganda,Tanzania and Rwanda, as well as in two countriesin which SIDI is not present, Kenya and Sudan. It

finances several MFIs that are already establi-shed, such as PRIDE or BRAC, which operate inseveral countries in the region, as well as smallMFIs that are in the process of consolidation andto which SMF EA also provides technical assis-tance (notably regarding the formulation of busi-ness plans). Finally, through its partners, the fundsupports the notion of Community ManagedMicro Finance, in other words, groups of 20 to 30people from a poor background who are not ser-ved by conventional MFIs and who instead pooltheir savings and grant loans to one another. Atthe end of 2010, SMF EA was providing supportto 14 partners who had adopted this approach(notably through the provision of managementassistance), thereby reaching out to some 30,000customers.In Europe, SEFEA provides financing to organicand fair trade organisations, such as Ethiquable,Biocoop or Alter Eco, cooperatives in disadvanta-ged areas (in Bosnia and in the south of Italy) andto microfinance institutions in eastern Europe,with Integra in Slovakia and KRK in Kosovo.SEFEA enables SIDI to establish a link with soli-darity financing in Europe. Finally, SINERGI in Niger is an investment com-pany that invests in very small, small and medium-sized enterprise, with a particular focus on the

agriculture and agri-food sectors, through the pro-vision of financing and assistance in the areas ofmanagement and the search for technical andcommercial partners. SINERGI has already madeseveral investments since its creation in 2006. Forexample, it has financed Compost Niger, whichmakes organic fertilisers, ETC which processesand sells cereals (SIDI provided it with direct fi-nancing in 2009 and then sold its shares to SI-NERGI). Similarly, Laitière du Sahel or the AfricanTrade Company, which sells dried meat, receivedapproval for financing in 2010, subject to the revi-sion of their business plan. Finally, one of the firstcompanies to receive financing paid out a divi-dend to SINERGI in 2010, which proves the ef-fectiveness of this model in a complexenvironment: the company in question is calledUnifam, which manufactures metal-based pro-ducts. Rather than distancing SIDI from the local level,this type of partnership enables SIDI to develop amore detailed knowledge of the local actors andchallenges, whilst at the same time lowering thelevel of risk and increasing efficiency through theleverage effect. Furthermore, the creation of theFOPEPRO and FEFISOL funds by SIDI repre-sents an extension of this important strategicfocus.

Working with refinancing institutions in order to reach out to new customers

13


Defending a social visionwithin the structuresIn its role as an “active social investor”, SIDI is particularly at-tentive to the need to ensure that a good degree of cohe-rency exists between the partners’ social vision and theireffective practices. In 2010, SIDI devoted 13% of its working time preparingfor, and participating in, board meetings. It has reaffirmedthe social vision of SIPEM in Madagascar, notably with re-gard to the decisions to be taken concerning the sharing ofthe added value, and it continues to closely monitor the im-plications of institutional change. SIDI has also taken partin the preparation of the capital increase of the CRG in Gui-nea (which is to take place in 2011), according particularattention to the adjustment in the balance of power thatmay ensue as a result of this operation (see Focus) At thegeneral assembly of CONSOLIDAR in Colombia, SIDIonce again reiterated the utility of developing the provisionof loans in a context in which the institution is more focus-sed upon responding to public tenders in order to subsi-dise those who have been displaced by the conflict.

Furthermore, together with the other board members ofTEMBEKA, it has validated a project designed to financerural enterprises with a social vocation in South Africa. Ithas adopted a similar approach to the BMS in Mali, wherethe financing of POs’ viable economic projects is now onthe agenda. Finally, together with another shareholder, ithas encouraged the board of Centenary Bank to adopt apositive position regarding the financing of small MFIs andPOs in Uganda.

