Unaudited semi-annual report as at 30 September 2015 Rapport semestriel non révisé au 30 septembre 2015
Microfinance for community development
The case of the MFI Pana Pana active in the poorest region of Nicaragua
In collaboration with
LMDF has been granted the LuxFLAG Microfinance Label
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Content // Sommaire
Page
04 LMDF in figures LMDF en chiffres
06 Report of the board of directors to the shareholders Rapport du conseil d’administration aux actionnaires 08 LMDF's Vision and Mission
09 Summary (Français / Deutsch) 10 Management report on activities
Rapport d’activité du gestionnaire 16 Microfinance institution in focus
Présentation d'une institution de microfinance 16 // 1 Pana Pana, Nicaragua
17 // 2 Four questions to Lucila Law Blanco, General Manager of Pana Pana, Nicaragua Quatre questions à Lucila Law Blanco, directrice générale de Pana Pana, Nicaragua 22 Statutory information
Organisation
24 Unaudited semi-annual financial statements États financiers semestriels non révisés 24 // 1 Statement of net assets
État des actifs nets
26 // 2 Statement of operations and other changes in net assets État des opérations et des variations des actifs nets 28 // 3 Statistical information
Informations statistiques
30 // 4 Statement of investments and other net assets État du portefeuille-titres et autres actifs nets
32 // 5 Breakdown of microfinance investment and evolution of NAV
Répartition des investissements en microfinance et évolution de la VNI 35 // 6 Notes to the unaudited financial statements
Notes aux états financiers non révisés
The pictures in the present report show clients and staff of the microfinance institution Pana Pana in Nicaragua.
Les photos présentées dans ce rapport montrent les clients et les employés de l’institution de microfinance Pana Pana au Nicaragua.
© Photos: Pana Pana // Clio Therage // WaterAid // LMDF
LMDF in figures // en chiffres
30 September 2015 // 30 septembre 2015
Note: The figures stated in this section of the report relating to information received from microfinance institutions are as at 30 June 2015 and largely based on unaudited information. The calculations follow, wherever applicable, the Microfinance Investment Vehicles Disclosure Guidelines as published by CGAP in 2010.
EUR 18.0 million
Investments in microfinance
33
Microfinance institutions financed directly3
Regional funds and support structures18
Countries1
Service provider61%
Latin America24%
Southeast and Central Asia12%
Sub-Saharan and North Africa3%
Developed countries12%
Financing in local currency596,317
Micro-entrepreneurs financed by partner MFIs
EUR 378 million
Total micro-loan portfolio of partner MFIs
74%
WomenEUR 1,218
Average disbursed micro-loan
31,587
Micro-entrepreneurs financed by LMDF
189
Number of university students financed49%
Micro-loans for services and small trade32%
Agricultural activities7%
Production and crafts12%
Other usesEUR 490,000
Average exposure per MFI
3.3%
Twelve months return Class A shares
4.2%
Twelve months return Class B shares
2.8%
Twelve months return Class C shares
1 USA MFX Solutions
Higher Education Finance Fund LP 2 El Salvador PADECOMSM Crédito
AMC
OPTIMA
3 Nicaragua Pro Mujer PANA PANA
MiCrédito
FUNDESER
4 Honduras Pilarh OPDF
ODEF
AMC
5 Ecuador Fundación Alternativa Coop. Maquita Cushunchic
FACES
INSOTEC
6 Peru IDESI Nacional
CREDIFLORIDA
FONDESURCO
7 Niger ASUSU
8 Cambodia Intean Poalroath Rongroeurng
SAMIC
Chamroeun Microfinance 9 Philippines Gata Daku MPC
KPS-SEED
10 South Africa Tembeka Social Investment 11 Uruguay Microfin
12 Azerbaijan FINCA 13 Guatemala ASDIR
ADISA
FUNDAP
14 Mali Soro Yiriwaso 15 Morocco AMSSF / MC
INMAA
16 Mongolia Khan Bank
17 Haiti ACME
18 East Timor TRM 1
2 34 5
6
7
8 9
11 10
12
13 14
15
Learn more about LMDF's portfolio of MFIs: www.lmdf.lu
16
17
18
The Board of Directors is pleased to present this report on the first half of its sixth year of operations.
The net assets of the Fund have increased by 7.9% in the period from EUR 19.8 million to EUR 21.4 million thanks to additional contributions from shareholders of EUR 1.2 million and the positive results of operations.
