Small Credit for Big Ideas KfW Entwicklungsbank by dominic.cecilia


									                              initiatEd By kfw
                              managEd By Sal. oppEnhEim
                              adviSEd By FinancE in motion

EuropEan Fund For SouthEaSt EuropE
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EuropEan Fund For SouthEaSt EuropE
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EFSE – a dEvElopmEnt FinancE initiativE
SupportEd By

           European Investment Fund
           as Trustee for
           European Commission

covEr picturE: dragana Stojak, chickEn FarmEr, cliEnt oF mi-BoSpo, BoSnia and hErzEgovina
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The European Fund for Southeast Europe – EFSE – is the successor of various
development finance initiatives that have been implemented since 1998 as a
post-conflict reconstruction effort in Southeast Europe.

These initiatives received financial support     this donor collaboration under the          The main advantages for incorporating the
from the European Union, the Austrian,           leadership of kfw generated an              preceding development finance initiatives
German and Swiss governments as well as          impressive track record in terms of         into the Fund in December 2005 were:
a loan from the Netherlands Development          development impact and financial            1
Finance Company (FMO). KfW Entwicklungs-         performance :                               Ensuring sustainability of operations
bank managed these funds under a fiduciary                                                   through institutionalisation and facilitating
arrangement.                                     • more than 45,000 loans were               flexible entry and exit of donors at the
                                                   granted between 1998 and the              same time, including the transfer of owner-
These preceding initiatives in Bosnia and          end of 2005.                              ship to local stakeholders,
Herzegovina, Kosovo, Montenegro and Serbia                                                   2
provided long-term funds to local financial      • in the same period, the total             leveraging additional funds from private
institutions for on-lending to micro and           amount disbursed was almost               institutional investors in the form of private
small enterprises and private households.          280 million Eur.                          public partnership,
Furthermore, comprehensive technical                                                         3
assistance programmes assisted in adjusting      • portfolio at risk of over 30 days         Extending the scope of financial services
lending techniques to increase outreach to         stood at around 1.8 % as of               to the partner lending institutions and
the target groups.                                 31 december 2005.                         the ultimate target groups, and
                                                 • the institutional capacities of           generating operational efficiency gains.
                                                   around 30 partner lending
                                                   institutions were strengthened.           During 2005 / 2006, the funds transferred
                                                                                             from these preceding initiatives to EFSE
                                                                                             amounted to around 125 million EUR.

                                               « the collaborative effort, referred to as the European Funds, has had a far
                                               greater impact than any one donor could have achieved alone, in terms
                                               of strengthened local lending institutions, increased outreach, and market

                                               … this successful collaboration offers one model for donors in other areas
                                               of the world. »

                                               CGAP Case Studies in Donor Good Practices No. 13

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miSSion and oBjEctivES
The Fund aims to foster economic development and prosperity in the
Southeast Europe region, including the European Eastern Neighbourhood
region, through provision of additional development finance.

The Fund offers long-term funding instruments to qualified partner
lending institutions to better serve the financing needs of micro
and small enterprises and private households in the target region.

dEvElopmEnt impact                               thE Fund’S ultimatE                 productS to BEnEFit thE
•	 Supporting micro and small enterprises        targEt groupS                       targEt groupS
   as the backbone of the local economies,                                           At present, the Fund’s long-term funding
   therewith contributing to income generation   • micro and small enterprises,      instruments promote partner lending
   and employment creation,                        and                               institution products for the target groups,
• Satisfying the basic need of decent shelter,                                       including but not limited to:
   and                                           • private households with limited   • Micro and small enterprise loans,
• Strengthening local financial markets.           access to financial services.     • Rural loans, particularly for agriculture, and
                                                                                     • Housing loans.

