Annual Report 2015

Annual Report 2015
Incofin cvso Annual Report 2015
Mission
Incofin cvso invests in sustainable microfinance institutions (MFIs) in developing countries that
offer financial services tailored to small local businesses and strive to promote significant social
added value. The goal of the fund is to help individual entrepreneurs to develop their own businesses and improve their standard of living.
Incofin cvso investment chain
In 2015, 6.9 million euros in new capital was acquired. On 31 December 2015 Incofin thus possessed a shareholders’ capital of 32.1 million euros, paid up by 1,492 shareholders. In addition,
Incofin cvso has access to loans. These two sources are used to finance a total investment portfolio of 52 million euros. Incofin cvso invests this in MFIs, which offer small-scale entrepreneurs a
better future through financial services. In this way, the fund generates both financial and social
returns. Incofin cvso invested in 23 countries in 2015. Working through 43 MFIs, the fund thus aided
2,908,547 micro-entrepreneurs, of which 71% were women. In 2015 the average loan amount was
1,141 euros.
1,492
43
shareholders
in 2015
MFI's
€ 52 million
total portfolio
in 2015
2,908,547
micro-entreprenuers
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Annual Report 2015
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Incofin cvso Annual Report 2015
Contents
Interview................................................................................................................ 4
·· Frans Verheeke, Chairman of Incofin cvso
Investing worldwide ...................................................................................... 6
·· Investing globally
·· New clients in the portfolio
Focus .................................................................................................................... 12
·· Focus on Congo
·· Client story: I-Finance
Our areas of expertise and funds .......................................................... 15
·· Fairtrade Access Fund
·· Social performance
·· Technical assistance
Financial report ............................................................................................. 20
·· Corporate governance
·· Report of the statutory auditor
·· Report of the Board of Directors
·· Advisory role of Incofin Investment Management
·· Key figures
·· Annual accounts at 31.12.2015
·· Notes
·· Compliance
·· Valuation rules
·· Risk management
‘Investment
with a social
impact is on
the rise’
Interview | Chairman Frans Verheeke
With an increase of nearly 7 million euros in
capital, the micro-finance fund Incofin cvso
reached an absolute highpoint in 2015. This
success was largely the result of the strong influx
of new individual shareholders. ‘Investors are
clearly looking for a social and sustainable added
value for their investment’, confirms founder and
Chairman of the fund Frans Verheeke.
In total, Incofin cvso closed out the year
2015 with no less than 32.1 million euros in capital. In the 24 years since the
fund’s launch in 1992, this marks a record high. The fund’s driving force and
Chairman, Frans Verheeke, has witnessed
this growth with pride. ‘The fact that we
are booking a record amount in these
uncertain economic times is a source of
great satisfaction. This year we also saw
a tremendous influx of individual investors, which once again demonstrates that
sustainable investing is gaining ground
among the general public.’
Interview | Incofin cvso Annual Report 2015
The Chairman sees the success of the investment fund as stemming from a number of factors including certain societal
changes. ‘We are advertising a bit more
than we did in the past, so people are
more aware of our name and what we do.
But in recent years, there has also been
a societal shift in the mind-set about investment. When I started out, people said
I was crazy. Scarcely anyone had heard
of the concept of microfinance and what
it meant. Now, we are no longer a lone
voice in the wilderness. People want to
give their investments added value, not
only in financial terms but socially as
well. Incofin cvso is able to provide the
answer.’
Reliable
investment
policy
However, the fund is also increasingly
reaping the rewards of its sustainable
and reliable investment policy. ‘We have
built up a significant buffer against risks
and potential problems’, notes Frans
Verheeke. ‘This is necessary in the countries where we operate. Still, in all these
years, we have not encountered very
much adversity.’
‘A consistent policy on dividends is very
important to us’, adds the Chairman.
When interest rates were higher, the
Incofin cvso dividends gradually increased to 2.5% and that level has been
sustained for a number of years now. ‘We
have never made excessive promises, but
we have always remained consistent. That
2.5% is highly attractive in the current
market. Furthermore, investors have the
advantage that part of the profit is tax-exempt since we are a certified cooperative.
That makes us even more attractive for
private individuals.’
Social profit
For Frans Verheeke it is at least equally
important, however, that investors are
attracted by the social profit of the fund.
‘That is one of the most important fundamental reasons for the existence of
Incofin cvso: enabling people in developing countries to improve their difficult
situations through their own efforts. A
loan is a sign of confidence. I have never had outsized ambitions with Incofin
cvso, but I wanted to start something that
would work efficiently, could achieve
change through a grassroots approach
and was about more than just making a
donation. My commitment went beyond
that and the fund has more than fulfilled
those ambitions.’
In fact, the Chairman is constantly thinking about new ambitions for Incofin cvso.
‘Sometimes I dream of taking it a step
further, doing more than granting loans
or holding minority stakes in MFIs. Why
shouldn’t we be able to set up and successfully manage a bank? Anyway, those are
ideas for the future.’
‘People want to give
their investments
real added value’
Each year, Incofin cvso provides resources
to smaller institutions to help them with
their organisation, personnel policy and
management through what is known as
technical assistance (TA). ‘I consider this
type of support to be very useful as well’,
says Frans Verheeke. ‘When we help organisations, it is not just by lending them
money. A rewarding project this year was
Tubai Rai Metin (TRM) in Timor-Leste. It is
an incredibly impoverished country: torn
apart by a civil war that lasted until 2008
and caused the entire economy to collapse.
TRM had been able to keep its operations
going there and wanted to convert from
an NGO to a bank. Together with several
partners, we became investors and helped
TRM develop a personnel policy and set
up a management system. Working jointly
with the organisation on site, the transformation was a success. Projects of this type
are absolutely in line with our philosophy.’
Congo
In the past year, Congo has been an important focus for the fund. Much to the satisfaction of the founder, who has felt an affinity
for the African country all his life. ‘I never
ended up living there, but I am fascinated
by the country. Congo has a huge potential,
but it is such a political and administrative
tangle. What it comes down to is finding the
right man and the right project. We are now
enthusiastically backing Rodney Schuster,
an American who has previously set up
an MFI in Uganda. In Congo he is starting
from scratch with i-Finance, but we believe
in his project.’
Making
a difference
Incofin has by now become a big name
in the relatively small world of microfinance. And that is a source of pride for
the chairman. ‘The fund manager Incofin
Investment Management has offices in
Bogota, Nairobi and Phnom Penh and is
represented in Chennai. There are 37 fulltime employees around the world. Incofin
cvso currently has a presence in 23 countries and we have the money and room to
expand further. This involves specifically
looking for institutions that can make a
big difference in challenging circumstances. A wonderful example of this is the MFI
Faten in the West Bank (Palestine). The
West Bank is a troubled area, where investment funds do not ordinarily dare to
go. However, in this difficult region, Faten
offers an incredibly high quality package
of financial services, and we are pleased to
support them in this work. Finding providers of quality services, is something
that we are constantly searching for in all
of our investments.’
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Incofin cvso Annual Report 2015
Investing worldwide
In the past year, Incofin cvso invested in 43 MFIs in 23 countries through
loans or by becoming shareholder. The total investment portfolio
currently represents 52 million euros.
New investments in 2015:
Bolivia: Fubode
Cambodia: Samic
Congo, DRC: I-Finance
Ecuador: Banco D-Miro, COAC Jardin
El Salvador: Optima, SAC Integral,
Sonsonate
Guatemala: Agudesa
Nicaragua: Finca Nicaragua
Palestine: Faten
Peru: Pacifico
Philippines: NPFC
Existing investments:
Argentina: FIE Gran Poder,
Armenia: Kamurj, SEF International
Azerbaijan: Azercredit
Bolivia: Banco FIE
Burkina Faso: ACEP Burkina SA
Cambodia: HKL, Kredit Cambodia,
TPC, Vision Fund Cambodia
Costa Rica: Coocique
Ecuador: Espoir, Finca Ecuador, Fundacion Alternativa, Maquita Cushunchic
Georgia: Credo, Crystal, Lazika Capital
Haiti: Acme
Kazakhstan: Asian Credit Fund
Kyrgyzstan: Kompanion
Mongolia: Credit Mongol, TenGer Financial Group, Vision Fund Mongolia
Nicaragua: ProMujer Nicaragua
Nigeria: Lapo
Peru: Financiera Confianza SAA, Financiera Proempresa
Tanzania: Akiba Commercial Bank
East Timor: TRM
Incofin cvso Annual Report 2015
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Incofin cvso Annual Report 2015 | Investing worldwide
New clients in the
portfolio of Incofin cvso
In 2015, 13 new partners received a loan or backing from Incofin cvso
as investor.
Guatemala:
El Salvador:
Agudesa
Optima
Offices: 6
Employees: 52
Clients: 4,984
Offices: 7
Employees : 73
Clients: 3,032
Agudesa is a small MFI active in the
rural areas of Guatemala. The MFI has
a NGO-status and is part of the World
Vision Network. The institution offers
financial services that are specifically
tailored to the agricultural sector. For
the most part, this involves individual loans. The MFI has a strong social
mission and uses clear indicators to
track its social performance. The loan
from Incofin cvso supports Agudesa’s
conservative plans for growth, which
will combine expansion with a robust
portfolio in terms of quality.
Optima Servicios Financieros is a
niche player in the microfinance sector in El Salvador. The institution has
a carefully planned, reliable credit
methodology which has enabled the
portfolio to remain well above the
national average in terms of quality.
Information from two credit agencies
is used to verify the background of
the (chiefly urban) clients. The MFI,
which has been operational since
2009, has not yet grown large enough
to be truly profitable. but they are
working hard to increase their impact
without sacrificing the good portfolio
quality.