This growth is not yet reflected in the Fund’s investments in microfinance, which have grown marginally from EUR 17.9 million at the last year end to EUR 18.0 million, as the Fund seeks qualifying investments of suitable quality. Cash and cash equivalents stand at EUR 3.4 million and represent 16% of net assets compared to 10.6% at the year end.
The Fund will be focusing between now and the year end, on reducing its excess liquidity.
Returns to investors for the six-month period remain stable compared to those of the first half of last year at 1.5% (Class A), 1.9%
(Class B) and 1.1% (Class C).
The Fund intends to continue to offer an attractive proposition to its targeted investors, enabling the Fund to grow while maintaining control over costs, and achieve the twin goals of maximising social impact and producing stable financial returns to investors. An important step in cost control was achieved, through the agreement reached recently with ADA, our Investment Advisor, to reduce its advisory fee as a percentage of assets under advice with effect from October 1, 2015, with a further reduction in future subject to certain growth targets being met. Further details are given in Note 3 to the attached financial statements.
As has been the case in previous annual and semi-annual reports we have selected one microfinance institution in which we have invested, in this case Pana Pana a
Nicaraguan MFI, to help illustrate how your Fund can have a strong positive impact on the lives and activities of people in some of the poorest regions of the world.
Corporate governance
At the AGM of the Fund held on 2 July 2015, the shareholders approved the appointments of Mr Michel Haas and Mr Manuel Tonnar, previously co-opted to the Board. Three further nominations were approved, which at the date of this report are still subject to the approval of the CSSF. Mr Marc Elvinger did not present himself for re-election to the Board, but continues to be a member of the Fund’s Investment Committee.
There are no disclosures required to be made by the Fund in relation to changes in the Prospectus since June 2014.
The Board of Directors is responsible, in accordance with the terms of the Articles of Association and the Prospectus for the overall management and control of the Fund and for implementing the Investment Objectives and Policy of the Fund. The day to day management of the Fund has been delegated to Kaspar Wansleben, Executive Director. The Board has selected and retained ADA (Appui au Développement Autonome a.s.b.l.) as its investment adviser to provide the services of identification, evaluation and selection of investment and disinvestment opportunities as well as the review, supervision and monitoring of its microfinance investments.
The Board has established the following committees whose role is to support and make recommendations to the Board in their areas of activity.
Report of the Board of Directors to
the shareholders
The Investment Committee, which has six members, considers recommendations from the investment adviser on investment and disinvestment opportunities.
The Risk Committee, which has four members, provides direction, advice and oversight with regard to LMDF’s risk management and reporting framework, including risk policies, processes and controls.
The Marketing Committee, which has two members, oversees the Fund’s marketing strategy including the development of the shareholder base.
The Employment Committee, which has three members, reviews the objectives, performance and remuneration of management.
The Board has resolved that membership of the above Committees may be open to non-directors on a limited basis, to the extent that the majority of the members of each Committee are directors of the Fund.
The members of the Board do not receive any remuneration as directors, apart from the reimbursement of expenses incurred for Fund business and approved in advance by the Board.
The Alternative Investment Fund Managers Directive
The Alternative Investment Fund Managers Directive (“AIMFD” or “the Directive”) was transposed into Luxembourg law on 12 July 2013 and became effective on 22 July 2013.
In October 2013, the Fund has registered as a self managed Fund; as the net assets of the Fund remain below the threshold of EUR 100 million, the AIFMD reporting requirements for the Fund are limited.
The Board wishes to thank the shareholders for their continued support.
The Board of Directors November 26, 2015
Kenneth Hay Chairman
Rosa, community bank member in the North Atlantic Autonomous Region of Nicaragua - RAAN // Pana Pana
LMDF aims to contribute to the alleviation of poverty by supporting organizations that empower people and stimulate entrepreneurship, with a particular focus on the most excluded. The Fund facilitates access to responsible finance by building sustainable links between investors, microfinance institutions and ultimate beneficiaries.
• Constitutes an attractive investment proposition by balancing stable financial returns to investors with the provision of responsible financial services to the poor.
• Specializes in facilitating the growth of promising emerging microfinance institutions which address the financial needs of marginalized communities and individuals in developing countries.
• Enables the development of micro-entrepreneurs in areas where unmet needs are largest, particularly among women, youth and rural populations.