                                                                                     The Fund is flexible to include new products
                                                                                     in view of unsatisfied needs of the target
                                                                                     groups in the region. New products will be
                                                                                     developed under the EFSE Development

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Sowing thE SEEdS For a BEttEr FuturE
kadri mane, greenhouse operator
client of opportunity albania

On a little piece of land within Myzeqeja,          To be able to sustain his business when         Kadri’s tomatoes are mainly sold locally in
a large agricultural area in central Albania,       times are not good, and grow it when they       Lushnja, «but sometimes we are lucky and
Kadri Mane, his wife and two youngest               are better, Kadri identified the need for       major traders take the tomatoes in bulk,
sons run a tomato farm. Every single day,           financial support. He received this financial   directly from the greenhouse, which is very
they wake up early to work the land, care           support from Opportunity Albania, an            good», explains Kadri.
for the young tomato plants or other seasonal       EFSE partner lending institution dedicated
vegetables, and reap the harvest come               to financing micro entrepreneurs. Since         « overall, i am really satisfied with
April each year.                                    2002, Kadri has received five separate loans    the results of our work as it helps
                                                    totalling EUR 25,000. «My business is not       me provide a much better life for my
Kadri started working in agriculture when he        huge and what I need are small amounts of       family. So much so, that i was even
was merely 10 years old. But it was already         money. Big banks usually do not offer loans     able to invest my latest loan to
clear then that this was not only going to be       to small farmers and are not suitable for me.   renovate my home following the birth
his livelihood, but an entire lifestyle – and       Despite this, I have found a real partner in    of my nephew – another child in
one which over the years would require a great      Opportunity Albania. They understand my         the mane family who will no doubt
deal of commitment from him and his family.         financing needs and listen to me.» While        also be taught the secrets of agri-
                                                    appreciating the support he has experienced     culture. »
«It’s very hard and tiring work», says Kadri        from his Opportunity Albania branch in
whose friendly, tanned face clearly reflects        Lushnja, he is just as aware that it would
the love he has for the land and all its produce.   make little sense if he wasn’t committed
                                                    enough to his work.

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SEwing hEr way to SuccESS
aida muslic, owner of a tailor shop
client of procredit Bank, Bosnia and herzegovina

Aida Muslic is an inspirational young woman.    result, the family’s standard of living remained    « i am very grateful to the procredit
Not only did she manage to recently complete    relatively low and they were unable to invest       Bank for supporting and trusting our
her degree at the University of Sarajevo in     in the expansion of their business. Aida realised   small business. with a new machine
Bosnia and Herzegovina, but she also man-       that the only way for the business to grow          we are able to service larger numbers
aged to achieve something which most people     and to secure a better future would be to apply     of customers and increase our income.
are never able to successfully accomplish in    for financial support.                              and not to forget, having received
their lifetime: the challenge of opening up                                                         funding from the procredit Bank,
your own business.                              She approached the ProCredit Bank with a view       i was able to concentrate much more
                                                to taking out a loan. Aida had heard a lot          on my studies, and i successfully
Ever since she was a young girl, both Aida      of positive reports about the ProCredit Bank        finished my degree. »
and her mother, Kika, have had to work hard     from a friend. A partner lending institution
sewing drapery, clothes, pillows and table-     to EFSE, the ProCredit Bank supports micro
cloths, which they sold in a production shop    and small business in their bid to develop
in Sarajevo. The demand for the drapery         and expand. Aida managed to obtain a loan
they made was always quite high, as imported    of around EUR 2,000 from the bank and
goods of this kind always failed to meet        used the money to purchase a new sewing
customer’s expectations and moreover, their     machine and materials, enabling Aida and
budget.                                         her mother to expand the output and income
                                                of their business. According to Aida, their
In 2004, Aida came up with the idea of          business profitability tripled in the last two
opening their own shop. Although the busi-      years as a result of the loan.
ness had always been a success, even from
the very beginning, all the money they earned
always went towards Aida’s education. As a

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rEFlEcting BuSinESS SuccESS
Family jordanov, owner of the vegetable and fruit processing company kim dooEl
client of Export & credit Bank (Ec Bank), Fyr macedonia