SAC Integral
Offices : 26
Employees: 356
Clients: 19,445
SAC Integral is a leading MFI in El
Salvador. Its activities are situated in
the niche market between the large
commercial banks and the small MFIs
serving small-scale entrepreneurs.
The MFI has put its plans for growth
temporarily on hold in order to first
focus on the quality of the portfolio.
Measures have been taken to prevent
clients from getting into an excessive
amount of debt. The MFI is intentionally focusing on the relatively poor
small business owners in rural areas.
The clients of SAC Integral in these
regions can also make their loan payments in 300 businesses (shops, pharmacies, garages, etc.). This gives the
institution a presence throughout the
entire country and brings its services
closer to the clients.
Sonsonate
Offices: 7
Employees: 133
Clients: 12,711
Caja de Crédito Sonsonate is one
of the largest credit and savings cooperatives in El Salvador. The institution has been securely anchored
locally since its founding in 1942
and is part of the cooperative federation Fedecrédito. Some 20% of the
Investing worldwide | Incofin cvso Annual Report 2015
portfolio is allocated to local government authorities that invest in
micro-entrepreneurship. Individual
entrepreneurs are also granted loans,
enabling the MFI to reach the bottom
layer of the pyramid as well.
Nicaragua:
Finca Nicaragua
Offices: 17
Employees: 409
Clients: 49,883
Finca Nicaragua has been active for
over 20 years, but it was only in 2011
that it was converted from an NGO
to a non-banking finance institution.
Despite this transformation, Finca
Nicaragua has remained true to its social mission. Finca Nicaragua is part
of the worldwide organisation Finca
International, which contributes extensive market knowledge and experience. The loyal clients (62% of the
clients of Finca Nicaragua work with
them exclusively) repay their loans
conscientiously (on-time repayment
rate: 98%). The reasons for this high
score include good screening when
loans are granted and a strict follow-up for the duration of the loan.
Ecuador:
Banco D-Miro
Offices: 14
Employees: 358
Clients: 46,147
Banco D-Miro has been active for
nearly 20 years in the coastal part of
Ecuador, specifically in the region
near Guayaquil. Banco D-Miro is
primarily geared towards small-scale
entrepreneurs in the impoverished
semi-urban districts. The institution
strives to be innovative at the same
time as having a social impact and
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10 Incofin cvso Annual Report 2015 | Investing worldwide
grants loans with special conditions
to disabled people or clients with HIV,
for example. Each loan automatically
comes with life insurance and credit
insurance. With a healthy portfolio of
nearly 100 million dollars and a bank
status, this MFI is highly creditworthy.
loans, for example, to Honda-outlets
that provide cars and motorcycles to
taxi drivers. Loans are also made to
small local cooperatives with services
focused on micro-entrepreneurs.
with other microfinance institutions.
Clients are thus prevented from getting into too much debt and obtaining
a loan simply to pay off another one.
Congo, DRC:
i-Finance
Offices: 3
Employees: 112
Clients: 2,597
COAC Jardin
Offices: 44
Employees: 602
Clients: 76,613
COAC Jardin Azuayo is one of the
leaders in the microfinance sector in
Ecuador. It is a strong, locally rooted cooperative that offers innovative
financial services at the same time
as maintaining a high social engagement. The microfinance sector
in Ecuador is well developed and is
managed with a high degree of professionalism. Jardin Azuayo is chiefly active in the rural and semi-rural areas
in the south of Ecuador, where other
MFIs are less present. The portfolio of
the MFI has grown significantly in recent years, but the institution has also
managed to keep the quality of its financial services high.
Peru:
Pacifico
Offices: 5
Employees: 77
Clients: 8,451
Cooperativa Pacifico, or Pacifico for
short, has been active since 1970 and
originated in the Japanese immigrant
community in Lima. The cooperative
is not a traditional microfinance institution but focuses its activities chiefly
on small-scale entrepreneurs in Peru.
In addition to loans directly to entrepreneurs, the cooperative also grants
i-Finance is a very young institution: the activities were started in
September 2014 with a first office at
the Gambela market in Kinshasa.
CEO Rodney Schuster is able to
draw upon his experience at Uganda
Microfinance Limited, one of the largest microfinance institutions in East
Africa. i-Finance is chiefly geared towards small-scale entrepreneurs active in trade. It is currently investing
in new offices in order to expand its
reach. The MFI was sufficiently well
capitalised by its shareholders and the
anticipated rapid growth should allow
it to reach break-even quickly.
Bolivia:
Fubode
Offices: 21
Employees: 290
Clients: 39,073
Fubode gives high priority to its social mission and uses clear indicators
to measure the social performance
of its loans. Fubode primarily offers
individual loans in the rural and
peri-urban areas of the Cochabamba
department. The institution has
grown tremendously in the past four
years, while the repayment rate has
remained satisfactory. Before a loan is
granted, Fubode performs a thorough
analysis of the client. This involves
investigating whether the client already has ongoing loan repayments
Palestine:
Faten
Offices: 24
Employees: 178
Clients: 29,390
Faten is the unrivalled market leader in the microfinance sector in the
Palestinian territories. In difficult circumstances, the institution succeeds
in offering a high-quality package of financial services. The institution takes
a conservative approach to lending, in
which the client must be able to clearly demonstrate an ability to repay the
amount borrowed. There is a very close
working relationship between the
MFI and the client, and the evolution
Investing worldwide | Incofin cvso Annual Report 2015 11
Cambodia:
of the client’s economic activities is
followed very closely. This thorough
knowledge of the clients is in turn used
to continuously adapt the products to
their needs. The approach of Faten
has also ensured a high-quality portfolio. It is the very first investment of
Incofin cvso in the Palestinian territories and attests to the commitment to
support micro-entrepreneurship even
in the most challenging circumstances.
Philippines:
Samic
NPFC
Offices: 17
Employees: 232
Clients: 19,561
Offices: 2
Employees: 27
Clients: 434
Samic is still a young and small-scale
institution in the highly competitive
Cambodian market. The MFI is part
of the network of ASA-International
which originated in Bangladesh. For
now, Samic has a small network of just
17 offices, but nevertheless reaches
20,597 clients. The portfolio is made
up for 80% of loans to individual
clients active in diverse sectors. The
loan amounts are low (74% are under
1,000 USD; the average loan is 580
USD). The remaining 20% is devoted
to group loans, chiefly for agricultural
activities. The loans are provided both
in local currency and in USD. With
an on-time repayment rate of 99%,
Samic is able to present an excellent
portfolio.
NPFC is still a very young institution
(2011), with a small number of clients.
The total portfolio is devoted to small
businesses which would be unable to
access financial services in any other
way. These small businesses are often
just too large in scale for traditional
microfinance, but too small for the
commercial banks. This market segment of the ‘missing middle’ (an estimated 800,000 SMEs) goes virtually
unserved. In addition to loans, NPFC
also offers training and education to
its clients.
12 Incofin cvso Annual Report 2015
FOCUS ON
CONGO
The microfinance sector in Congo is still very
young, but the outlook is highly promising. The
country has a flourishing culture of small businesses, which still have virtually no access to
financial services. Incofin cvso wants to help
them by investing in Congolese MFIs with solid
potential.
Although the Democratic Republic of
the Congo has an extraordinary abundance of natural riches, the economy
remains highly vulnerable. Because financial institutions continue to prioritise loans to large companies or apply
overly stringent conditions, the many
small businesses are generally unable to
obtain loans from ordinary banks. This
makes them dependent on the informal
market, which hinders their growth.
Microfinance institutions therefore have
a crucial role to play in improving the
Congolese economy. Thanks to them,
small-scale entrepreneurs can have the
opportunity to grow despite the turbulent economic conditions.
The microfinance sector in Congo is still
very young and remains relatively smallscale. Congo is home to some 100 cooperatives, 20 MFIs and several branches
of large microfinance groups or banks
(ProCredit, Advans, Finca, etc.). The
activities are chiefly concentrated in the
capital city of Kinshasa and in eastern
Congo in the Kivu region. In the rest of
the country, microfinance is virtually inexistent, in part due to poor infrastructure. This means that some 70% to 90%
of the population do not have a bank
account and simply save their money in
their homes.
‘Some 70% to 90%
of the population
do not have a bank
account’
Incofin cvso is investing in FPM and i-Finance, two Congolese MFIs that offer
future prospects and growth opportunities to small-scale entrepreneurs.
FPM, ‘Fonds pour l’inclusion financière en RDC’ is a fund that
is recognised by Central Bank of
Congo. FPM is made up of two
parts: ‘FPM asbl’, a non-profit that is
responsible for providing technical
assistance to financial and microfinance institutions and ‘FPM SA’, a
fund that provides loans.
The fund supports the development
of financial institutions that are active
in microfinance (from microfinance
banks to cooperative savings banks),
as well as local commercial banks that
have launched specific programmes
for the smallest micro-entrepreneurs
(MSMEs) In the next five years, FPM
SA intends to provide up to 60 million
USD in medium-term lines of credit
for Congolese financial institutions.
These lines of credit will be used by
Focus| Incofin cvso Annual Report 2015 13
Surface
2,345,409 km²
Number of residents
81.7 million
Major economic sectors
Mining
Textile industry
Mineral processing
Capital
Kinshasa
the financial institutions to finance SMEs
in Congo. By the end of 2015, not even
one year after starting operations, FPM
SA had been able to build a portfolio of
11.7 million USD via loans to seven different institutions.
“FPM also supports
programmes for the
smallest micro-entrepreneurs”
Incofin cvso is shareholder of FPM SA,
while Incofin Investment Management
acts as fund manager thanks to its specific experience and market knowledge
of financial services to micro, small and
medium-sized enterprises.