• Is accessible to public, institutional and retail investors; is accountable for reaching both social and financial objectives; and is transparent in its reporting.
Mission
In order to realize its Vision, LMDF
Vision
Résumé / Zusammenfassung
Ce rapport semestriel couvre les six pre- miers mois de l'exercice 2015/16. Le Fonds ne cesse d'innover pour devenir une «proposition d'investissement attrayante en équilibrant des rendements stables pour les investisseurs avec la provision de services financiers responsables pour les pauvres» (extrait de notre mission). Nous vous présentons aussi l’IMF indigène Pana Pana au Nicaragua, active le long de la côte atlan- tique, où se trouvent les régions les plus pauvres du pays, souvent touchées par des tempêtes tropicales et des ouragans. Nous vous invitons à découvrir leur travail à travers une interview avec la directrice générale et quelques illustrations de leurs activités.
Lors de l’exercice précédent, LMDF a poursuivi ses activités d'investissement: huit crédits sup- plémentaires ont été attribués, dont 1 aug- mentation de financement pour un partenaire existant et sept en faveur de nouvelles IMF. Au 30 septembre 2015, 61% des investissements du fonds étaient effectués en Amérique latine, 13% en Afrique, 23% en Asie et 3% dans les pays développés.
Dans l'ensemble, le portefeuille d'investissements du Fonds a légèrement augmenté pour atteindre 18.0 millions d'euros fin septembre contre 17.9 millions d'euros fin mars 2015 et les actifs nets du LMDF atteignent 21.4 millions d'euros contre 19.8 millions d'euros six mois auparavant.
Les coûts relativement élevés de la structure du LMDF ont été revus avec le conseiller en investissement ADA, ce qui a abouti à un accord d'honoraires révisés. Les frais de conseil seront réduits à 1.70% à compter du 1 octobre 2015 et de 0.10% supplémentaires une fois que les investissements gérés par ADA dépasseront les 25 millions d'euros. Le rendement des douze derniers mois est de 3.3% pour la classe A, 4.2%
pour la classe B et 2.8% pour la classe C.
Au cours de la période considérée, LMDF a suivi de près la situation des trois IMF partenaires. Le Fonds été exposé au risque de pays en Argen- tine mais ceci est aujourd'hui résolu à travers un remboursement.
Dieser Halbjahresbericht des Luxembourg Microfinance and Development Fund deckt die Aktivitäten der ersten sechs Monate des Ge- schäftsjahres 2015/16 ab. Der Fonds entwickelt sich weiterhin zu einer "attraktiven Anlage mit einer Balance zwischen stabilen Renditen für Inves- toren und der Entwicklung von verantwortlichen Finanzdienstleistungen für die Armen" (Auszug aus unserem Leitbild). Wir präsentieren in diesem Bericht die Arbeit der Mikrofinanzinstitution Pana Pana aus Nicaragua. Pana Pana arbeitet an der Atlantikküste, eine Region die zu den ärmsten des Landes zählt und häufig von tropischen Stürmen getroffen wird. Wir laden Sie ein, mehr über die Region und Arbeit der MFI durch das Interview mit der Geschäftsführerin und durch zahlreiche Fotos zu entdecken.
Der Fonds setzte in den vergangenen sechs Monaten seine Investitionstätigkeit fort. Es wurden acht Kredite vergeben, einen zur Aufstockung der Finanzierung von einem bestehenden MFI Partner und sieben zur Finanzierung neuer MFIs. Das Portfolio teilte sich zum 30. September wie folgt auf: 61% in Lateinamerika, 13% in Afrika, 23% in Asien und 3% in entwickelten Ländern.
Insgesamt erhöhten sich die Mikrofinanzinvesti- tionen des Fonds leicht auf EUR 18.0 Millionen im Vergleich zu EUR 17.9 Millionen Ende März und das Nettovermögen erreicht EUR 21.4 Millionen im Vergleich zu EUR 19.8 Millionen.
Die relativ hohen Kosten der LMDF Struktur wurden mit dem Anlageberater ADA überarbeitet und die Honorarvereinbarung wurde daraufhin an- gepasst. Die Beratungsvergütung wurden ab dem 1. Oktober 2015 auf 1.70% reduziert, und eine weitere Reduktion um 0.10% tritt in Kraft sobald das durch ADA verwaltete Investitionsvermögen EUR 25 Millionen überschreitet. Die Nettorendite der letzten zwölf Monaten beträgt 3.3% für Klasse A, 4.2% für die Klasse B und 2.8% für Klasse C Aktionäre.