In 1999, the family Jordanov established KIM     later, KIM has become a brand to be reckoned      as a bank. Their excellent repayment disci-
as a micro family business. «Although we         with. Its products are available in all major     pline is a reflection of their hard work and
enjoyed a great start with our tomato ketchup    Macedonian supermarket chains and are even        dedication to quality», says Krste Angelkov
product, we soon realised we would have to       being exported to neighbouring countries.         loan officer at EC Bank. «We are convinced
expand operations to maintain our position on    Through carefully considering the investments     that KIM has a promising future.»
the Macedonian market», remembers                they made with the loans provided by EC
daughter Marija.                                 Bank, KIM was able to raise the overall quality   «thanks to the loans, we have been
                                                 of production so that it today adheres to all     able to continuously grow our busi-
In 2002, they approached the EFSE partner        major European food-manufacturing stan-           ness. our company now employs
lending institution EC Bank to find support      dards. At present, KIM produces ketchup in a      more than 30 dedicated staff – and
for their ventures. «We needed funds for         variety of different packages and sizes, and,     the whole family is part of the active
completion of a new facility as well as for      in addition, has expanded production activities   management of the company. our
equipment. EC Bank was the only bank             to tomato juice and mayonnaise.                   business has entered into a new era.»
that understood our situation. They offered                                                        Magda Jordanov, the mother of the
us a loan that was exactly tailored to our       Recently, the company took a bold step in         Jordanov family
needs», says father Slavko.                      innovation and created a new lid for their
                                                 ketchup bottles that allows for better hand-
Eight years and three credit line loans to the   ling and more hygienic closure. «KIM has
total value of approximately EUR 100,000         achieved a great deal of confidence from us

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targEt rEgion



             BoSnia and                           moldova                                                      azErBaijan

                                     SErBia     Bulgaria
        montEnEgro                                                                              armEnia

                        alBania                  Fyr macEdonia
                                           koSovo *

                                                                                                      * under UNSCR 1244 / 99

Donor or grant funds can be earmarked
to specific countries or the region at large.
In priciple, additional countries may be
included upon availability of donor or grant

invEStorS – FirSt-claSS StakEholdErS

EFSE has attracted a highly reputable group     These public investors have been joined
of investors. These include the European        by international financial institutions and
Commission as well as the governments of        development finance institutions, including
Germany, Austria, Switzerland and Denmark,      KfW, International Finance Corporation (IFC),
through the German Federal Ministry for         Netherlands Development Finance Company
Economic Cooperation and Development (BMZ),     (FMO), European Bank for Reconstruction
Swiss Agency for Development and Coop-          and Development (EBRD), European Invest-
eration (SDC), Austrian Development Agency      ment Bank (EIB), and the Oesterreichische
(ADA), and the Danish International Devel-      Entwicklungsbank (Austrian Development
opment Agency (DANIDA).                         Bank, OeEB).

In addition, the first government from South-   Finally, private investors, both with a
east Europe, the Government of the Republic     commercial orientation and social
of Albania, has invested in the Fund.           responsibility, also contribute a significant
                                                share to the funding base.

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partnEr lEnding inStitutionS
                                                  « alter modus is a non-bank microfinance institution, established in 1999
                                                  and dedicated to providing finance to micro businesses in montenegro.

                                                  with the funds we have received from EFSE we have been able to offer loans
                                                  to over 2,000 clients totalling Eur 5 million, reaching out to the smallest
                                                  and poorest of business clientele in montenegro. approximately half of our
                                                  clients are women. as well as helping us in our aim of reaching more clients
                                                  in rural settings, EFSE funds also assisted us to diversify our product range
                                                  by providing further tailored loans to our clients in areas such as agriculture,
                                                  for instance. »

Luka – urovic, Co-Director, Alter Modus Ltd.,
     D      ´

                                                  «kEp is the leading microfinance institution in kosovo with an outstanding
                                                  portfolio of Eur 42 million, operating in 5 regions with over 30 offices
                                                  throughout kosovo and serving approximately 19,000 clients.