In 2014, i-Finance opened its first office
at the Gambela market, one of the largest
markets in Kinshasa. Five months after
launch, i-Finance was providing financial services to 25% of the 12,000 traders at this market. A second office was
opened at the Rwakadingi (or GrandMarché) market.
Opening the office in Kinshasa is a first
step, but the MFI has ambitious plans to
provide financial services in more remote
regions of Congo as well, with the potential to reach thousands of additional
clients. The major market potential and
the internal capacities of i-Finance were
strong arguments for Incofin cvso to invest in this institution. The support of
the fund should enable the MFI to expand and optimise its services. i-Finance
is directed by Rodney Schuster, who has
extensive experience in developing fi-
“The institution especially values customer
service, flexibility and
speed in its financial
services”
nancial services in Africa. His previous
experience in Uganda includes helping
to launch Uganda Microfinance Limited,
a highly successful microfinance institution. Rodney Schuster leads a dedicated
management team which in turn oversees a staff of motivated employees in
order to realise the mission of i-Finance.
The institution especially values customer service, flexibility and speed in its financial services.
|Case
14 Incofin cvso Annual Report 2015
Client story | from telephone salesman to banking agent
i-FINANCE
For a client like Thaddee Muluwayi Mpinga, MFIs like
i-Finance make a world of difference. He has been
able to grow from small-scale mobile telephone seller
to the successful manager of a hardware store which
has recently even begun acting as a point-of-sale for
i-Finance.
Thaddee Muluwayi Mpinga comes from
Mbuji-Mayi, a city in the south of the
Democratic Republic of the Congo. He
is a born salesman: already as a child, he
spent his time after school selling sardines
and soap. After leaving secondary school
in 1994, Thaddee went into the currency
exchange business.
“Thaddee will become
the first banking agent in
the i-Finance network”
Two years later, he decided to move to the
capital city of Kinshasa and began selling
prepaid telephone cards. His sales went
very well and Thaddee was able to accumulate capital. Evolving along with the
market, he later began selling mobile telephones as well. On ‘La place de la Victoire’
in the centre of Kinshasa, Thaddee opened
the very first mobile telephone shop. But
then, disaster struck. When rioting broke
out during the local elections in DR Congo
in 2006, his shop was looted and Thaddee
had to file for bankruptcy.
Hardware store
He didn’t let this stop him, however, and
shortly afterwards, he resumed commercial activities with the help of his
wife. This time, he focused on cosmetic
products. Again, his business thrived,
enabling Thaddee to open a hardware
store. In late 2014 he took out a loan
from i-Finance. He has used the loan to
finance a larger inventory, allowing him
to increase turnover. The collaboration is
going smoothly for both parties. Thaddee
has been able to save enough money to
build a house in Kasa-Vubu, a town on
the outskirts of Kinshasa.
Banking agent
The relationship of trust between
Thaddee and i-Finance continues to grow.
Thaddee recently signed a contract with
the MFI that will also make his shop a
point-of-sale. This will make him the
first banking agent in the i-Finance network. Points-of-sale of this type, which
are more accessible for the direct clients,
form a crucial link in the network of an
MFI. Other i-Finance clients can now
stop by Thaddee’s shop make their loan
payments, for example.
Fairtrade Access Fund | Incofin cvso Annual Report 2015 15
Fairtrade Access Fund
further expands investments
The Fairtrade Access Fund, the fund in which Incofin cvso is a shareholder
and which is managed by Incofin Investment Management, continued
to grow in 2015. The fund provided 30% more financing than in 2014
and expanded its investments to include new countries and diversified
products.
In the past year, the Fairtrade Access Fund
(FAF) added bananas and fresh vegetables
to the product range, in addition to further
expansion in cacao and nuts. The fund is
increasingly diversifying, although coffee
remains the most important product in
the portfolio (59%). The well-developed
coffee sector and its importance in general
in the global Fairtrade network will ensure
that coffee will remain a key product in the
years to come.
In 2015, FAF invested for the first time in
Ghana and Ecuador. The fund also further
expanded the investment portfolio in Ivory
Coast, Guatemala, Mexico and Colombia.
In total, 10 new partners received investment; for 5 of them, FAF was their first international lender.
The fund continued to provide long-term
loans as a key part of its strategy. Fortaleza
del Valle, for example, a cacao cooperative
in Ecuador, received new long-term loans
that were used to pay for the construction of
a new production hall. PAMOC, a nut processing operation, will be able to expand its
fleet of machines thanks to the investment
from FAF and FECCEG, a Guatemalan cof-
fee exporter, will use the investment to purchase a sorting machine for the beans.
In the past year, it was again made clear that
along with funding, additional support
through technical assistance is an important part of supporting the development
of the agricultural sector. That is why the
fund is proud to have been able to launch
the FAF Technical Assistance programme
in late 2015. This programme makes it possible to offer partners additional training
and support, together with the financial
services.
KfW, the German Development Bank,
launched the facility with a donation of 1
million euros for the TA programme and
four project proposals have already been
presented to the FAF TA committee. These
proposals include a market study in Africa
that will help 15 small-scale agricultural
producers to perform a strengths-weaknesses analysis, training in financial management for a Colombian association of
cooperatives, and the development of a
long-term marketing strategy for a honey
producer.
16 Incofin cvso Annual Report 2015
Social Performance | Incofin cvso Annual Report 2015 17
Social Performance
in practice
In all of its investments, Incofin cvso places great importance to the MFIs
social performance management, or how they are able to give concrete
form to their social mission. The fund is a global pioneer in the integration
of Social Performance Management (SPM) in its selection criteria, vetting
procedure and monitoring.
SPM action plans are developed for all
MFIs that receive loans or investment
through Incofin cvso. The institutions are
encouraged to set realistic goals in light of
their expertise.
In 2015, Incofin IM published its second
Social Performance Management Report.
The report illustrates how Incofin
Investment Management and Incofin cvso
put the principles of socially responsible
investment into practice. There has been
considerable progress in the application
and reporting of social performance since
the first edition in 2012.
The report is drawn up based on the
seven-point Principles for Investors in
Inclusive Finance (PIIF), which were developed within UN-PRI, an initiative of
the United Nations. In this way, Incofin
communicates openly and honestly about
the implementation of the principles for
responsible investment. The report is available from Incofin Investment Management
or via the website (www.incofin.com).
Incofin IM plays an active role in various
sector initiatives and is a member of a
number of international networks that
strive to optimise and promote SPM
(financial institutions, investment funds,
investors). Thus, Dina Pons, Director of
the East Asia office of Incofin and Incofin
Social Performance Manager, represents
the investors on the Board of Directors of
the Social Performance Task Force (SPTF)
and she is also co-chair of the Social
Investor Group. She was involved in organising the annual general meeting of
the SPTF that was held in 2015 in Siem
Reap, Cambodia. The four-day event offered over 250 participants from 51 countries the opportunity to learn more about
impact investing.
www.smartcampaign.org
www.sptf.info
www.mftransparency.org
www.unpri.org
www.thegiin.org
18 Incofin cvso Annual Report 2015 | Technical assistance
Added value through
technical assistance
In 2015, for the fifth year running, Incofin funded technical assistance (TA)
for a number of MFIs. This involves a focus on smaller, more vulnerable
institutions. Since 2010, the fund allocated a total amount of 250,000 euros,
of which 205,000 euros (82%) was assigned.
Through the TA programme, Incofin cvso is now supporting nine MFIs in eight countries. In 2015, two new projects were started: Tubai
Rai Metin (TRM) in Timor-Leste and Negosyong Pinoy Finance (NPFC) in the Philippines. The support from Incofin cvso chiefly takes
the form of risk management as well as assistance with a transformation process and social performance.
1
2
3
4
Ecuador: Espoir, Fundación Alternativa
Argentina: FIE GP
Congo DRC: Advans Congo
Armenia: Kamurj
5
6
7
8
Azerbaijan: Kamurj Viator
Mongolia: Credit Mongol
Philippines: NPFC
East Timor: TRM
6
4 5
7
3
1
8
2
Technical assistance | Incofin cvso Annual Report 2015 19
Key results in 2015:
·· 3 MFIs reinforced their risk management and internal
auditing.
Technical assistance Incofin cvso 2015.
Allocation of funds per area of intervention.
Human resources
Risk management
·· 1 MFI optimised its human resources strategy and made the
hiring process more efficient. One of the consequences of
this was a reduction in the departure of credit officers from
32% to 25%.
Transformation
Social performance management
Management
information
system
·· 2 MFIs improved their social performance management.
·· 1 MFI completed a successful transformation from NGO to
‘Other Deposit Taking Institution’.
·· Transformation Risk management SPM MIS HR
The TRM success story: from NGO
to Other Deposit Taking Institution
TRM, an MFI from Timor-Leste, was launched in July
2001 as a microcredit programme of the international
NGO ‘Save the Children’. In 2002, TRM was converted
to an NGO so that the institution could take over the
microcredit programme and would be able to offer microfinance in a sustainable way.
The civil war in Timor (2006 – 2008) was disastrous for
the microfinance sector: 13 microfinance institutions
went bankrupt or were forced to substantially reduce their
activities. Despite the difficulties, under the leadership of
Mr. Soares (currently CEO, previously regional manager),
TRM decided to continue its operations. In 2010 TRM was
recognised by the Ministry of Justice as an NGO-MFI.
When the Other Deposit Taking Institution (ODTI) law
came into effect on 17 December 2010, the management
of TRM decided to begin the transformation process for
the institution. TRM underwent this process from 2011
to 2015 with the support of various partners including
the funds RIF II and Incofin cvso, managed by Incofin IM.