Bezüglich der Risiken im Fonds verfolgt LMDF die Situation von drei MFI Partner enger. Zudem bestand ein Länderrisiko in Argentinien welches zum Ende der Berichtsperiode durch Rückzahl- ung gelöst wurde.
This report covers the first six months of the 2015/16 financial year and confirms that the Fund is continually innovating to become an
“attractive investment proposition by bal- ancing stable returns to investors with the provision of responsible financial services to the poor” (see our mission statement).
LMDF’s relatively high cost structure has been a concern to current and potential investors. Negotiations between LMDF and its investment advisor, ADA, have led to a revised fee agreement aligned with our cur- rent growth strategy. Under the agreement ADA reduced its advisory fees by 0.25% ef- fective 1 October 2015 and a further 0.10%
once the assets under advice reach EUR 25 million. We strongly believe that this is an important step in addressing shareholder concerns while linking cost efficiency to growth.
This report features an emerging micro- finance institution from Nicaragua, Pana Pana. Pana Pana is active along the Atlantic coast, one of the poorest regions in Nicara- gua and often impacted by tropical storms and hurricanes. We invite you to discover the work of Pana Pana through an interview with the General Manager and some illus- trations of their activities.
/ Investment activities
The Fund finalized eight transactions with microfinance institutions (“MFIs”) during the first six months of the financial year and disbursed EUR 3.4 million. Seven out of the eight transactions were with new MFIs, ex- panding the number of partners we finance to 37. Among the transactions we highlight:
• A first loan to the microfinance institu- tion ACME in Haiti, active since 1997
including the period after the devastat- ing earthquake of 2010. ACME finances the active population in the capital Port-au-Prince and in secondary cities throughout the country;
• Another new partner is the microfinance institution Tuba Rai Metin in East Timor.
TRM is one of the leading microfinance institutions in a country emerging from its struggle for independence and with large development challenges;
• A first financing has been granted to the MFI Chamroeun in Cambodia. Cham- roeun has an inspiring social business model oriented to the needs of house- holds below the mainstream of the microfinance market in Cambodia.
During the period six senior loans to MFIs matured and were paid back in full. In addi- tion, the Fund negotiated pre-payments of part of the outstanding loans with two MFIs due to breaches in the loan covenants in place. Finally, the Fund was impacted by the coup in Burkina Faso where one transaction was put on hold.
Investment activities and cash inflows from MFIs balanced each other with the portfolio of microfinance investments increasing only slightly from EUR 17.9 million end of March to EUR 18.0 million end of September, an increase of 0.5%. At the same time EUR 1.2 million of new shareholder funds helped to increase the total net assets of LMDF by almost 8% to EUR 21.4 million.
As a consequence the investment quota of the Fund dropped from 90% (31 March) of net assets to 84% as at 30 September.
Management report on activities
Note: Note: National Loan Size Ratio is the average loan size granted by microfinance institutions in each country divided by the GDP per capita.
Source: LMDF analysis of data submitted by MFIs as at 30 June 2015, excluding certain indirect investment in microfinance ; International Monetary Fund estimated GDP per capita 2015, converted into EUR; United Nations Development Program Human Development Index 2014;
Market segments derived from MicroRate (2014) : Performance and Social Indicators for Microfinance Institutions
GRAPH 1:
MICROFINANCE INVESTMENTS BY REGION AND COUNTRY (in % of microfinance portfolio)
Source: LMDF analysis as at 30/09/2015
GRAPH 2:
NATIONAL LOAN SIZE RATIO AND HUMAN DEVELOPMENT INDEX BY COUNTRY
Ecuador Nicaragua El Salvador Peru Guatemala Honduras Haiti Uruguay Cambodia Philippines East Timor Niger Mali South Africa Morocco Mongolia Azerbaijan USA
Latin America 61%
Southeast Asia 17%
Sub-Saharan Africa 8%
Developed countries 3%
0 5 10 15 20
North Africa 5%
Central Asia 6%
0%
25%
50%
75%
100%
Cambodia
0.584
0.471
Haiti Mongolia El Salvador Nicaragua Peru Niger Honduras Ecuador Guatemala Morocco Azerbaijan Mali Philippines Uruguay
0.698 0.662
0.614 0.737 0.377 0.617
0.711 0.628
0.617 0.747
0.407 0.660 0.790 Medium market segment
Lower market segment National loan size ratio (see note) 0.584 Human Development Index
Source: LMDF analysis of weighted average data provided by partner MFIs as at 30/06/2015
Source: LMDF analysis of weighted average data provided by partner MFIs as at 30/06/2015
GRAPH 3:
ECONOMIC PURPOSE OF MICRO- CREDITS FINANCED BY LMDF (in %)
GRAPH 4:
ACTIVE MICRO-ENTREPRENEURS FINANCED BY LMDF
The geographic composition of LMDF’s portfolio remained largely stable. Latin America and the Caribbean remained a central region, comprising 61% of all invest- ments (62% at the year-end 31 March) in eight countries (Graph 1). LMDF’s only investment in Argentina matured, while the Fund made its first investment in Haiti.