Reinforcing governanceIn order to ensure the long-term coherence of the develop-ment of the structures of which it is a member, SIDI devotesa substantial amount of time supporting the efforts under-taken to define their strategic priorities: to this end, it hastaken part in the formulation of the business plans of KO-KARI in Niger (with the intention of not only making surethat the structure conforms with the new framework law onmicrofinance, but also of developing non-financial services),of the UGC-CPC in Mozambique (of which it is the only part-ner) and of TEMBEKA in South Africa. In Peru, by taking astake in the capital of CREDIFLORIDA, a rural MFI createdby CAC LA FLORIDA, a coffee growers’ cooperative, SIDIhas been able to participate in the work designed to updateits strategic plan. It has adopted a similar approach to itsrelations with FORTALECER, a cooperative of rural MFIs,since its election to the board has enabled it to initiate a pro-cess to strengthen the institution (business plan, strategicplan, a plan to mobilise resources). SIDI also sits on the loans committees of the SMF EA inUganda and of SINERGI in Niger and is therefore able totake part in the investment decisions. Similarly, it is also amember of the executive board of the Finance Commissionof AL AMANA in Morocco, where it is monitoring the effortsmade to aid the recovery of the institution (following the cri-sis in the sector due to an increase in the number of custo-mers in a situation of over-indebtedness).Finally, SIDI has taken part in the definition of the humanresource policy at the CRG in Guinea and at KOKARI inNiger, and also led a workshop on credit risk evaluation forthe staff of the UGC-CPC in Mozambique. ◆

Ensuring the partners’institutional viability and social purpose

14

The role of SIDI as a“patient” investor is towork alongside thepartner LFS in order toensure that they areable to provide theircustomers withappropriate and long-term financial services.This means that SIDIhas to support them intheir process ofinstitutionalisation, inthe use of tools todirect and to monitortheir activities, in thedefinition of theirstrategic priorities and,finally, to ensure theirgood governance. Instructures in which SIDIis a shareholder, then itsystematically asks tobe represented on thedecision-making bodiesso that it has a say inthe decisions that aretaken to implementthe general policy.This means that SIDImust ensure that it hasan active presence onthe 27 boards ofdirectors of which it isa member, as wellbeing involved in theirpreparation and theimplementation oftheir decisions,alongside the othermembers of the board.


GOVERNANCE 2010 2009

Number of partners with whom SIDI takes part in strategic reflection 29 28i.e. 33% of the partners Number of partners where SIDI is represented on the Board 21 23Number of days devoted to governance 450 434Including days spent participating in Board meetings 309 297Number of days devoted to institutionalisation 81 85Involving 10 partners in 2010 (same number as in 2009)

COMPLEMENTARY DATA

2010 2009

Percentage of partners in crisis areas 32% 31%90% of which are in political crisis zones (86% in 2009)

Percentage of partners who have reduced their interest rates over the last 3 years 12% 21%The interest rate has remained stable for 76% of partners (73% in 2009)

Financial dataTotal MFI loan portfolio € 448 M € 492 MTotal MFI savings portfolio € 284 M€ € 333 MTotal amount of partners’ assets € 1,4 MM€ € 1 MM

Percentage of partners who have increased their equity during the year 71% 44%

Percentage of partners who have generated a positive result during the year 49% 52%

Percentage of POs/ rural businesses that have improved their turnover during the year 58% 25%