On 1 December 2015, the transformation from NGO to the
limited liability company KIF (Kae Bauk Investmentus No
Finança) was successfully completed. In 2015, Incofin cvso
provided 35,000 euros for the final phase of the transformation. The following results were achieved:
1. The successful completion of the legal steps to obtain
the ODTI licence.
2. Implementation of new rules and procedures according to the requirements of the Central Bank.
3. General supervision of the effective migration to the
new management information system.
The funding of the final phase of the technical support
was crucial to acquiring the new legal status. This will
enable TRM/KIF to work under the supervision of the
Central Bank, which will require the application of stricter rules and guarantees the transparency of the services
for the clients.
20
FINANCIAL
REPORT
Corporate governance
Report of the statutory auditor
Report of the Board of Directors
Advisory role of Incofin
Investment Management
Key Figures
Annual accounts at 31.12.2015
Notes
Compliance
Valuation rules
Risk management
22 Incofin cvso Annual Report 2015 | Financial report
·· Leen Van den Neste - Chairman, Management Committee, VDK
Spaarbank
·· Miguel Van Hoof - Director, Wereld Missie Hulp
·· Ann Van Impe - Compliance Officer, VDK Spaarbank
·· Bart Vannetelbosch - Director, Sociaal Fonds Arbeiders Voedingsnijverheid
·· Henri Vansweevelt - Former Vice President, Bekaert Group
·· Frank Vereecken - Director, VDK Spaarbank
·· Koenraad Verhagen - Investments and microfinance advisor
·· Pieter Verhelst - European and International Policy Advisor Boerenbond
(Belgian Farmers’ Union)
·· Luc Versele - Chairman, Crelan
·· Dirk Vyncke - Honorary Chairman, Vyncke
Corporate
governance
General Meeting
The General Shareholders Meeting takes place annually on
the last Wednesday in April. In 2015, it fell on 29 April.
HONORARY DIRECTORS
Board of Directors
·· Jan Bevernaege - Director, Volksvermogen
·· Erik Bruyland - Former senior journalist at Trends magazine
·· Frank Lambert - Chairman, Antwerp Management School Fund for
Sustainable and Innovative Entrepreneurship
·· Guido Lamote - Former CEO, Trias
·· Walter Vandepitte - Honorary Chairman, AVEVE Group
·· Roland Van der Elst - Former professor, EHSAL
The Board of Directors met three times in 2015. During these
meetings, the financial figures, the annual budget and the
general operations of Incofin cvso were discussed.
Members of the Board of Directors receive no remuneration
or financial benefits of any kind in return for their mandate.
The composition of the Board of Directors at the end of 2015
was as follows:
CHAIRMAN
Executive Committee
The Executive Committee is responsible for the preparation and
follow-up of the current and long-term strategies, objectives,
plans and budgets, and for monitoring the general affairs of the
company. The Executive Committee met four times in 2015.
·· Frans Verheeke - Chairman, Volksvermogen
DIRECTORS
··
··
··
··
··
··
··
··
··
··
··
··
··
··
··
··
··
··
··
··
··
··
··
··
··
Willy Bosmans - Individual
Benoît Braeckman - Former head of asset management, Electrabel
Erik Brijs - Vice President Accounting & Control, Umicore
Jos Daniëls - Honorary Chairman of the Board of Directors, KBC
Insurance
Frank De Leenheer - Investor Relations & Corporate Communications
Manager, Gimv
Alfons De Potter - Vice Chairman, ACV Bouw – Industrie & Energie
Johan De Schamphelaere - Director, VDK Spaarbank
Rein De Tremerie - General secretary, ACV-CSC Metea
Frank Degraeve - Head of Large Companies, Crelan
Eric Delecluyse - Former chairman, ACV Voeding en Diensten
Yvan Dupon - Individual
Michiel Geers - General secretary, Volksvermogen
Tony Janssen - Former Chairman, ACV Metaal and European Metal
Association
Mark Leysen - Chairman, Vanbreda Risk & Benefits
Philippe Leysen - Director, Tradicor
Greet Moerman - Director, Sociaal Fonds Bedienden Voedingsnijverheid
Guy Pourveur - Company Director
André Sarens - Grid Participations Manager, Electrabel
Frans Samyn - Chairman, Tabor
Ignace Schatteman - Internal Auditor, VDK Spaarbank
Paul Steppe - Honorary Chairman, Management Committee Centea
Marc Timbremont - Former Managing Director, Huisvesting Het Volk
Anne Van Autreve - Flemish Government – Flemish Department of
Foreign Affairs Department Head
Herman Van de Velde - Chairman, VKW
Peter Van den Brock - Former Director, Pax-Bank, Vorstand Pax-BankStiftung
The Executive Committee is composed as follows:
··
··
··
··
··
··
··
··
Frans Verheeke (Chairman)
Willy Bosmans
Jos Daniëls
Eric Delecluyse
Yvan Dupon
Paul Steppe
Leen Van den Neste
Ann Van Impe
Members of the Executive Committee receive no remuneration.
Financial report | Incofin cvso Annual Report 2015 23
Investment Committee
The Investment Committee is responsible for the implementation of the company’s investment policy, as set out in the investment guidelines. The Investment Committee is composed
of members of the Board of Directors specialising in financial
affairs and development issues. The Committee met ten times
in 2015.
The members of the Investment Committee are:
··
··
··
··
··
··
··
··
Frans Verheeke (Chairman)
Johan De Schamphelaere
Tony Janssen
Michiel Geers
Peter van den Brock
Ignace Schatteman
Pieter Verhelst
Frank Degraeve (from 16/11/2015)
Members of the Investment Committee receive no remuneration.
Audit Committee
The Audit Committee supervises the company’s procedures and
processes, as well as all aspects related to risks and their management. The Audit Committee is composed of members of the
Board of Directors and met twice in 2015.
The members of the Audit Committee are:
·· Frans Samyn (Chairman)
·· Marc Timbremont
·· Henri Vansweevelt
Members of the Audit Committee receive no remuneration.
Auditor
Deloitte Bedrijfsrevisoren, represented by Frank Verhaegen and
Maurice Vrolix, was appointed by the General Shareholders
Meeting of 30 April 2014 as auditor of Incofin cvso for a period
of three years.
Report of the statutory
auditor
The statutory auditor Deloitte Bedrijfsrevisoren CVBA, represented
by Frank Verhaegen and Maurice Vrolix, delivered an unqualified
audit opinion on the financial statements, with an emphasis of
matter paragraph. The financial statements as of 31 December
2015 give a true and fair view of the company’s assets, financial
position and results in accordance with the accounting principles
applicable in Belgium.
From left to right, back row: Willy Bosmans, Paul Steppe, Marc Timbremont, Michiel Geers, Tony Janssen, Guy Pourveur, Frans Samyn, Frank
Vereecken, Frank Degraeve, Ignace Schatteman, Peter van den Brock. From left to right, front row: Leen Van den Neste, Alfons De Potter, Rein
De Tremerie, Frans Verheeke, Ann Van Impe, Johan De Schamphelaere, Greet Moerman, Henri Vansweevelt.
24 Incofin cvso Annual Report 2015 | Financial report
Report of the Board of
Directors
We hereby present our report on the financial year 2015 and ask
you to approve the annual accounts at the balance sheet date of 31
December 2015. The Board of Directors has monitored the activities
of the company, with attention for its special social purpose.
At the end of 2015 Incofin cvso’s assets stood at k€ 59,014, an increase of 19.9% over the previous year. At the end of the financial
year, the equity of Incofin cvso stood at k€ 36,582 in comparison
with k€ 29,288 at the end of the 2014 financial year. The subscribed
capital rose by k€ 6,890 to k€ 32,088 thanks to the arrival of new
shareholders.
The Board of Directors proposes to offer Incofin cvso shareholders a
total return on capital invested of k€ 681 for the 2015 financial year
(equal to a 2.5% dividend). The new partners and the partners who
have increased their capital during the course of the financial year
will be remunerated pro rata in accordance with Article 34 of the
Articles of Incorporation.
Debt in the form of short and long term loans increased by k€ 2,265
during the course of 2015 as a consequence of the increase in the
portfolio. At the end of 2015, Incofin cvso had k€ 21,150 in loans effectively outstanding, representing 58% of its equity. The fund also
had undrawn credit lines totalling k€ 6,100. Within the guidelines
set by the Board of Directors, these credit lines may be drawn on
to a maximum of 100% of the amount of the shareholders’ equity.
At year end the investment portfolio stood at k€ 52,179, consisting
of k€ 15,419 in participations and k€ 36,760 in loans, of which one
subordinated loan granted to an MFI in Nicaragua in the amount
of k€ 1,772. In 2015 the loan portfolio consisted of 43 loans to 36
microfinance institutions across 20 countries.
The increase in the participations portfolio by k€ 797 to k€ 15,419
is the result of (i) the pay-out of stock dividends from Banco Fie
and Financiera Proempresa in the amount of k€ 1,032 and (ii) the
additional impairment of the participation in Fie Gran Poder in the
amount k€ 235. In accordance with the valuation rules, the Board
of Directors decided to book an additional impairment of k€ 235 on
its participation in FIE Gran Poder in the context of a new depreciation of the Argentine Peso (ARS) in December 2015.
At the end of the reporting period the loan portfolio stood at k€
34,988. At the end of the reporting period the general provision for
any impairment was k€ 1,384 – 4.0% of the total loan portfolio –
and was offset against the loan portfolio. The loan portfolio of the
MFIs in which Incofin invests is generally of good quality (with an
average backlog in payments (PAR 30) of the MFI clients of 3.5%).
The MFIs to which Incofin cvso provides credit have fully complied
with their payment obligations towards Incofin cvso with the exception of Azercredit and Credit Mongol.