Through the first investment in East Timor, the share of Southeast Asia increased slightly (17% end of September compared to 16% in March) while the share of invest- ments in North Africa (5% compared to 4%
in March), Central Asia (6% compared to 7%) and Sub-Saharan Africa (8% compared to 9%) remained stable.
/ Social performance
LMDF’s investments in Haiti and East Timor illustrate that social performance consid- erations continue to be integral part of our decisions. Although measurement of social performance across the portfolio remains methodologically challenging, we continue to report proxy indicators developed in our Social Performance Report: “Driving Social Impact Through Microfinance: Social Per-
formance Report 2010 – 2015”, available for download on our website.
Graph 2 shows our portfolio by country (with the exception of East Timor, for which data will be available in the next report) and market segmentation into lower and me- dium market segments. The Graph provides strong indication of the focus of our part- ner MFIs on the lower part of the medium market segment, suggesting an orienta- tion towards the needs of relatively poorer households.
Of the final clients, 74% are women (an increase from 72% in March), and financ- ing for smallholder agriculture constitutes a third of the total portfolio. The investment in the Higher Education Finance Fund is gain- ing momentum with almost 2,000 students from low-income households reached, 10%
of whom are financed by LMDF.
/ Financial performance
The Fund maintained stable financial returns in line with its objectives, despite a more adverse currency environment. Despite a slightly lower investment quota, income from
Consumption & others Production & craft activities Agricultural activities Services & trading activities
Services/
trade activities 49%
Agricultural activities 32%
Production/
crafts activities 7%
Consumption
& others
12% Women
23,463 (74%) Men
8,124 (26%)
Total 31,587
microfinance and liquid assets remained stable at 7.2% of average net assets during the period (annualized).
The cost structure of the Fund also remained stable, albeit at a high level evidenced by a total expense ratio (TER) of 3.5%. The revised advisory fee structure — which became effective on 1 October 2015 — establishes a decreasing trend for the TER in the future.
Net returns of the NAV/Share during the last twelve months were 3.3% for Classes A, 2.8% for Class C and 4.2% for Class B shareholders (Graph 6).
/ Risk review
During the reporting period, LMDF closely monitored the situation of three partner MFIs, and was exposed to the country risk in Argentina where the conversion of a loan from Argentinian Pesos to US-Dollar proved to be challenging, but has now been resolved.
- Credit risks
Note 6 to the financial statements provides shareholders with improved transparency on the provisions the Fund has made on financial instruments with three microfinance institu- tions: IDESI Nacional and Crediflorida in Peru and Microfin in Uruguay.
The provision on the loan granted to the MFI Crediflorida in Peru was originally made in March 2014. Increased risk of default was caused by the impact of the coffee rust on many of the MFIs’ clients, mostly smallholder
coffee farmers. As at 30 September 2015 the situation is stable, with risks mainly arising from the MFIs’ funding structure. The Board decided to maintain the provision of 10% or EUR 62,696 on the principal amount out- standing pending further improvements.
During the last financial year, the Fund made a provision against its exposure to the mi- crofinance institution IDESI in Peru. IDESI is facing a number of strategic challenges in a competitive market. The provision accounts for 10% of the outstanding principal amount.
Due to a partial pre-payment of the loan, the provision has decreased to EUR 25,727 at the end of September. Further payments are expected when the loan matures at the end of October 2015.
During the reporting period, the Fund also made a 10% provision against the exposure towards the MFI Microfin in Uruguay. Microfin’s financial position has deteriorated significantly.