Percentage of partners who have a social policy 77% 70%

The Crédit Rural de Guinée (CRG), whichhas been a SIDI partner since 2002, is anumbrella organisation that groups togethera network of 114 local savings banks loca-ted throughout the country (the savingsbanks are affiliated to the umbrella organi-sation by contract and are shareholders init). For the most part, the savings banks arelocated in rural areas (representing 80% ofthe network’s 150,000 member-borrowers),although they are also to be found in themedium-sized villages and, more recently,in the urban centres. In a highly difficultcontext, which has been fraught with a suc-cession of both political (the succession ofLansana Conté) and economic (further exa-cerbated by the crisis in its neighbouringcountry, the Côte d’Ivoire) crises for severalyears, the CRG has always managed tomaintain its mission to finance income-ge-nerating activities, particularly for small far-mers. The CRG is an atypical institution in thesense that it has adopted a “joint manage-ment” approach: the activities of the savingsbanks are managed by both the elected re-presentatives and by the workforce. Thissystem is also adopted by the umbrella or-ganisation and by the Board of Directors,where seats are allocated to representa-tives of both the workforce and the savingsbanks. In this way, it is possible to defendeveryone’s interests in discussions with se-nior management.The fact that the CRG has chosen to focusits attention on rural activities, in a countrythat offers precious little prospect of finan-cing for small farmers, together with thequality of its governance, led SIDI to takean 8% stake in the company’s capital in2002 (one year after the institutionalisationof the programme. This also means thatSIDI has a seat on the board of directors. Since then, SIDI has attended each of thethree annual board meetings, as well as themeetings of the commissions and the pre-paratory meetings. During these meetingsit constantly strives to defend several stra-tegic priorities:- the financing of agricultural activities, en-suring that the ceiling of 20% outstandingloans, which was decided upon by theboard, is respected; - controlling expenditure: the CRG muststrive to ensure that it maintains a balancein a context in which the AFD subsidies (for

training and the introduction of IT systems)are no longer being provided;- training: the withdrawal of subsidies usedto provide training for the workforce and forthe members elected to sit on the boardhas undermined the culture of “joint mana-gement”, which continues to be endorsedby the majority of board member;- the search for new resources: the boardhas accepted a proposal to launch a newcapital increase initiative in 2011. SIDI willtake part in this initiative and will increaseits share to 20%.- the reduction in the board’s operatingcosts: with a view to generally limiting ex-penditure, SIDI would like the board to setan example by reducing daily allowances,keeping a close eye on situations in whicha budget is exceeded and closely exami-ning costs.- the continuation of the policy based on thedecision not to distribute dividends.

The fact that it attends the board meetingson a regular basis and that it maintains clearobjectives, means that SIDI is consideredto be a well-respected board member bythe other members of the board and the se-nior management team. Furthermore, itsposition as a foreign investor means that itis able to distance itself from local issues.This means that the desk officer, who hasrepresented SIDI since 2002 (making thisperson the longest-serving board member)is able to positively influence important de-cisions when there is tension amongst theother board members. Indeed, it is this verysame person who has been training thenew board members on an informal basissince the subsidies for this type of traininghave been withdrawn. She also proposedand obtained a slower turnover amongstthe board members, so that they have thetime required to learn how to exercise theirpowers.Over a ten year period, the board has be-come significantly stronger and it now re-presents a genuine governance body with astrong identity, which reflects the interestsof the different actors, whilst at the sametime defending the collective interests.Today, together with the general manage-ment, it is striving to effectively correct thecurrent situation and is preparing a capitalincrease that is scheduled for 2011 and inwhich SIDI will take part.

Ensuring its long-term role as a boardmember: the Crédit Rural de Guinée

GOVERNANCE



SIDI’s 2010 financial statementsSIDI’s balance sheet at December 31, 2010 in thousands of euro

16

ASSETS2010 2009

Net intangible assets 60 61Net financial assets 9,710 8,674

of which shares and claims 5,718 4,394of which loans 3,878 4,103of which other financial assets 115 176

Total fixed assets 9,771 8,735

Claims (net value, including co-financing) 434 383

Cash assets 1 9,295 9,295

Accruals 21 122TOTAL 21,154 18,535

LIABILITIES2010 2009

Capital 13,000 13,000Reserves 701 546Profit/loss for the year 306 155

Total equities 14,007 13,701

Provisions 2 183 180Loans for activities 1,313 1,292CCFD-RURAL FUND 3 1,000

Shareholders, current account 522 128 FID 4 International guarantee fund 2,478 2,040 C.D.C. Fund 374 366 SAAP – FEFISOL Fund 500 -

Accruals 247 224TOTAL 21,154 18,535

4 Provisions on loansand equity investmenthave since 2004 been covered by the F.I.D., ahedging mechanism thatapplies, with a few exceptions, to all invest-ment conducted by SIDI.It comprises current accounts of shareholderswho are convinced of theimportance for SIDI totarget difficult intervention areas.