The institution Azercredit (from Azerbaijan), at which the bank accounts were frozen in 2014 by a court in Baku for reasons which
remain unclear, regained access to its bank accounts in October
2015, but some uncertainty remains regarding the collection of the
outstanding claim. The case was accepted in 2015 by DelcredereDucroire (credit insurer) for insurance against political risks. In
accordance with the recommendations of the Belgian Accounting
Standards Board (CBN) the outstanding claim of Incofin cvso regarding Azercredit of k€ 908 was written-down for 100% and a
claim was booked from Delcredere-Ducroire for 90% of the outstanding balance. After the six-month waiting period, DelcredereDucroire will make the payment. The remaining 10% was offset by
a deduction from the general provisions.
The institution Credit Mongol (from Mongolia) encountered structural liquidity problems in 2015 such that the loan from Incofin cvso
was converted to a loan in euros with monthly repayments and a
new maturity date of 31 May 2016. The failure to make the last three
payments led Incofin cvso to decide to fully write down this claim
amounting to k € 296. The impairment was covered by a recovery
of the general provision.
The available cash at the end of the reporting period was k€ 6,768,
an increase of k€ 2,731 in comparison to the end of 2014 as a result
of the influx of new shareholders. The remaining balance sheet entries consist mainly of expected interest on the loan portfolio of k€
574 and other receivables amounting to k€ 902 (mainly DelcredereDucroire and recoverable VAT).
Off-balance sheet obligations include the contracts with KBC Bank
and MFX Solutions in the form of cross-currency interest rate swaps
and forward currency contracts to hedge exchange rate risks on the
outstanding loans to MFIs. These hedge all non-euro interest and
capital flows for loans made by Incofin in local currency with a cross
currency swap. At the end of 2015 Incofin had exchange rate hedging products outstanding in a total notional sum of k€ 37,668 at the
hedging rate, representing 100% of the outstanding loan portfolio.
Hedged loans to MFIs in exotic currencies in 2015 represented 11%
of the hedged loans. The remaining 89% consisted of USD loans
to MFIs.
Explanatory notes to the 2015 Incofin cvso
profit and loss account
Incofin cvso closed the fiscal year with an after-tax profit of k€
1,086, which is significantly higher than last year (2014: k€ 730).
Financial report | Incofin cvso Annual Report 2015 25
The financial income amounted to k€ 3,317, principally composed of (i) interest received on MFI loans amounting to k€ 2,260,
(ii) stock dividends received amounting to k€ 1,032, (iii) cash dividends received amounting to k€ 181, (iv) fee income amounting
to k€ 382 and (iv) financing charges amounting to k€ 561.
The compensation payment from Delcredere-Ducroire of k€ 822
in the Azercredit case is included in the gross margin which explains the increase by k€ 760 over 2014.
At the end of 2015, the impairments on claims were k€ 1,212
(an increase of k€ 877 over the previous fiscal year) and consist
of (i) specific impairments on Azercredit and Credit Mongol
amounting to k€ 1,204, (ii) the allocation of the general provision
amounting to k€ 390 and (iii) the recovery of the general provision amounting to k€ 382. The allocation of the general provision
to compensate for possible future payment defaults and currency
fluctuations is 1% of the outstanding gross loan portfolio (weighted based on the ECA risk scores).
The profit on ordinary activities before taxes for the fiscal year
2015 comes to k€ 1,474 which represents a 33% increase over
2014 thanks to the results of the participations portfolio and higher fee income. Services and other goods totalled k€ 1,433 for the
reporting period 2015 and are slightly higher than the operational expenses for the reporting period 2014.
This year too, the fund has recorded an impairment of k€ 235
on the holding in Fie Gran Poder. This means that the fund has
realised a profit before taxes for the reporting period of k€ 1,239.
After deduction of the withholding tax on interest received abroad
the profit for the reporting period is k€ 1,086.
We kindly ask you to approve the annual accounts at 31 December
2015. After approval, we propose to appropriate the profit for the
financial year and the profit carried forward from the previous
financial year as follows:
Profit available for appropriation
€ 4,064,235
Profit for the financial year available for appropriation
€ 1,085,822
Profit carried forward from the previous financial year
€ 2,978,413
Allocation to capital and reserves
€ 54,291
Allocation to the legal reserve
€ 54,291
Allocation to unavailable reserves
€0
Allocation to capital and issue premiums
€0
Retained earnings to be carried forward
€ 3,328,706
Retained profit to be carried forward
€ 3,328,706
Information on major events occurring after
the close of the fiscal year
Incofin has an investment insurance policy with DelcredereDucroire. Under this insurance, in 2015, Delcredere-Ducroire
awarded a number of payments as compensation for damages
that Incofin incurred as a result of the freezing of the Azercredit
bank accounts in Azerbaijan. The Azercredit bank accounts were
subsequently released in the course of November 2015.
In a letter of 25 February 2016, Delcredere-Ducroire indicated
that, in their opinion, losses dating from after the release date of
the bank accounts (late November 2015) are no longer covered by
the investment insurance as they are not (or are no longer) the result of a political event. If this position were to be accepted, which
is not the case, the default on loan 1314 (for which Azercredit
currently owes USD 710,000 in principal) would no longer be reimbursed by Delcredere-Ducroire.
The Board of Directors believes that Delcredere-Ducroire’s position is contestable. Together with a lawyer specialised in insurance law, Incofin is preparing to take further (legal) steps against
Delcredere-Ducroire.
In the event that Incofin is unsuccessful, it may still be possible
to use the general provisions that have been set aside to cover the
losses incurred.
Social performance
Incofin cvso invests in 43 MFIs in 23 countries. Together these
MFIs reach 2,908,547 clients (in 2014: 2,813,670), 71% of whom
are women. The involvement of these local intermediaries creates
a very powerful leverage effect for Incofin cvso investments. The
combined loan portfolios of the institutions in which Incofin cvso
invests amount to m€ 4,286.
The MFIs in the Incofin cvso portfolio are robust, high-performance financial institutions with the exception of the MFIs mentioned above for which impairments were booked: they have good
quality loan portfolios (with limited late payments), they keep
their general costs under control, and they are profitable.
Directors
Profit for distribution
Return on capital
Risks and uncertainties
As a result of its activity, Incofin cvso is subject to a range of risks
including credit risks, country-specific risks, exchange rate risks
and liquidity risks. The Board of Directors pays the necessary
attention to monitoring these risks and is of the opinion that the
risks are limited and more than adequately covered.
€ 681,238
Please pronounce on the discharge to be given to the Board of
Directors and to all the directors individually for the performance of
their mandate during the past financial year.
26 Incofin cvso Annual Report 2015 | Financial report
Auditor
Please pronounce on the discharge to be given to the auditor for the
performance of his mandate during the past financial year.
Incofin Investment
Management
Appointments
The following directors are nominated for a six-year mandate:
·· Mr Luc Versele
·· Mr Frank Degraeve
·· Mrs Anne Van Autreve
·· Mrs Klaartje Vandersypen
·· Mr Francis Deknudt
Reappointments
The following terms of office expire on the day of the General
Meeting on 27/04/2016:
·· Mr Frans Verheeke
·· Mrs Ann Van Impe
·· Mrs Rein De Tremerie
·· Mr Michiel Geers
·· Mr Frank De Leenheer
·· Mr Guy Pourveur
The Board of Directors proposes to renew these terms of office for
the statutory period of six years.
Dismissal
Incofin Investment Management (Incofin IM) is the manager of the
RIF II and Agrif funds and advisor to Incofin cvso and another 7
funds and facilities for a total of more than USD 725 million.
The strengths of Incofin IM
With a multilingual and international team of 37 experts, Incofin
IM offers customised financial services. Incofin IM in particular
has extensive experience of microfinance in international markets
and the maintenance of links with investors worldwide.
In 2014 Incofin IM, as the first Belgian microfinance expert, obtained the AIFM licence from the FSMA, the Belgian authority for
financial services and markets. The AIFM (Alternative Investment
Fund Managers) Directive is a European directive which introduces
harmonised rules for the managers of alternative investment funds.
The methods used by Incofin IM are fully in line with those of
Incofin cvso. Incofin IM also aims for a “double bottom line” approach, with equal attention to financial and social performance.
This is measured using the ECHOS© tool and the CRS risk management tool.
·· Mr Herman Vandevelde
Incofin Investment Management
>725M USD Assets under Management
Advisory role of
Fund Management
Rural
Impulse
Fund II
agRIF
(2010)
135M
USD
(2015)
112M
USD
Advisory Services
Invest
In
Visions
Incofin
CVSO
VDK
Impulse
(2015)
224M
USD
(2001)
70M
USD
(2007)
48M
USD
(2004)
44M
USD
Rural
Impulse
Fund I
Fairtrade
Access
Fund
FPM
Volksvermogen
(2007)
31M
USD
(2012)
27M
USD
(2014)
23M
USD
(2004)
15M
USD
Financial report | Incofin cvso Annual Report 2015 27
Key figures in k euro
Balance sheet total
Portfolio
Participations
Subordinated loans
2015
2014
59,014
49,218
52,179
15,419
Return
Average investment in MFIs
Average loan amount to MFIs
Equity
Capital
Debt financing
Available (uncalled)
Proportion of loan finance
General provision for loan portfolio
% balance sheet total
2014
8.50 %
nvt
45,957
Return on loan portfolio (IRR)
6.94%
7.30 %
14,623
Weighted average financing charge
3.05%
3.06%
Dividend
2.50 %
2.50 %
1,772
Loans
2015
Return on subordinated loan portfolio (IRR)
34,988
31,335
1,144
1,144
842
803
36,582
29,288
32,088
25,198
21,150
18,885
6,100
7,615
58%
64%
1,410
1,403
2.39%
2.85%
MFI portfolio per country
MFI performance
2015
2014
MFI portfolio (€ m)
4,286
2,917
Average loan amount (€)
1,141
933
2,908,547
2,813,670
Total number of clients reached
71%
71%
3.60 %
2.30 %
# of MFIs
43
37
# of countries
23
21
% women
Portfolio at risk – 30 days (PAR30)
Portfolio per MFI
Portfolio in k euro
Portfolio in k euro
Bolivia
Banco FIE
HKL
Ecuador
Coac Jardin
Financiera Confianza SAA
Cambodia
Credo
Finca Nicaragua
Georgia
Vision Fund Cambodia
Kompanion
Peru
Maquita
Banco Dmiro
Nicaragua
Lazika Capital
El Salvador
TPC
Mongolia
TenGer Financial Group
SEF International
FIE Gran Poder
I-Finance
Kyrgyzstan
Faten
Armenia
Pro Mujer Nicaragua
Sonsonate
Argentina
Pacifico
SAC Integral
Congo, DRC
Espoir
Fubode
Palestine
Finca Ecuador
TRM
East Timor
Crystal
Haiti
Acme
Costa Rica
Coocique
Vision Fund Mongolia
CREDIT Microfinance Institution
Samic Plc.