The Fund has negotiated a pre-payment whereby the MFI will pay back its loan in full by the beginning of February 2016.
The Fund’s risk diversification improved significantly and its average exposure to MFIs decreased from 2.8% of total net assets at the end of March to 2.3% at the end of September.
In line with the overall growth in net assets, the Fund’s largest exposures decreased from more than 5% of net assets to below 4.5%.
LMDF’s average exposure to MFIs is EUR 490,000, in line with our focus on emerging microfinance institutions.
Rural areas are inhabited almost entirely by indigenous population. These women are members of the solidarity groupe "Aguacate" // Pana Pana
GRAPH 6:
DEVELOPMENT OF NAV PER SHARE OF CLASS B AND CLASS C SHARES DURING THE LAST 12 MONTHS (in EUR)
GRAPH 5:
LIQUID ASSETS AND MICROFINANCE INVESTMENTS (in EUR)
Source: LMDF analysis
Source: LMDF analysis
30/09/2015
30/09/2014 31/12/2014 31/03/2015 30/06/2015
Microfinance investments Liquid assets
0 2,000,000 4,000,000 6,000,000 8,000,000 10,000,000 12,000,000 14,000,000 16,000,000 18,000,000 20,000,000 22,000,000
Class C Class B
30/06/2015 31/03/2015
31/12/2014
30/09/2014 30/09/2015
100 101 102 103 104 105 106 107
+ 2.8%
+ 4.2%
108
- Currency risk
The Fund maintained its conservative ap- proach to currency risks in volatile markets.
67% of the Fund’s total net assets are invest- ed in instruments denominated in USD. The USD-EUR market risk is a significant risk for the Fund and continues to be hedged through forward foreign exchange instruments.
In the current environment, the Fund’s risk committee is reviewing the Fund’s hedging policy in the interest of protecting assets and interest income to the fullest extent possible.
- Country risks
Ecuador, Cambodia and Nicaragua constitute the three most important countries in LMDF’s portfolio. The average country exposure decreased significantly to 4.7% of total net assets at the end of September (5.3% end of March). The five most important countries now concentrate 47% of total net assets, a decrease of 10% compared to March 2015.
The Fund and its local partner MFI faced sig- nificant regulatory challenges to convert the matured senior loan from Argentinian Pesos into US-Dollars and repatriate the amount to Luxembourg. After a five-month process, the situation was resolved at the beginning of October 2015.
/ Outlook
Management laid out three strategic priorities for the year 2015/16: (1) Ensure that the Fund is fully invested, (2) increase its size and (3) improve its cost efficiency:
1. Mid-year, LMDF is slightly below its op- timal investment level, mainly caused by unusual events such as two prepayments and the coup in Burkina Faso. However efforts are underway to address the situ- ation by the end of the year;
2. The Fund realized an increase of 8% in net assets during the first six months, while discussions for additional funding from current and prospective investors are ongoing;
3. The agreement reached with the invest- ment advisor, ADA, is an important step in improving the Fund’s cost structure and efficiency with immediate effect.
Although progress has been made, work remains on all three priorities to ensure LMDF is on track to constitute an attractive invest- ment proposition to the Luxembourg public, institutional and private investors.
As always, we very much welcome your com- ments or questions.
Kaspar Wansleben Executive Director (kaspar@lmdf.lu)
Note: The figures stated in this report are historical and partly based on unaudited information received from microfinance institutions. Such figures are not necessarily indicative of future performance. The calculations follow, wherever applicable, the Microfinance Investment Vehicles Disclosure Guidelines as published by CGAP in 2010.
Well drilling for safe drinking water // Pana Pana
Founded in 1990, Pana Pana started its microfinance program in 1997, making it a pioneer NGO in the region of the RAAN. This region has a legal status of autonomy and has been self-governed since 1990. The cultural, linguistic and political differences make it a marginalized region.
Very little help from the central government is given. In this context, NGOs such as Pana Pana are important providers of essential services to the majority of the inhabitants.
In line with its vision, Pana Pana targets poor and extremely poor people and focuses on rural populations and women, which form 71% of their clientele. By offering products tailored to the ethnic diversity of the region, the institution contributes to the improvement of their living conditions.
Today, the institution serves more than 2,000 clients through 3 branches in different productive sectors such as fishing, small industry, commerce, housing improvement, smallholders and various services.