2 These are provisionsfor risks and financialprovisions for exchange rate losses.

3 Resource providedby CCFD as part of theforthcoming “EcologicalTransition” financial instrument (see p.3)

1

Cash (includingF.I.D.), invested

in ethical securities and

investment realestate.

"S.A. SOFIDEEC BAKER TILLY, external auditor, a member of CRCC in Paris, represented by its chairman Mr Fouad EL M'GHAZLI, has certified without reservations SIDI's annual accounts, ended December 31, 2010."

The solidarity chain for financing

LFS PO LFS LFS PO LFS

1,450 shareholders

Capital 13 million euros

Refinancing fund Technical Assistancefund

5,000 savers Income from the Joint Investment Fund and from CCFD

1.2 million euros/year

Mobilisation of funds fromalliances

FID

End beneficiariesLFS : Local Financing StructuresPO : Producers’ Organisations FID : Development Incentive Fund (guarantee mechanism)


SIDI’s income statementat December 31, 2010 in

thousands of euro

CCFD-TerreSolidaire 22%and

French Financial Institutions 12%

Other 4%Northern Partners 5%

14 religiouscongregations29%

ÉpargneSolidarité

Développement28%

(ESD – grouping of1,270 individual

shareholders)

Breakdown of SIDI’s capital at 31/12/10

at December 31, 2010 2009

Income Total 1,629 1,568

CCFD services 1,185 1,185

Co-financing 276 116

Export services 25 64

Other products 37 65

Provision reversal & transfer of expenses 106 138

Charges Total 2,261 2,043

Current operation income (of which technical operations in the amount of € 69,175) 668 722

Wages and salaries 1,241 1,147

Depreciation expense 21 20

Provision for charges 3 -

Allocated grants 249 96

Other expenses 78 58

Operating profit/loss -632 -475

Income Total 1,077 985

Income from portfolio (loans and shares) 638 556

Investment income 39 38

DIF resources 67 24

Exchange rate gains 122 42

Provisions reversal 205 325

Other 7 0

Charges Total 144 339

Provision for financial risks, translation differential 5 5

Provision for risks on shares and loans

Loan write-down 79 195

Interests on loans 27 30

Disposal of shares, Investment securities 0 16

Exchange rate losses 34 75

Other 18

Financial profit/loss 933 646

Exceptional products 7 142

Exceptional charges 2 158

Exceptional profit/loss 5 -16

Income taxes -

Net profit/loss 306 155

These are co-financings from internationalpartners transferred directly to the partnersfor their projects.

Mainly recoveryof provisions on cashinvestments.

This heading mainly comprises • contributions received from the CCFD to finance support activities

(1,2 million euro). Most of these resources are provided to the CCFD from the proceeds of the Faim et Développement investment fund

• resources from international partners, which are either transferred to the partners or are spent on financing SIDI support.

Other proceeds include fees for attending board meetings,application fees, etc.

