REGMIFA successfully attains the USD 50 million mark reaching more than 112,000 borrowers, 91% of which micro-, small and medium enterprises (MSMEs)
The Regional MSME Investment Fund for Sub-Saharan Africa S.A., SICAV-SIF (REGMIFA) celebrates its second anniversary with good performance results in 2011 and promising prospects for 2012. Development Finance Institution (DFI) investors have created a successful track record for crowding in private sector investors in African microfinance.
This May, REGMIFA celebrated its second anniversary since its inception as a fund dedicated to fostering growth through the support of micro- up to middle-sized entrepreneurial activity in Sub-Saharan Africa. On this occasion, Mr. Wolfgang Kroh, Chairman of the Board of Directors of REGMIFA, and Mr. Roland Dominicé, CEO of Symbiotics, the Fund’s Investment Manager, presented an overview of REGMIFA’s achievements during 2011 and its prospects for 2012.
The Board of Directors and the Investment Manager are pleased to announce that at the end of 2011, and despite the unfavourable market conditions, the Fund was able to close the year with strong investment activity, which brought the portfolio to a level above USD 43m, and achieved a satisfactory financial performance, fully in line with the development and sustainability return goals set up by the Fund’s stakeholders. As of 31.12.2011, the Fund had a gross asset value of USD 60.8m, positive financial targets and no loss in its portfolio. As of today, it has reached a portfolio level of USD 51.3m.
The Fund distributed 32 investments to 20 microfinance institutions (MFIs) throughout 11 Sub-Saharan economies and was able to accomplish a net portfolio growth of USD 27m, adding a total of 11 new partner MFIs, 5 new countries and 4 new currencies. REGMIFA has a healthy and diversified exposure, despite the many existing difficulties in the various risk categories. A solid credit risk profile was evidenced, on the one hand, by an average MFI Symbiotics shadow credit rating of BBB- and an average country risk of BB- and on the other hand, there wasn’t any PAR>30 at the Fund level, and just 3.8% at the MFI level.
In terms of social outreach, in 2011 REGMIFA’s financings reached 103,307 final borrowers (2012, 1st quarter: 112,362), with an average loan amount of USD 420. 22% of the borrowers were located in rural areas, 68% were women and 91% were running MSMEs.
Mr. Kroh noted: ”REGMIFA is a very good example of DFIs purposefully working to crowd in private sector investments. REGMIFA has created an important track record setting an example for several microfinance investment vehicles (MIVs) and preparing the groundwork for larger private sector flows in the future”.
According to the Symbiotics 2011 MIV Survey, covering 70 microfinance funds worldwide, the average share pushed to Sub-Saharan Africa reached just 5% of global microfinance investments. Taking this into account, Mr Dominicé is proud to see that “REGMIFA is continuing to increase the overall global investments to the continent, being the largest single exposure to Sub-Saharan Africa microfinance”.
The average transaction size in 2011 was USD 1.36m, which keeps the Fund´s market positioning opposite to larger MVIs seeking economies of scale going up the market. REGMIFA´s MFIs have balance sheets four times smaller than in other regions, and similarly their average loans are more than half the size of those elsewhere, on average. Furthermore, 58% of the invested volume went to tier 2 & tier 3 MFIs, whereas in number, these MFIs reached 72% of the portfolio. 54% of the disbursed volume (10 out of 20 investees) is going to local grassroots MFIs unrelated to the international microfinance network.
Mr. Mariano Larena, the Fund manager at Symbiotics, adds: “It is also worth mentioning that REGMIFA belongs to the handful of investors that can provide much demanded local currency financing to African MFIs. During 2011, 96% of the transactions were denominated in local currency. Moreover, REGMIFA is a structured product and has fixed return targets with fixed coupons expected by layers of different investors, and works off slim margins to cover all its various costs. It has a clear commercial orientation and can neither afford to undercut the market on small transactions nor be under any circumstances the lowest price in any market”.