In this very poor and isolated region of Nicaragua, the access to safe water and sanitation is challenge, both in rural and peri- urban areas. Together with the Fundación Interamericana and WaterAid America, Pana Pana has, to date, been able to meet the direct needs of more than 800 families with rainwater recovery systems, perforations, improving wells and ecological sanitation.
In February 2013, LMDF granted a USD 200,000 loan to Pana Pana to facilitate the MFI's growth.
Microfinance institution in focus
Pana Pana, Nicaragua
Pana Pana is an indigenous Nicaraguan NGO, active in the North Atlantic Autonomous Region (RAAN) where over 70% of the population lives below the poverty line.
Source: Data provided by Pana Pana / ADA asbl
70% of clients are women
More than 800 families now have access to water 2,650 clients in a
100% indigenous community
3 branches
EUR 1,697,237 loan portfolio
Strong focus on poverty and human development at country level
1
Four questions to
Lucila Law Blanco
General Manager of Pana Pana
Mrs Law Blanco, can you briefly tell us about PANA PANA’s development since the beginning of its operations?
The Asociación para el Desarrollo de la Costa Atlántica “PANA PANA" is a civil not- for-profit organization, originated and indig- enous from the Caribbean and North Coast of Nicaragua. It was founded in November 1990 with the aim of contributing to the solu- tion of the most sensitive problems in the Atlantic region, giving priority to indigenous communities and sectors with higher rates of extreme poverty.
Pana Pana was the first not-for-profit organi- zation originating from the region that suc- ceeded in establishing microcredit services in indigenous communities and urban sec- tors of the North Atlantic Autonomous Re- gion (RAAN) while contributing to community development by self-help housing projects, agroforestry projects, environmental protec- tion and technical assistance. It obtained its legal status in February 1991.
It was born in a context of post-war, during the return of people to their communities of origin after the civil war of the '80s. This is why its operations started with projects for agricultural rehabilitation and self-help housing.
Pursuant to its mission, PANA PANA has been implementing two programs: the mi- crofinance program and a rural development program with a focus on life improvement.
The microcredit service provided by Pana Pana originates in 1996 with a small revolv- ing fund that benefited 50 heads of house- hold; today the loan portfolio serves 2,260 clients in various productive sectors: fishing, small industry, commerce, housing improve- ment, smallholders and microcredit to vari- ous services.
Through the microcredit program, the social bases were organized and created to provide microcredit services to the urban and rural population in the towns of Waspam and Puerto Cabezas; it was later extended to the town of Rosita and Bonanza. From the beginning, the program was geared toward people who have never had the possibility of having access to credit in the formal financial systems, an alternative to income generation and employment, and above all, the hope to improve the quality of their families as they often do not have formal guarantees or live in isolated or inaccessible areas.
We started supporting 50 people and today we serve 2,650 heads of families with mi- crocredit, contributing to job creation and income generation, which enable single mothers or heads of poor families, mostly Miskitos, to have more possibilities to ensure the education of their children, to improve the nutrition of their children and to grow as small traders or improve agricultural produc- tion and small cattle raising. The financial products we offer today are commerce, traditional fishing, storage and commerciali- zation of seafood, agricultural production, services, housing improvement, water and sanitation.
2
With the rural development program we implement various projects that help reduce poverty in the rural area, which is inhabited by a nearly 100% indigenous population.
We promote and contribute to local capac- ity building, the promotion of community micro-enterprises and community forestry, the promotion of agricultural production that is friendly to the environment, the strengthen- ing of the community organization and new friendly practices to mitigate environmental effects of climate change. To date, more than 40 indigenous and mestizo communi- ties have benefited in the northern Caribbean coast of Nicaragua.
Pana Pana has been regulated by the Na- tional Microfinance Committee (CONAMI) since 2013.
The RAAN is a marginalized region and is characterized by extreme poverty. What challenges are you confronted by and how do you face them?
Nicaragua's Atlantic Coast has a vast terri- tory, which covers about 46% of the national territory (59,673.60 square kilometres), and 53% of natural resources of the country. The North Atlantic Autonomous Region (RAAN), is composed of seven municipalities (dis- tributed on 32,127.28 square kilometres), of which six are governed by the Statute of Autonomy (Waslala is attached to the depart- ment of Matagalpa). It is characterized by its affluence of natural resources, significant rural population, large indigenous population
and limited access to basic services such as education, health and communication.