                                                  EFSE is one of kEp’s main investors and has provided strong funding support
                                                  to our institution, enabling us to grow further as an institution and to increase
                                                  our outreach to our common target group: micro and small businesses in

                                                  through the partnership with EFSE we were able to strengthen our position
                                                  in the microfinance market. we are looking forward to continuing our
Arten Zikaj, Deputy CEO, KEP, Kosovo
                                                  cooperation with EFSE, also in the area of technical assistance. »

targEt Financial                                  Financial inStrumEntS For
intErmEdiariES                                    partnEr lEnding inStitutionS
• Local commercial banks,                         The Fund provides long-term funding to
• Specialised microfinance banks,                 partner lending institutions through a mix of
• Microcredit organisations,                      different instruments. These include, without
• Other non-bank financial institutions           being limited to:
  (e.g. leasing companies), and                   • Medium to long-term senior loans,
• Investment companies or funds with              • Subordinated loans,
  a regional orientation.                         • Term deposits,
                                                  • Subscriptions to bond issues,
The target partner lending institutions have      • Co-investments (syndicated loans),
to either currently finance or be committed       • Stand-by letters of credit,
to finance the target group and fulfil a set of   • Guarantees, and
financial performance criteria.                   • Equity and quasi-equity participations.

                                                  The Fund is able and willing to participate
                                                  in loan syndications of a broader investors
                                                  group if this adds value to the respective
                                                  partner lending institution.

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EFSE dEvElopmEnt Facility
The EFSE Development Facility aims to increase the impact of EFSE’s
investments within the target region. It provides complementary non-financial
services to EFSE’s partner lending institutions, and commissions studies in
selected areas of specific interest to the Fund.

projEctS initiatEd and                    promoting rESponSiBlE                             StrEngthEning riSk
SponSorEd By thE Facility                 FinancE                                           managEmEnt
• Technical assistance, consulting        Since 2007, the EFSE Development Facility         Against the background of the recent institu-
  and training for EFSE partner lending   has promoted responsible lending practices        tional challenges highlighted in the financial
  institutions,                           and client education in Southeast Europe          crisis, the Development Facility has increased
• Workshops and roundtables,              through various initiatives at the sector level   its activities in various fields related to risk
• Research projects and studies, and      as well as at the level of financial institu-     management. Several partner lending institu-
• Annual Development Impact Studies       tions and clients.                                tions of the EFSE are supported in building
  of the Fund.                                                                              up capacities in credit risk and delinquency
                                          Responsible finance conferences were organ-       management. Hands-on, tailor-made techni-
                                          ised with KfW and hosted by the respec-           cal assistance implemented in intermittent
                                          tive regulators in Serbia, Kosovo, Bosnia and     missions of the consultants of the Facility,
                                          Herzegovina and Albania. These events             helped the EFSE partner lending institutions
                                          brought together several experts and prac-        to improve their internal structures and
                                          titioners who discussed the relevance of          processes. Where necessary, the Facility also
                                          responsible finance and aimed to raise the        supports financial institutions in reviewing
                                          awareness of this topic with the broader          their overall risk management approach and
                                          public. In Bosnia and Herzegovina, the Facility   systems, including operational risk, credit
                                          supported setting up a debt advice centre         risk and market risk. Sector-wide workshops
                                          for clients of microcredit organisations. On      provide a platform to discuss challenges
                                          the institutional level, responsible finance      and how to approach them among different
                                          aspects were integrated into capacity building    institutions, while research projects imple-
                                          measures and trainings. Projects at the           mented by the Facility facilitate the develop-
                                          client level include the development of client    ment of new ideas.
                                          educational booklets or educational TV
                                          clips to promote financial literacy among
                                          EFSE’s final target group.

