WHY INVEST IN FINANCIAL INSTITUTIONS HOW FINANCIAL INSTITUTIONS

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WHY INVEST IN FINANCIAL INSTITUTIONS

WHY INVEST IN FINANCIAL INSTITUTIONS

HOW FINANCIAL INSTITUTIONS CONTRIBUTE TO DEVELOPMENT Access to finance Employment Banks More than 50%

HOW FINANCIAL INSTITUTIONS CONTRIBUTE TO DEVELOPMENT Access to finance Employment Banks More than 50% of SMEs identify access to finance as a key constraint The missing middle • Total credit gap USD 1. 3 trillion Microfinance Source: World Bank Corporates • > 300 employees Medium-sized businesses • 50 – 300 employees • USD 3 – 15 mill in revenues Small businesses • 10 – 50 employees • USD 0. 1 – 3 mill in revenues Microenterprises • < 10 employees Poverty reduction Creating jobs in economically sustainable businesses Increased tax base 2

CORE NORFUND FOCUS : FUNDING OF SME-BANKS Several inhibitors for SME-banking Few pure SME-banks

CORE NORFUND FOCUS : FUNDING OF SME-BANKS Several inhibitors for SME-banking Few pure SME-banks • • Corporate banks Microfinance banks Non-bank FIs … seen as a growth area • • Different skill set required Bank access to finance Bank ownership Regulations Norfund contribution • • • Training support Stable long-term funding Active ownership Influence strategy Governance and compliance We look for the players we believe will be the winners in this segment Financial success and development effects are interrelated

CRITICAL TO REDUCE THE LARGE UNBANKED POPULATION Served by microfinance • Subscale and inefficient

CRITICAL TO REDUCE THE LARGE UNBANKED POPULATION Served by microfinance • Subscale and inefficient • Limited product offering 70 -80% of adult population unbanked Opportunity for banks • • Cheap funding Reduce foreign reliance Upsell opportunities Growth business Banks have been reluctant • Too costly to serve • Informal sector • Economically inefficient Norfund’s contribution New distribution channels • Mobile and agency banking • • Finance mass market banking Deposit taking microfinance Electronic distribution channels “Stamp of approval”

CURRENT NORFUND FI PORTFOLIO Direct Norfund • 30 loans • 9 equity investments •

CURRENT NORFUND FI PORTFOLIO Direct Norfund • 30 loans • 9 equity investments • 4 FI funds MNOK 3 240 MNOK 1 220 MNOK 590 Asia Central America Africa COMMITMENTS 5, 048 MNOK (~650 MUSD) as of 31. 12. 2016 Other financial services 13% Microfinance 21% SECTORS Nordic Microfinance Initiative • About 10% of Norfund FI portfolio • MFIs in Africa and South Asia Arise • About 50% of Norfund FI portfolio • 10 banks in Sub-Sahara Africa Banks 66%