Kazakhstan
Asian Credit Fund
Tanzania
Akiba Commercial Bank
Agudesa
Guatemala
Lapo
NPFC
Nigeria
Optima
Fundacion Alternativa
Philippines
Kamurj
Financiera Proempresa
Burkina Faso
ACEP Burkina SA
Credit Mongol
Azerbaijan
Azercredit
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
28 Incofin cvso Annual Report 2015 | Financial report
Annual accounts at 31.12.2015 in k euro
Profit & Loss Account
Balance sheet
Assets
Participations portfolio
Acquisition value
Stock dividends
Impairment
Subordinated loan portfolio
Subordinated loan portfolio > 1 year
General provision
Profit & Loss Account
12/2015
12/2014
15,419
14,623
Operating income
11,457
11,457
Participations portfolio
4,944
3,912
-981
-746
735
181
127
Stock dividends
1,032
844
-235
-237
Subordinated loan portfolio
-27
33,604
29,932
Interest
Loan portfolio > 1 year
17,640
16,007
Upfront fees
Loan portfolio < 1 year
18,546
15,328
Loan portfolio
2,793
Cash dividends
Impairments
1,772
12/2014
3,238
978
Gains/(losses) on sales
1,746
12/2015
24
49
1
-27
General provision
1,977
2,052
Loan portfolio
2,210
2,249
133
138
Impairment
-1,199
General provision
-1,384
-1,403
1,477
627
Other amounts receivable
903
125
Impairments
Prepayments and accrued income
574
502
Reversal of general provision
6,768
4,036
General provision
1,079
7
59,014
49,218
Other income
-1,461
-1,369
-1,034
-943
12/2015
12/2014
-171
-145
Current assets
Cash and cash equivalents
Assets
Interest
Upfront fees
Operational expenses
Liabilities
Equity
Capital
Reserves
Result carried forward
36,582
29,288
32,088
25,198
1,165
1.111
3,329
2,978
21,150
18,885
Debt financing > 1 year
14,065
11,085
Debt financing < 1 year
7,085
7,800
Loan capital
Current liabilities
Other debts
Dividends
Provisions for Technical Assistance (TA)
Prepayments and accrued income
Liabilities
1,282
1,045
274
146
681
591
87
72
240
236
59,014
49,218
Incofin IM management fees
Portfolio insurance
Technical Assistance (TA) contribution
-1,204
382
-363
-335
-15
14
-50
-50
Additional TA provision
35
64
Reversal of TA provision
-112
-130
Communications
Net operating result
Financial results
Interest
Miscellaneous
Income before tax
-129
-165
1,777
1,424
-538
-555
-561
-573
22
18
1,239
869
-153
-139
1,086
730
Corporation tax
Withholding tax interest
Income after tax
Financial report | Incofin cvso Annual Report 2015 29
Notes in k euro
Cashflow
Cashflow
Financing structure
12/2015
Cash flow from operations
EBIT
Other cash results
Non-cash results
Participations portfolio
Impairment
Stock dividends
Subordinated loan portfolio
General provision
Loan portfolio
General provision
Reversal of general provision
Impairment
Technical Assistance (TA)
(Increase)/decrease in current assets/liabilities
Cash flow on net-income basis
1,777
-131
Capital
In 2015 the shareholders’ equity rose by k€ 6,890 to k€ 32,088,
an increase of 27% over 2015. This equity is represented by 1,492
shareholders.
430
-797
Capital variations
235
-1,032
27
27
1,185
363
-382
1,204
15
Paid-up capital k euro
#Shareholders
35,000
1,600
30,000
1,200
25,000
1,000
20,000
-723
1,353
15,000
Investment cash flow
(Increase)/decrease in participations portfolio
10,000
(Increase)/decrease in subordinated loan portfolio
-1,772
(Increase)/decrease in loan portfolio
-4,852
Free cash flow
5,000
-5,271
Dividend paid out, 2014 financial year
Increase/(decrease) in debt financing
Interest paid on debt financing in 2015
Increase/(decrease) in outstanding interest
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
6,890
1992
Increase/(decrease) in capital
1997
Financial cash flow
-591
2,265
-643
82
Overview shareholders
Shareholders with more than 1% of equity
Volksvermogen
1,510
4.7%
Net cash flow
2,732
ACV Metea
1,263
3.9%
Cash and cash equivalents previous period
4,036
VDK Spaarbank
1,146
3.6%
Cash and cash equivalents current period
6,768
Wereld-Missiehulp vzw
1,130
3.5%
Anonymous
1,003
3.1%
Congrégation Hospitalière des Soeurs de la Charité de J.M.
1,003
3.1%
Flemish Government – Flemish Department of Foreign
Affairs
1,000
3.1%
Anonymous
755
2.4%
Sociaal Fonds Bedienden Voedingsnijverheid
727
2.3%
KBC
559
1.7%
Gimv
521
1.6%
Crelan NV
521
1.6%
ACV Voeding en Diensten
521
1.6%
Tradicor
469
1.5%
Umicore
398
1.2%
de Kade vzw
372
1.2%
Bosmans Willy
362
1.1%
Anonymous
352
1.1%
YROANKA BM
339
1.1%
Anonymous
Shareholders < 1% of equity
312
1.0 %
17,827
55.6%
32,088
100.0%
30 Incofin cvso Annual Report 2015 | Financial report
Debt financing
> 1 year
< 1 year
12/2014
+/-
12/2015
ACV Metea
2,000
-1,000
1,000
Belfius
2,250
-2,250
Bank Für Kirche und Caritas
3,000
2,000
12/2014
1,750
Book value
+/-
12/2015
12/2014
12/2015
1,000
1,000
2,000
2,000
500
2,250
4,000
2,250
3,000
5,000
500
1.000
1.000
1,935
3,435
4,500
5,000
Hef boom
500
ING
500
KBC
1,935
LBC
500
VDK
900
3,600
4,500
4,050
-3,150
11,085
2,980
14,065
7,800
-715
630
500
500
2,565
1,500
435
500
500
500
500
500
900
4,800
5,400
7,085
18,735
21,150
Proportion of loan finance
12/2015
Equity
36,582
Debt financing
21,150
Proportion of loan finance (max. 100%)
57.8%
Max. increase in debt financing
15,432
Available credit lines
6,100
Portfolio summary
Participations portfolio in k euro
MFI
Date
Investment
Currency
Country
Acquisition value
12/2014
+/- 12/2015
Stock dividends
12/2014
Impairments
+/- 12/2015
12/2014
Book value
+/- 12/2015
12/2014
12/2015
ACEP Burkina SA
25/09/2009
XOF
Burkina Faso
244
244
244
244
Acme
14/07/2009
HTG
Haiti
782
782
782
782
Akiba Commercial Bank
30/04/2008
TZS
Tanzania
530
530
60
Banco FIE
28/08/2008
BOB
Bolivia
2,463
2,463
3,339
Financiera Confianza SAA
1/05/2013
PEN
Peru
2,516
2,516
FIE Gran Poder
11/08/2009
ARS
Argentina
1,189
1,189
466
Financiera Proempresa
25/08/2010
PEN
Peru
284
284
46
18
64
8,008
8,008
3,912
1,032
4,944
Impulse
16/11/2005
EUR
1,000
1,000
Incofin IM
23/07/2009
EUR
395
395
395
395
Fair Trade Fund
3/09/2012
USD
583
583
583
583
MFI portfolio
1,014
60
591
591
4,353
5,803
6,816
2,516
2,516
466
-746
-746
-235
-235
-981
-981
909
674
330
348
11,174
11,971
1,000
1,000
MFX LLC
25/06/2009
USD
355
355
355
355
Rural Impulse Fund
15/10/2008
USD
1,037
1,037
1,037
1,037
FPM SA
7/10/2014
USD
Fund portfolio
Participations portfolio
79
79
79
79
3,449
3,449
3,449
3,449
11,457
11,457
14,623
15,419
3,912
1,032
4,944
-746
-235
-981
Subordinated loan portfolio in k euro
MFI
Finca Nicaragua
Equity portfolio
Investment
Date
Currency
26/08/2015
USD
Country
Nicaragua
> 1 year
< 1 year
12/2014
+/- 12/2015
Impairments
12/2014
+/- 12/2015
Book value
12/2014
+/- 12/2015
12/2014
1,772
1,772
12/2015
1,772
1,772
1,772
1,772
Financial report | Incofin cvso Annual Report 2015 31
Loan portfolio in k euro
MFI
Investment date
Currency Country
> 1 year
12/2014
< 1 year
+/- 12/2015 12/2014
+/-
Depreciation
12/2015 12/2014
Book value
+/- 12/2015 12/2014 12/2015
MFI portfolio
16,007
1,633
17,640
15,328
3,219
18,546
-1,199
-1,199
31,335
34,988
Existing loans
Asian Credit Fund
Asian Credit Fund
Azercredit
Coocique
Credo
Credo
Crystal
FIE Gran Poder
Fundacion Alternativa
HKL
HKL
Kamurj
Kompanion
Kredit Cambodia
Lapo
Maquita Cushunchic
SEF International
SEF International
TenGer Financial Group
TPC
TRM
Vision Fund Cambodia