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dEvElopmEnt principlES
The Fund is a unique development finance vehicle with the following features:
Combination of development and market orientation, creating additionality
and acting complementary to other donor and government initiatives, operating
as market enabler, facilitator and risk taker, being an innovator and incubator for
new financial products benefiting the target group, and ensuring sustainability
of Fund operations through a commercial legal form.

dEvElopmEnt pErFormancE                         dEvElopmEnt pErSpEctivES
and impact aSSESSmEnt                           By 2014, the Fund is expected to:
Development performance measurement             • have an outstanding investment
The Fund’s management is annually assessed         portfolio of Eur 900 million, and
according to the following development          • have provided a cumulative
performance criteria:                              number of more than 500,000
• Breadth of outreach: number of micro             business loans to micro and small
  and small enterprises reached, and               enterprises and farmers as well as
• Depth of outreach: average loan size.            housing loans to private households
                                                   since its inception in december
Development impact measurement                     2005.
An Annual Development Impact Study com-
missioned to a third party analyses different   the Fund clearly targets micro and
aspects of the Fund’s development impact,       small enterprises with an individual
such as employment effects or its social and    loan size of below Eur 10,000.
environmental impact. Results have been
published on the Fund’s website

                                                the Fund obtained the luxFlag
                                                microfinance label as one of the first
                                                development finance funds in the

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organiSational StructurE

         initiator and lead investor:

                          general Shareholder

     Board of directors                         advisory group
                                                                              development Facility
                      investment committee

           custody and                       Fund management and management of the
        Fund administration                         EFSE development Facility

                                                                                regional offices

                                                                     investment & technical assistance / training

                                Qualified partner lending institutions

         commercial Banks               microfinance institutions                      others

            micro and Small Enterprises                             private households

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Representatives from investing parties parti-    The Advisory Group to the Board of Directors
cipate in the Fund’s Investment Committee        comprises representatives from Central Banks
which decides on each investment.                in the region. It meets annually. The role of
                                                 the Advisory Group is to
Representatives from the main donors provi-      • Provide the Fund with better linkages to
ding grants to the EFSE Development Facility        local realities, concerns and needs,
are members of an independent Committee,         • Share local experiences, and
which oversees all activities of the Facility.   • Make recommendations to the Fund Mana-
                                                    ger and / or Board of Directors in terms of
                                                    Fund policies and operations.

… and FEaturES

complEmEntarity                                  EFFiciEncy                                       rEgional EntrEnchmEnt
Combination of financial and non-financial       Professional management                          Physical presence in the region
services                                         Professional service providers are in charge     In most countries of operations, local offices
The Investment Fund and the EFSE Develop-        of fund management and administration.           facilitate the day-to-day contact with the
ment Facility work jointly in support of the     They are selected through an international       partner lending institutions and local stake-
target group.                                    tender process.                                  holders.

Coordination of donors and development           Performance incentives                           Local participation
finance institutions                             Service fees are tied to the fulfilment of       Through the Advisory Group, local govern-
The Board of Directors serves as a coor-         performance targets regarding financial and      ments, as future shareholders, get familiar with
dination platform for different donors and       development performance.                         the Fund and prepared for their future role.
development finance institutions active in
the region. The Fund aims at complementing
existing initiatives of local governments,
donors and development finance institutions
and strives to harmonise efforts.