The REGMIFA fund is paralleled by a Technical Assistance Facility, which started its operations about a year after the launch of the Fund. It approved 11 projects, with an average size of EUR 87,000. In terms of outreach of TA interventions, it served 10 MFIs (50% portfolio) and 71% of the volume went to tier 2 & tier 3 institutions. Mr. Dominicé reported: “TA mandates always come downstream from the investments and are not automatic – they depend on the analysis of the investees in the Fund, and the eventual development needs. According to a rough estimation, 7 out of 10 MFIs take out a loan without the intention of receiving TA. This is due to the fact that many MFIs are not actually interested in TA in the first place and in some cases, a few MFIs were already receiving TA from other initiatives. Furthermore, the REGMIFA TAF has strict rules and regulations (e.g. tender and consulting selection etc.), to which some MFIs are not willing to submit”.
Although, in the long-term, the market potential remains very high for REGMIFA and the current deal flow is strong, the prospects for 2012 are reflecting the continued pressure and competition on pricing witnessed across all markets in Sub-Saharan Africa as more investors enter the space as well as the recent currency volatility in the key markets of East Africa and Nigeria causing hedging costs to increase. For 2012, the Fund’s target is set to reach, as per year-end, an outstanding portfolio of USD 70.5m, whose materialization will depend mostly on the development of the parameters mentioned above. Geographically, the Fund considers Nigeria, Kenya, Uganda, Senegal, Ghana, Benin and Cameroon as its key markets and a deeper penetration into more stable markets like Ghana and Senegal is expected, whereas the Fund will remain cautious in regards to its introduction into new markets.
About the Regional MSME Investment Fund for Sub-Saharan Africa (REGMIFA)
The Regional MSME Investment Fund for Sub-Saharan Africa S.A., SICAV-SIF (REGMIFA) was launched on May 5th, 2010 and qualifies as a Société d’ Investissement à Capital Variable- Fonds d’Investissement Spécialisé (SICAV-SIF) under Luxembourg Law. Its mission is to foster economic development and prosperity in Sub-Saharan Africa essentially through the provision of local currency medium to long-term debt financing to financial institutions serving micro-, small and medium-sized enterprises.
Initiated by the G8 Summit in Heiligendamm, REGMIFA is a Public-Private Partnership that combines funds from public and private investors, including KfW Entwicklungsbank (also acting as structuring agent), the German Federal Ministry for Economic Cooperation and Development (BMZ), the Spanish Ministry of Foreign Affairs (MAEC), the Spanish Agency for International Cooperation for Development (AECID), the Spanish Development Bank (ICO), the International Finance Company (IFC), the Belgian Investment Company for Developing Countries (BIO), Oesterreichische Entwicklungsbank (OeEB), the European Investment Bank (EIB), the French Development Agency (AFD), the French Investment and Promotions Company for Economic Cooperation (PROPARCO), the Norwegian Microfinance Initiative (NMI) and the Netherlands Development Finance Company (FMO).
Complementary to the Fund’s investment activities, a dedicated Technical Assistance Facility focuses on technical support to client institutions. The Technical Assistance Facility (TA Facility) was set up as an independent entity from the Fund and was structured as a fiduciary agreement under Luxemburg law in July 2010.
Symbiotics Asset Management SA, a specialized asset management company based in Geneva, Switzerland, is in charge of the Fund’s management as both Investment Manager and Technical Assistance Facility Manager.
Communication Officer, Symbiotics Group
Phone: +41 (0) 22 338 15 40
From The FINANCIAL -
REGMIFA has disbursed the first loans totalling USD 13.75 million to microfinance institutions in Ghana, Kenya, Senegal and Tanzania.
Structured by KfW Entwicklungsbank, the Regional Micro, Small and Medium Enterprises Investment Fund for Subsaharan Africa (REGMIFA), the first of its kind, invests in microfinance institutions that grant loans to microentrepreneurs.
The first loan in Ghanaian cedi was granted to the Sinapi Aba Trust (SAT). The microfinance institution gives loans to microenterprises mainly located in rural areas, primarily through a group lending methodology. The second loan went to First Allied Savings and Loans (FASL), which offers mainly individual loans but also group loans to micro and small entrepreneurs. The third loan went to the Kenya Women Finance Trust (KWFT) for onlending in Kenya shillings to low-income women borrowers. Further loans went to Faulu Kenya, PAMECAS in Senegal and FINCA in Tanzania.