700007000 14 000

Kilom�tres

14 000

700007000 14 000

Kilom�tres

14 000


Mapof SIDI’s

financial partners*

in 2010

18

FONHSUDFRICS

INDEPCOKOFIP

KNFP / IMOFOR HAITI

* and Southern networks

FEFISOLAfrica

MAIN NetworkAfrica

SMF EAAfrica

TEMBEKASOUTH AFRICA

CAPADCOPED

COSPECISHAKA

BURUNDI

CRGFPFD GUINEA

ADAPS PAMF

PHILEOLSIPEM TITEM

MADAGASCAR

UGC-CPC MOZAMBIQUE

CENTENARY BANKOMIPA

UGANDAADI-KIVU CCRD COOCECCOODEFI DEMOCRATIC REPUBLIC OF CONGO

IMPUYAKI RWANDA

CGRH CRECESCALES JAPPOO DEVELOPPEMENT KAYERMEC PROPEM UGPM SENEGAL

AKIBA BIO SUSTAIN TANZANIA

AMRETHATTHA KAKSEKAR

CAMBODIA

FONDS COOPERATIF LAO FARMERS PRODUCTS

LAOSHIEP THANVIETNAM

ETCKOKARIMECREFSINERGI

TAANADINIGER

MICROINVEST MOLDAVA

KRK KOSOVO

SEFEAEurope

APFFHALGERIA

EACDEGYPT

FAIR TRADE LEBANONNAJDEHLEBANON

FOROLACFRLatin America

FOPEPROSociété de gestion ACEROLA

Pays Andins - Amérique Centrale

ANEDBOLIVIA

INDESCHILE

CONSOLIDARCOLOMBIA

SAINDESURURUGUAY

BANCOSOLIDARIOCORECAFEFAPECAFESGRUPPO SALINASECUADOR

RED FASCOGUATEMALA FENACOOP

NICARAGUA

CAFEPERUCONFIANZACREDIFLORIDAFORTALECERLA FLORIDAPERU

AL AMANA AMSSFMOROCCO

ACADASALA

Guarantee FundPALESTINE

ASIENAFNGN BTEC MOGTEDO BURKINA

AOPPBMS SANIAKO MALI

FECECAVMAPTOTIMPACUCMECSWAGES TOGO


Africa SMF EA Africa FUND 483 * * * *MAIN Africa NETWORK 38 * * * *FEFISOL Africa FUND - * * * *ASIENA BURKINA MUSO - * * *FNGN BTEC BURKINA MFIC - * * *MOGTEDO BURKINA PO 23 * *CAPAD BURUNDI MUSO - * *COPED BURUNDI MUSO - *COSPEC BURUNDI MFIC - * *ISHAKA BURUNDI MFIC 10 * * * *ADI-KIVU DRC MUSO - * * *CCRD DRC MUSO 18 * * * *COOCEC DRC MFIC - * * *COODEFI DRC MFIC 11 *CRG GUINEA MFIC 18 * * * *FPFD GUINEA PO - *ADAPS MADA PO 30 * * * *PAMF MADA MFIC 182 * * *PHILEOL MADA PAVRA 110 * * *SIPEM MADA MFIP 537 * * * *TITEM MADA MFIC - * * *AOPP MALI PO - * * * *BMS MALI UMBRELLA 152 * * * *NIAKO MALI MFIC 10 *UGC-CPC MOZAMBIQUE MFIC - * * * *ETC NIGER PAVRA - * *KOKARI NIGER MFIC 179 * * * *MECREF NIGER MFIC - *SINERGI NIGER FUND 126 * * *TAANADI NIGER MFIC 107 * * *IMPUYAKI RWANDA MUSO - * *CGRH SENEGAL PO 30 * * * *CREC SENEGAL MFIC 127 * * *ESCALES SENEGAL PAVRA 100 * * * *JAPPOO DEVELOPPEMENT SENEGAL PAVRA - * * * *KAYER SENEGAL PME - * * * *MEC PROPEM SENEGAL MFIC 160 *UGPM SENEGAL PO 60 * * * *TEMBEKA SOUTH AFRICA UMBRELLA 781 * * *AKIBA TANZANIA MFIP 420 * *BIO SUSTAIN TANZANIA PAVRA 71 * * * *FECECAV TOGO MFIC 114 * * * *MAPTO TOGO PO - * *TIMPAC TOGO MFIC - * *UCMECS TOGO MFIC 152 * * *WAGES TOGO MFIP - * *Centenary Bank UGANDA MFIP 475 * * * *OMIPA UGANDA MFIC 18 * * *