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Funding mEchaniSm
oF invEStmEntS

1 lEvEraging                                                                                        2 pooling
leveraging up to seven times                                                                        different types of risk capital are pooled
the initial donor funds                                                                             to undertake investments in one country

          Private                                 A Shares
        Investors             Senior              and Notes        Leveraging
                             Tranche                               up to
                                                                   seven times
   Development                                                     initial
and International                                                  donor funds
         Finance            Mezzanine             B Shares         in different
     Institutions            Tranche
                                                                   risk tranches

     Donor Funds              Junior              C Shares

Donor funds used for development finance           While mezzanine and senior investors invest      In order to undertake investments, different
initiatives in the target region are generally     at regional level, donor funds can either be     sources of funds representing different risk
scarce in view of actual needs. The advantage      earmarked to a specific country or the region    tranches are pooled. They then constitute
of EFSE’s funding strategy is to use these         at large. Country-specific donor funds are       one single source of financing for the Fund.
donor funds to leverage additional funds at        exclusively used for investments in one par-     Consequently, the Fund uses these pooled
large scale for development purposes. This         ticular country, facilitating a possible later   funds flexibly within each country based on
is achieved by issuing different share tranches    transfer of ownership to local stakeholders.     the Fund’s overall investment policy. This
bearing different risks:                           Regionally earmarked donor funds allow the       approach creates efficiency gains and also
1. Public donors invest in the Junior Tranche      flexible use of funds and can therefore best     effectively addresses the risks associated
   (first loss piece),                             accommodate changing development finance         with each investment.
2. Development finance institutions and            needs in the target region.
   international financial institutions in the
   Mezzanine tranche,
3. Private investors in the Senior Tranche.

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                                                 3 riSk protEction or
                                                 Subordination mechanism in case of losses
                                                 affects donor funds first, then mezzanine
                                                 capital and finally senior capital

                                                 In the unlikely event of losses:

                                     C Shares
                                                                                    C Shares
                                     B Shares
                                                                                    B Shares

                                     A Shares                                       A Shares
                                     and Notes                                      and Notes

For the investment portfolio in each country,    Leveraging private capital is only possible due
however, the proportion of the different risk    to the subordination mechanism in place for
tranches contributing to the total amount of     each country in which the Fund invests. In
pooled funds remains intact. Hence, donors       the unlikely event of losses, for example, due
as well as the other investors hold a specific   to a defaulting partner lending institutions,
share of the pooled funds in the amount of       the grant funds constituting the first-loss
their original contribution to the Fund in       tranche, i. e. C Shares, are affected first. Only
nominal terms.                                   when these are fully depleted, the mezzanine
                                                 capital is affected (B Shares), being followed
                                                 by holders of senior capital (A Shares).

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Funding mEchaniSm
oF thE EFSE dEvElopmEnt Facility

The EFSE Development Facility relies on two          Contributions are held in a separate trust,
funding sources to sponsor its activities:           ensuring independence between investment
1                                                    activities and technical assistance. For
Direct grant contributions from public and           private donors, the Facility will facilitate the
private donors, which can either be ear-             issuance of donation receipts.
marked for specific activities or can be pro-
vided to the Facility at large.
Annual share of the Fund’s income,
depending on the discretion of the Board
of Directors.

Sergiu Guzun (right), owner of the Bakery Panilion   Ana Fekete (middle), farmer, client of ProCredit Bank, Serbia, together with her mother (left)
Ltd., client of Societe Generale S. A., Moldova,     and daughter (right)
together with his employees

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rolE oF donorS
Grant funds provided by donors are essential for the Fund’s operating
mechanism. They constitute the risk cushion (C Shares) for private investors
that otherwise would be unable to invest in high-risk countries as the target
region. Through this mechanism, private capital can be leveraged, substantially
enlarging the total amount of funds available for development purposes.

Grant funds in the form of risk capital are               Furthermore, grants can be provided to
particularly relevant to allow:                           the EFSE Development Facility to offer
• Starting Fund operations in new                         complementary non-financial services to the
   countries, and                                         investments. In general, grant funds can
• Introducing new financial instruments                   be earmarked to specific nations /national
   and products of higher risk.                           entities as well as activities to be financed
                                                          under the Facility.