Vision Fund Mongolia
New loans
Agudesa
Banco D-Miro
COAC Jardin
Credo
Faten
Fubode
I-Finance
Lazika Capital
Maquita Cushunchic
NPFC
Optima
Pacifico
ProMujer Nicaragua
SAC Integral
Samic
Sonsonate
Renewals
Credit Mongol
Credit Mongol
Espoir
Espoir
Finca Ecuador
Finca Ecuador
16,007
-11,159
4,848
2,128
10,552
12,679
-908
-908
18,135
16,619
324
346
813
1,478
1,151
766
785
372
403
730
790
395
1,603
735
464
942
372
736
1,087
1,218
204
1,642
778
324
346
HKL
HKL
Loans repaid
AB Microfinance Bank
Advans Congo
Contactar
FIE Gran Poder
Financiera Proempresa
Finca Congo
Findev
Imon
Manuela Ramos
ProMujer Nicaragua
SEF International
Viator
Total loan portfolio
25/07/2014
30/09/2014
29/07/2012
22/11/2013
5/03/2013
7/06/2013
30/09/2014
28/07/2014
19/12/2014
28/02/2014
27/10/2014
15/10/2014
27/11/2014
27/01/2014
9/09/2013
2/08/2013
23/07/2014
24/06/2014
27/12/2013
20/12/2014
24/12/2014
30/12/2014
18/12/2014
KZT
KZT
USD
USD
USD
USD
USD
USD
USD
THB
USD
USD
USD
USD
NGN
USD
USD
USD
USD
USD
USD
USD
MNT
Kazakhstan
Kazakhstan
Azerbaijan
Costa Rica
Georgia
Georgia
Georgia
Argentina
Ecuador
Cambodia
Cambodia
Armenia
Kyrgyzstan
Cambodia
Nigeria
Ecuador
Armenia
Armenia
Mongolia
Cambodia
East Timor
Cambodia
Mongolia
2/12/2015
7/12/2015
23/06/2015
30/03/2015
9/12/2015
15/09/2015
16/11/2015
11/02/2015
27/02/2015
4/12/2015
7/05/2015
29/06/2015
9/12/2015
26/05/2015
9/06/2015
23/12/2015
GTQ
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
USD
NIO
USD
USD
USD
Guatemala
Ecuador
Ecuador
Georgia
Palestine
Bolivia
Congo, DRC
Georgia
Ecuador
Philippines
El Salvador
Peru
Nicaragua
El Salvador
Cambodia
El Salvador
30/09/2013
30/09/2015
8/06/2013
8/06/2015
22/02/2014
23/02/2015
MNT
EUR
USD
USD
USD
USD
Mongolia
Mongolia
Ecuador
Ecuador
Ecuador
Ecuador
7/08/2013
USD
Cambodia
7/08/2015
USD
Cambodia
17/04/2012
1/08/2013
2/07/2013
29/07/2013
23/07/2012
12/12/2013
17/06/2013
26/06/2014
29/11/2013
24/07/2013
7/05/2013
6/12/2013
NGN
USD
COP
USD
PEN
USD
USD
USD
PEN
NIO
USD
USD
324
346
739
576
766
785
372
403
730
790
395
1,603
735
464
942
372
736
1,087
1,218
204
1,642
778
324
-346
813
739
576
-739
-576
-766
766
346
908
739
576
766
372
403
730
790
395
1,603
735
464
941
372
736
372
403
730
790
395
1,603
735
464
941
372
736
204
821
778
204
821
778
3,794
3,794
-908
-908
785
-372
-403
-730
-790
-395
-1,603
-735
-464
-942
-372
-736
409
-821
-778
1,087
1,218
613
821
11,423
11,423
497
1,378
2,727
878
525
497
1,378
2,727
878
525
465
1,322
442
465
1,322
442
227
455
918
227
455
918
675
915
675
915
1,369
1,369
455
455
394
894
465
394
894
465
459
227
459
227
900
900
3,250
-1,177
2,073
627
-627
291
-766
900
-727
882
766
727
1,369
1,633
17,640
739
576
766
785
372
403
730
790
395
1,603
735
464
941
372
736
1,087
1,218
818
1,642
778
15,217
497
1,378
3,182
878
919
894
929
1,322
442
459
455
455
918
900
675
915
-291
-291
3,250
3,151
627
291
-291
-291
766
900
900
727
882
882
1,131
-1,131
1,131
9,950
-9,950
9,950
1,448
1,131
1,188
379
408
726
752
1,470
237
713
763
735
-1,448
-1,131
-1,188
-379
-408
-726
-752
-1,470
-237
-713
-763
-735
1,448
1,131
1,188
379
408
726
752
1,470
237
713
763
735
15,328
3,219
1,369
Nigeria
Congo, DRC
Colombia
Argentina
Peru
Congo, DRC
Azerbaijan
Tajikistan
Peru
Nicaragua
Armenia
Azerbaijan
16,007
346
95
1,369
18,546
-1,199
-1,199
31,335
34,988
32 Incofin cvso Annual Report 2015 | Financial report
Compliance in k euro
Fund policy
·· In accordance with fund policies, the following rules for diversification were established to avoid concentration risk: the book
value per country and per MFI must not exceed 15% and 10% respectively of Incofin cvso’s total assets.
·· Incofin cvso limits its participations in MFIs and other funds to a maximum of 75% of its equity.
Compliance
Exposure per country
Portfolio risk spread
See charts.
Book value k euro
Stock dividends k euro
% Balance sheet total
Max. exposure
Balance total
Book value of participations portfolio
Book value in k euro
16%
12/2015
8,000
14%
Equity
36,582
Max. book value (75%)
27,436
12%
Participations portfolio
15,419
10%
42%
8%
Current book value
9,000
7,000
6,000
5,000
4,000
6%
3,000
4%
2,000
Azerbaijan
Burkina Faso
Nigeria
Philippines
Tanzania
Guatemala
Kazakhstan
Haiti
Costa Rica
Palestine
East Timor
Congo, DRC
Armenia
Argentina
Mongolia
Kyrgyzstan
El salvador
Peru
Nicaragua
Georgia
0
Cambodia
0%
Bolivia
1,000
Ecuador
2%
Book value per MFI
Book value k euro
Stock dividends k euro
% Balance sheet total
Max. exposure
14%
8,000
12%
7,000
6,000
10%
5,000
8%
4,000
6%
3,000
4%
2,000
2%
1,000
Azercredit
Credit Mongol
Kamurj
ACEP Burkina SA
Financiera Proempresa
Fundacion Alternativa
Lapo
NPFC
Optima
Agudesa
Samic Plc.
Asian Credit Fund
Akiba Commercial Bank
CREDIT Microfinance Institution
Acme
Coocique
Vision Fund Mongolia
TRM
Crystal
Fubode
Finca Ecuador
Espoir
SAC Integral
Pacifico
Sonsonate
Faten
I-Finance
ProMujer Nicaragua
FIE Gran Poder
SEF International
TenGer Financial Group
TPC
Banco Dmiro
Lazika Capital
Maquita
Kompanion
Vision Fund Cambodia
Credo
Finca Nicaragua
Financiera Confianza SAA
HKL
Banco FIE
0%
Coac Jardin
The maximum book value in Banco FIE
was exceeded as a consequence of the
stock dividends received in the sum of k€
4,353; the acquisition value of Banco FIE
still lies beneath the 10% threshold.
Financial report | Incofin cvso Annual Report 2015
Number of MFIs in the portfolio according to MFI’s average loan amount
17
Low average
loan amount
(avg. loan size >
€2,000)
11
10
5
High average
loan amount
(€1,000 > avg. loan
size > €500)
Medium average
loan amount
(€2,000 > avg. loan
size > €1,000)
Very low average
loan amount
(€500 > avg. loan
size)
Number of MFIs in the portfolio according to MFI’s size
28
Large MFIs
(Portfolio >
€20 m)
12
Medium MFIs
(€20 m > Portfolio >
€5 m)
3
Small MFIs
(€5 m > Portfolio)
Number of MFIs in the portfolio according to MFI’s
number of clients
24
Large number
of clients
(clients > 20,000)
11
8
Low number
of clients
(10,000 > clients)
Medium number
of clients
(20,000 > clients >
10,000)
Incofin portfolio per product
72
%
Loans
24%
Participations
4%
Subordinated loans
34 Incofin cvso Annual Report 2015 | Financial report
Valuation rules
Without prejudice to the specific valuation rules mentioned below, the valuation rules that apply are those that were established
pursuant to the provisions of the Royal Decree of 30 January
2001 in implementation of the Companies Code, more particularly Book II, title I, chapter II relating to valuation rules. Unless
stated otherwise, the article numbers refer to the corresponding
articles in the aforementioned Royal Decree of 30 January 2001.
Assets
Without prejudice to the specific valuation rules mentioned below, each asset item is valued separately at its acquisition cost
and recognised in the balance sheet at that amount, after deduction of the depreciations and impairments on the asset item in
question (Article 35, first paragraph).
Amounts receivable at more than one year and within one year
Without prejudice to the provisions of Articles 67, paragraph
2, 68 and 73, receivables are recognised at their nominal value
(Article 67, paragraph 1) on the final day of the financial year.