“The disbursement of these loans is an important milestone for REGMIFA, a fund designed to support employment and entrepreneurship of small businesses in Sub-Saharan African countries. It will help to deepen Africa’s economic growth and to improve the economic opportunities of small enterprises and poor population groups. REGMIFA will support particularly those institutions that act responsibly towards their customers and keep a watchful eye on their debt situation. Thus the Fund sets important standards”, said Dr Norbert Kloppenburg, member of the Executive Board of KfW Bankengruppe.
The Fund was officially launched on 5 May 2010, with over a dozen public investors committing over USD 150 million. The Federal Ministry for Economic Cooperation and Development and KfW Entwicklungsbank will contribute some EUR 30 million to the Fund. The Fund is expected to develop a credit portfolio of some USD 200 million by 2014. It is the first fund to offer microfinance institutions in Sub-Saharan Africa a range of financing instruments such as long-term debt capital and quasi-equity financings such as subordinate loans in local currency.
“The Fund has achieved a great deal in its first six months, it has acted quickly and effectively. Its portfolio will further expand with the scheduled disbursement of loans to microfinance institutions in Nigeria and Cameroon”, said Dr Kloppenburg.
REGMIFA will make funds available to numerous MSME lending intermediaries which will grant local currency loans to some 300,000 micro and small enterprises. The advantage is that the intermediaries will incur no currency risk and, hence, their debt burden will be lower.
KfW Entwicklungsbank is the world’s largest financier of microfinance in developing and transition countries. In 2009 alone, almost one third of its commitments (EUR 1.1 billion) went to the financial sector.
OSLO, NORWAY–(Marketwire – May 11, 2010) – NMI Global Fund today announced an investment of USD 7,000,000 in the newly established Regional MSME Investment Fund for Sub-Saharan Africa (REGMIFA). REGMIFA is the first regional investment fund that will support micro-entrepreneurs and medium and small enterprises (MSMEs) in Sub-Saharan Africa through medium and long-term loans to Microfinance Institutions (MFIs). REGMIFA will provide loans largely in local currency and will also provide targeted technical assistance to these MFIs.
REGMIFA has received initial capital commitments of over USD 150 million and expects to develop a credit portfolio of about USD 200 million by 2014. The Fund will lend to roughly 50 MFIs, which in turn will make local currency loans to an estimated 300,000 small businesses and micro-entrepreneurs. The German Development Bank (KfW) is the lead sponsor of REGMIFA and the Fund will be managed by Symbiotics, one of the premier microfinance fund managers.
REGMIFA is NMI’s first fund to invest exclusively in Sub-Saharan Africa and confirms NMI’s commitment to investing in the region. REGMIFA will be a cornerstone investment for the NMI Global Fund in Sub-Saharan Africa and may provide NMI with a variety of co-investment opportunities.
“There is substantial unmet demand for local currency debt products in Sub-Saharan Africa,” said Richard Weingarten, Managing Director of NMI and member of the REGMIFA Board. “In addition, medium and long-term financing are difficult to obtain and highly beneficial for small African MFIs and financial institutions.”
NMI is a founding investor in REGMIFA. Other founding investors include the Ministry for Economic Co-operation and Development (BMZ) , the Spanish Ministry of Foreign Affairs (MAEC), the Spanish Agency for International Cooperation for Development (AECID), the Spanish Development Bank (ICO), the International Finance Corporation (IFC) of the World Bank, the Belgian Investment Company for Developing Countries (BIO), the Development Bank of Austria (OeEB), the Development Bank of the Netherlands (FMO), the European Investment Bank (EIB), the French Development Agency (AFD), the Investment and Promotions Company for Economic Cooperation (PROPARCO), and the African Development Bank (AfDB).
“Our investment partners in REGMIFA are some of the most prominent development agencies working in Africa. We are delighted to be able to invest with these firms and to participate in this highly developmental activity in Sub-Saharan Africa,” said Mr. Weingarten.
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