Dilaver Hysa (6th from left), farmer, client of ProCredit Bank, Albania, together with his family                        ´
                                                                                                          D ž emila Slabic, wedding dress maker, client of
                                                                                                          Microcredit Foundation Partner, Bosnia and

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promoting rESponSiBlE FinancE
EFSE is committed to promoting responsible financing practices in a very
practical and hands-on-manner. This commitment stems from the Fund’s
social mission to improve the access of less privileged population groups to
finance. Furthermore, stable and integer financial markets are the foundation
to the EFSE business model and are particularly crucial for the long-term invest-
ment horizon of the Fund.

The following are among the dimensions of         Promoting sound social and environmental           Fund’S and invEStorS lEvEl
responsible finance that the EFSE cares about:    management systems                                 Transparency of information
                                                  EFSE promotes the implementation of sound          The Fund aims at maximum transparency of
End-BorrowEr lEvEl                                social and environmental policies and man-         its operations. In addition, to the official
Promoting financial literacy                      agement systems in partner lending institu-        reports submitted to the Luxembourg Super-
EFSE aims to enhance the level of understand-     tions. For instance, as a minimum standard,        visory Agency for the Investment Fund
ing of financial terms and concepts among         the Fund requires each partner lending institu-    Industry (CSSF), the Fund publishes quarterly
its end-borrowers. The objective is to help       tion to refrain from financing activities listed   data on its investment portfolio, financial
clients make well-informed decisions regarding    in a social and environmental exclusion list.      and development performance (available on
the financial services they need.                                                                    the Fund’s own website ( as
                                                  Financial SEctor lEvEl                             well as on microfinance information platforms.
Preventing over-indebtedness                      Promoting responsible financial instruments
The Fund aims to raise awareness of the           EFSE aims to provide long-term funding in a        Regular social performance monitoring
consequences of over-indebtedness among           manner that is conducive to developing local       On a quarterly basis, EFSE monitors the
its final target group through public cam-        financial markets. The Fund, for example,          proper use of the funds by the Fund’s partner
paigns, working on industry codes of conduct      provides local currency financing wherever         lending institutions to the end-borrowers,
to limit the debt burden to single client         possible.                                          i.e. through the collection and analysis of a
households and by supporting the set-up of                                                           comprehensive set of subloan data.
debt advice centers.                              Raising awareness of responsible finance
                                                  With the aim to sensitise the public in the
partnEr lEnding inStitutionS                      target region to the issues of responsible
lEvEl                                             finance, EFSE organises joint seminars and
Social Responsibility Assessment of partner       conferences with KfW and central banks
lending institutions                              in the region.
In addition to assessing the financial strength
of every partner lending institution, EFSE also   Active support of the SMART Campaign and
examines the scope and quality of corporate       other industry initiatives
values and business practices employed by its     The Fund was among the first signatories of the
partners. The so-called Social Responsibility     SMART Campaign (,
Assessment covers the following areas, among      a joint initiative of CGAP and ACCION Interna-
others: Mission, Client Protection Principles     tional, to promote consumer protection in
and the outreach of microfinance institutions.    the microfinance industry.