Under Article 68 impairments are applied where repayment of
all or part of the receivable on the repayment date is uncertain.
To make allowance for the special credit and currency risk that
arises from extending credit to high-risk countries with unstable
economic and political climates, global impairment of 1% is applied annually to the receivables in the outstanding investment
portfolio, weighted by the ECA risk scores published for each
country. This global impairment is applied in accordance with
Article 47 of the Royal Decree, given the similar technical and
legal characteristics of these receivables.
The level of this impairment can be adapted on the basis of historical loss data.
Intangible fixed assets
Intangible fixed assets are valued at their acquisition cost, exclusive of additional costs. They are amortized over the economic
lifetime of the asset, and over five years in the case of software.
Investments and cash and cash equivalents
Tangible fixed assets
Liabilities
Tangible fixed assets are valued at their acquisition cost, exclusive of additional costs. They are amortized over the economic
lifetime of the asset, as follows:
·· Office equipment5 years
·· Computers 3 years
·· Furniture 10 years
Provisions for risks and expenses
These are recognised at the lesser of their acquisition cost or the
realisable value at the reporting date (Article 74).
Provisions are set aside to cover losses or expenses of a clearly
defined nature that are probable or certain at the balance date,
but the amount of which is not known (Article 50, Royal Decree
of 30.01.2001).
Amounts payable at more than one year and within one year
Participations and shares
Participations and shares are valued at their acquisition price, exclusive of additional costs (Article 41, paragraph 2). Impairments
are recognised in the event of sustained loss of value, as evidenced by the status, profitability, or prospects of the company
in which participations or shares are held (Article 66, paragraph
2 of the Royal Decree of 30 January 2001). Participations and
shares that are recognised under financial fixed assets are not
revalued (Article 57, paragraph 1). Once a participation has been
impaired, it will be revalued at no more than the original acquisition value, if the status, profitability or prospects of the company so justify in the judgment of the Board of Directors.
Fixed-interest securities
Fixed-interest securities are valued at their acquisition price. The
difference between the acquisition value and the redemption
value is recognised in the income statement on a straight-line
pro rata basis.
Without prejudice to the remaining provisions of Articles 77, 67,
paragraph 2 and 73, amounts payable are recognised at their nominal value (Article 67, paragraph 1).
Foreign currency translation (Article 34)
Transactions in foreign currency are recognised at the exchange
rate applicable on the transaction date.
All amounts receivable or payable in foreign currency are hedged
against possible exchange rate differences via cross-currency
contracts or forward contracts. These amounts receivable or payable are valued at the contractually agreed hedging rate.
Other financial assets and liabilities in foreign currency are
translated at the closing rate on the balance date. Gains and
losses arising from foreign currency transactions and from the
translation of monetary assets and liabilities in foreign currency are recognised in the profit and loss account. Non-monetary
Financial report | Incofin cvso Annual Report 2015 35
items valued at their acquisition price in a foreign currency are
translated at the exchange rate applicable on the date on which
the acquisition price was determined.
Positive and negative exchange rate differences are entered in
the financial results on a net basis.
Risk management
Risks inherent in offering and holding shares
Incofin cvso’s investment decisions are taken by the Investment
Committee, which is made up of a qualified team of experts with
broad financial and legal expertise. They have experience of the
microfinancing sector and are well able to assess the risks of an
investment. The Investment Committee closely monitors the evolution and management of all of these risks.
Directive 2011/61/EU of the European Parliament and of the
Council of 8 June 2011 on Alternative Investment Fund Managers
and amending Directives 2003/41/EC and 2009/65/EC and
Regulations (EC) No 1060/2009 and (EU) No 1095/2010 (“the
Directive”) has been transposed into Belgian law in the form of
the “AICB” law.
Risks inherent in investing in shares
There are economic risks inherent in an investment in Incofin cvso
shares, as in any investment in equities: when considering an
investment decision, investors must remember that they could
lose their entire investment in shares.
Following rigorous analysis of the AICB law and consultation
with the FSMA it was concluded that Incofin cvso is covered by
this legislation. However, the impact of this legislation on the ac-
Limited liquidity of Incofin shares
·· Incofin cvso benefits from the de minimis rule as set out in
article 106 of the AICB law; and
·· Incofin cvso is a development fund in the sense of Article 2,
1° of the law of 1 June 2008 and therefore falls within the exceptional regime under the AICB law as specified in its Article
180 §2 2°.
There is no secondary market on which Incofin cvso shares
are traded. Although it is possible for a shareholder to withdraw in accordance with the procedure set out in the Articles of
Incorporation, there is relatively limited liquidity. In addition,
the funds raised by Incofin cvso are reinvested as efficiently
as possible in its core activities. These resources are employed
by MFIs under a series of contracts for a fixed time as working
capital for financing the micro-entrepreneurs, and are thus not
immediately available for withdrawal.
Under Article 10 of the Articles of Incorporation, partners may
only withdraw or seek a partial repayment of their shares in
the first six months of the financial year, after approval by the
Board of Directors. Finally, shares may only be transferred with
the Board of Director’s prior consent.
tivities of Incofin cvso is limited, for the following two reasons:
In accordance with Article 107 of the AICB law Incofin cvso has
duly notified the FSMA. Incofin CVSO will fulfil its obligations to
process the registration documentation in accordance with Article
107 § 2 of the AICB law.
There is no further impact on the operations of Incofin cvso, nor
on the relationship with Incofin Investment Management as fund
adviser.
Credit risks
Risks of future dividend changes
Past gains offer no guarantee for the future, and no guarantee
is given as to future gains. The dividend may rise or fall to a
maximum of 6% as set out in the Act of 20/7/1955 for cooperative partnerships recognised by the National Cooperation
Council (NRC). Incofin cvso makes no forecasts or estimates
of dividend yields.
Risks inherent in the business of Incofin cvso
Incofin cvso is a specialist player in the microfinancing sector.
Incofin cvso invests directly and indirectly in MFIs in developing
countries, which offer microloans and financial services to small
local entrepreneurs.
Incofin cvso invests in microfinance institutions, which in turn
grant loans to people who are often unable to provide any real security. Incofin cvso also works together with such microfinance
institutions and with microfinance funds. It cannot be ruled
out that the microfinance institutions in which Incofin cvso
invests or with which Incofin cvso collaborates could at any given moment become insolvent, as a result of which Incofin cvso’s
investment could be lost. Incofin cvso manages this risk by:
·· conducting a rigorous financial analysis;
·· evaluating their business plans;
·· evaluating their management and directors;
·· calling for regular reporting of developments in their activities;
·· regular on-site follow-up.
36 Incofin cvso Annual Report 2015 | Financial report
Country-specific risks
Interest rate risk
Incofin invests in developing countries, which are subject to
country-specific risks. These risks include political risks (e.g. war
or civil war) and transfer risks (the inability to repatriate funds
invested in the country owing to foreign exchange shortages or
other government measures). To cover these risks, Incofin cvso
has concluded an insurance policy with the Delcredere-Ducroire
Group, the Belgian export credit insurer, which insures Incofin’s
entire investment portfolio against these risks (with an excess
of 10%).
On the one hand Incofin cvso draws debt financing, and on the
other it places loans with MFIs in foreign currencies. Over time,
the interest rates at which these operations take place are subject to market influences. Incofin cvso will always ensure that
the margin between debit and credit interest rates remains large
enough to allow Incofin cvso to continue to grow. The fund adviser manages this risk by (i) applying fixed rates to both incoming and outgoing transactions and (ii) determining a “minimum” return for all loan transactions.
The institution Azercredit (from Azerbaijan), at which the bank
accounts were frozen in 2014 by a court in Baku for reasons
which remain unclear, regained access to its bank accounts in
November 2015, but some uncertainty remains regarding the
collection of the outstanding claim. The case was accepted in
2015 by Delcredere-Ducroire (credit insurer) for insurance
against political risks.
Liquidity risk
Incofin cvso diversifies its investment portfolio (consisting of
equity investments and loans) and spreads its risks in a prudent
manner based on the risk distribution policy established by the
Investment Committee. This policy states that the exposure to
any one country or MFI should not exceed 15% and 10% respectively of Incofin cvso’s total assets.
Market risks
The investments are also exposed to market and environmental
risks, which cannot be hedged from an insurance perspective.
These risks include economic environmental factors, legal certainty and the quality of the local regulation of microfinance
institutions. Incofin cvso analyses these issues carefully and also
applies a sound geographic spread in the portfolio composition,
to limit this risk as much as possible.
Despite the fund manager’s experience in the microfinancing
business, there is no guarantee of the identification of adequate
attractive investments or of an optimal spread in the portfolio.
Each contract is the result of negotiation, and the agreement of
both the Investment Committee and the MFI in question is required to complete a transaction.
Exchange rate risks
Incofin actively manages its currency risk using hedging techniques (such as cross currency swaps, forwards etc.). The exchange rate risk on investments in local currency is not actively
hedged. In these cases, it is expected that the return on investment will off-set the possible depreciation of the currency concerned.
The liquidity risk of the fund is relatively low given the high
liquidity and maturity of the loan portfolio. The cash available
(including available credit lines) and the outstanding loans
which will reach maturity during the coming year will always be
amply sufficient in order to meet the financial obligations and to
absorb any loan defaults.
Financial report | Incofin cvso Annual Report 2015
COLOPHON
Publisher
Loïc De Cannière
CEO Incofin Investment Management
Design, layout, copywriting and coordination
Cantilis (www.cantilis.be).
Printing
This magazine is printed on
Amber Graphic, paper certified by the
Forest Stewardship Council.
Photography
Incofin cvso and Cantilis.