Latin America FOROLACFR Latin America NETWORK - * * *FOPEPRO Latin America FUND 1416 * * * *ACEROLA Latin America FUND 2 * * *ANED BOLIVIA MFIP 146 * *INDES CHILI MFIP 85 * *CONSOLIDAR COLOMBIA MFIC 100 * * *BANCO SOLIDARIO ECUADOR MFIP 165 * *CORECAFE ECUADOR PAVRA 14 * *FAPECAFES ECUADOR PAVRA 65 * * *GRUPPO SALINAS ECUADOR PAVRA - *RED FASCO GUATEMALA UMBRELLA 236 * * *FENACOOP NICARAGUA UMBRELLA 130 * * *CAFEPERU PERU PAVRA 344 * *CONFIANZA PERU MFIP 142 * *CREDIFLORIDA PERU MFIC 143 * *FORTALECER PERU UMBRELLA 193 * *LA FLORIDA PERU PO - * *SAINDESUR URUGUAY MFIC 109 * *

Asia AMRET CAMBODIA MFIP 97 *HATTHA KAKSEKAR CAMBODIA MFIP 238 * * *FONDS COOPERATIF LAOS MFIC 190 * * * *LAO FARMERS PRODUCTS LAOS PAVRA 54 * * * *HIEP THAN VIETNAM PAVRA 23 * * *

Medit. Basin APFFH ALGERIA PAVRA - * * *EACD EGYPT MFIC 264 * *FAIR TRADE LEBANON LEBANON PAVRA 119 * * *NAJDEH LEBANON MFIC 28 *AL AMANA MOROCCO MFIP 246 * * *AMSSF MOROCCO MFIC - *ACAD PALESTINE MFIC 101 * *ASALA PALESTINE MFIC 72 * *Guarantee Fund in Palestine PALESTINE FUND 99 * *

Caribbean INDEPCO HAITI PAVRA 66 *KNFP / IMOFOR HAITI NETWORK - * * *FONHSUD HAITI MUSO 29 * * * *FRICS HAITI UMBRELLA - * * * *KOFIP HAITI MUSO - *

Europe SEFEA Europe FUND 135 * * *KRK KOSOVO MFIP 649 * * * *MICROINVEST MOLDOVA MFIP 187 * * *TOTAL 10,429.10

GOVERNANCEAT DECEMBER 31, 2010

BOARD OF DIRECTORS

SCHMITZ ChristianChairman of the Board of Directors

GUENARD GenevièveBoard Member

RICARD Xavier Board Member

SUPERVISORY BOARD

AURENCHE GuyChairman

MESNY PhilippeVice-chairman

CAISSE DES DEPOTS ET CONSIGNATIONSRepresented by CHABRILLAT Pascale

CCFD - TERRE SOLIDAIRERepresented by LESAY Martial

CONGREGATION DESSŒURS AUXILIATRICES Represented by Sister Marie-Thérèse GAUD

CONGREGATION DESURSULINES DE JESUSRepresented by Sister Christiane GROSSIN

CREDIT COOPERATIFRepresented by MORET Laurence

EPARGNE SOLIDARITEDEVELOPPEMENTRepresented by ANCELIN Pierre

BITSCH GérardMember

AREA PARTNERS COUNTRY CATEGORY

SIDI’S PORTFOLIO AT

31/12/10. IN THOUSANDS

OF EURO (CAPITAL, LOANS,

GUARANTEES)

VOLUME OF SUPPORT

IN TIME SPENT BY THE SIDI TEAM

The portfolio is invested as follows: 52% in equity capital, 38% in loans and 10% in guarantees.For further information, see www.sidi.fr

INTERNATIONAL SOLIDARITY FOR DEVELOPMENT AND INVESTMENT

12 rue Guy de la Brosse75005 Paristél. : 33(1)40 46 70 00fax : 33(1) 46 34 81 [email protected]

www.sidi.fr

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SIDI - Annual Report 2010

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