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Fund highlightS

1                                               5                                                 8
contriButing to thE                             Facilitating accESS to                            coordination platForm
millEnnium dEvElopmEnt                          capital markEtS                                   For local and intErnational
goalS                                           By leveraging private capital through the risk    StakEholdErS
EFSE contributes to the Millennium Develop-     protection mechanism set in place with            EFSE serves as a coordination platform
ment Goals, particularly to eradicate extreme   donor funds and mezzanine capital from            for donor agencies, development finance
poverty and hunger (MDG 1) and to develop       development finance institutions and inter-       institutions and international financial
global partnerships for development (MDG 8).    national financial institutions, EFSE helps       institutions, as well as local governments.
                                                local and regional financial institutions to
2                                               access European and international capital         9
promoting rEgional                              markets.                                          local ownErShip
coopEration                                                                                       It is envisaged that the donor funds invested
With its regional approach, EFSE serves as      6                                                 in EFSE will partly or at large be transferred
a vehicle to strengthen economic cooperation    SErving aS a markEt EnaBlEr                       to local stakeholders. In the future, therefore,
between different countries.                    EFSE acts as risk taker to overcome prohibitive   local stakeholders will become shareholders
                                                country and institutional risks, which prevent    of the Fund.
3                                               the financial sector from serving the ultimate
Balancing Social dEvElopmEnt                    target groups. Furthermore, the Fund plays an     10
and commErcial approach                         important role in anticipating market develop-    catEring For thE nEEdS
EFSE combines in an innovative manner a         ments. By continuously adjusting its range of     oF donor and govErnmEnt
clear development orientation with private      services and products, it pushes the develop-     programmES
sector efficiency and positive risk-adjusted    ment finance frontier further to the benefit of   EFSE allows earmarking grant funding for
returns, thereby ensuring institutional         the target groups.                                investments in specific countries and/or for
sustainability.                                                                                   specific activities of the EFSE Development
                                                7                                                 Facility. Furthermore, the Fund is also open
4                                               EnSuring thE dEvElopmEnt                          to incorporate existing donor or government
promoting privatE puBlic                        miSSion through a mix                             programmes that serve the ultimate target
partnErShipS and lEvEraging                     oF inStrumEntS at diFFErEnt                       groups.
privatE capital For                             lEvElS
dEvElopmEnt                                     EFSE’s development mission is continuously        11
EFSE uses donor grants as a risk cushion        assured through donor representation              promoting rESponSiBlE
for attracting private investors for develop-   at Board level and in various committees.         FinancE
ment purposes. Up to seven times the            Furthermore, the development performance          EFSE is committed to support responsible
original grant contributions can be raised      is constantly assessed against development        finance practices and principles in the
for the target group, representing signifi-     targets and in the Annual Development             financial markets of the target region at all
cant leverage.                                  Impact Study.                                     levels: end-borrower level, partner lending
                                                                                                  institutions level, financial sector level and
                                                                                                  investors level.

                                                                                                                                                   19                                                                                                               This publication can be downloaded or ordered from

EFSE – a dEvElopmEnt FinancE initiativE
SupportEd By

                   European Investment Fund
                   as Trustee for
                   European Commission

initiator and lEad invEStor                                  Fund managEr                                                 Fund adviSor
kfw                                                          oppenheim asset management                                   Finance in motion gmbh
Ms. Monika Beck                                              Services S.à r.l.                                            Ms. Sylvia Wisniwski
Palmengartenstr. 5 – 9                                       Mr. Johann Will                                              Eschersheimer Landstr. 6
D-60325 Frankfurt/Main, Germany                              4, rue Jean Monnet                                           D-60322 Frankfurt/Main, Germany
Phone + 49 69 7431 4069                                      L-2180 Luxembourg, Luxembourg                                Phone +49 69 977 876 50-0
Fax + 49 69 7431 3490                                        Phone + 352 22 15 22 423                                     Fax +49 69 977 876 50-10                                           Fax +352 22 15 22 500                                                                                                  

EFSE disclaimer
All rights reserved. This fund is reserved for institutional investors. Units in this investment fund may not be offered, sold or transferred, directly or indirectly, in the USA or
its territories or possessions or areas subject to its jurisdiction, or to citizens or residents thereof (»US Persons«) other than in accordance with the laws of the United States.
The information given in this document does not constitute an offer nor a product recommendation, it is provided for individual information purposes only. No guarantee is
given or intended as to the completeness, timeliness or adequacy of the informations provided herewith. Past performance is no guarantee for future results. The value of the
fund and its shareclasses is calculated without taking into account any placement or redemption fees and assuming constant reinvestments of dividends. This is not a fund
prospectus as specified by law. The fund prospectus is obtainable free of charge from Oppenheim Asset Management Services S.à r.l., 4 rue Jean Monnet, L - 2180 Luxembourg.

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