The Atlantic Coast is a totally different reality regarding the culture, language, ethnicity, religion, politics and history in comparison to the rest of Nicaragua.
The biggest challenges we face to work on the Northern Caribbean of Nicaragua are:
• High vulnerability to natural disasters
• Political polarization
• Citizen insecurity
• Paternalism rooted in the population, especially the rural population
• Severe poverty and extreme poverty
• Lack of good roads
• Lack of public transportation
• Widely dispersed population
• Lack of human resources with experi- ence in microfinance
• Incipient agriculture and subsistence production
• Lack of job opportunities
• The Caribbean region is an area with little access to credit, and this deepens even more in the case of rural women Gender inequalities in the Nicaraguan Carib- bean are evident at the level of unemploy- ment of women, the area in which they are occupied or the level of underemployment that they have and their access to land.
The main challenges we face today are achieving a higher level of market penetra- tion; maintaining the quality of the portfolio as the loan portfolio grows; growing healthily, and finding strategies to develop activities in rural areas and improve the management level, especially in terms of governance and appropriate internal operating systems.
"Our objective is to strengthen local,
institutional and community capacity for
sustainable delivery of safe water, sanitation
and hygiene education"
We face the challenges with as our mission as a main guide, through which declare that
"Pana Pana" is an indigenous institution of the Northern Caribbean Nicaragua (RAAN) that provides financial services in a timely and efficient manner to poor women and men, preferably those with an entrepreneurial spirit, in urban and rural areas of the Autono- mous Regions of the Caribbean Coast of Nicaragua. We strive to provide equal oppor- tunities with a focus on gender. We endeavor to be a competitive and profitable microfi- nance institution that provides services of quality, recognized for its impact on improv- ing the quality of life of women and men entrepreneurs and rural and urban families of the Nicaraguan Caribbean Coast. To do this, we have considered the following strategies:
• Institutional strengthening of technical, administrative, organizational and mana- gerial capacities to improve the social and financial performance in order to achieve institutional sustainability.
• Prioritize women's access to credit, en- suring the availability of 75% of funds for safe and sustainable competitive prices, adjusted to the demand, linking the at- tention with financial and non-financial services.
• Market positioning by strengthening competitive advantages and brand im- age, improving governance and strength- ening internal processes and institutional development, increasing our financial and social impacts.
• Improving the performance of personnel, infrastructure, communication technol- ogy and institutional relations, through investing in training, improved offices,
information technologies and strategic alliances with other market players.
You recently launched a loan product for water and sanitation. What were your motivations for launching it and what have been the results so far?
With the support of the Fundación
Interamericana, in partnership with WaterAid America, Pana Pana is currently conducting a pilot implementation of credit products for water and sanitation in three municipalities of the Northern Caribbean coast of Nicaragua where the shortage of safe water and improved sanitation is a factor that affects the level of poverty in indigenous communities in both rural and peri-urban areas.
The main mission of Pana Pana as indigenous organization of the Caribbean Coast of
Nicaragua is to improve the quality of life of men and women that have limited resources but a spirit of overcoming hardship through projects focusing on improvement of living and the development of microcredit for small business, improvement of housing, safe water and sanitation improvement.
To date, we have successfully responded to a total of 820 families directly in 14 rural communities and two peri-urban areas in the municipalities of Puerto Cabezas and Waspam, with recuperation systems for rainwater (SCALL), perforated wells, improved wells and ecological toilet systems.
"The LMDF funding has been fundamental in
the institutional growth of Pana Pana and for
the growth in the number of customers"
Installation of ecological toilets improved the health situation and hygiene in clients' homes // Pana Pana In the pilot phase, we have also served a
total of 10 families through microcredit with recuperation systems for rainwater, perforated wells, improved wells and ecological toilet systems. This product has had a strong impact in improving the quality of life of clients. Both beneficiaries and users of microcredit product for water and sanitation are very happy with the system because it has resolved the access to safe drinking water and, with access ecological toilets in their homes, it is also improving their quality of life by improving their health situation and hygiene in their homes. In the case of women and children, it has had a major impact, since they don’t have to carry water anymore over long distances and have more time for other activities.
Our objective in this respect is to strengthen local, institutional and community capacity in the North Caribbean Coast Autonomous Region for sustainable delivery of safe water, sanitation and hygiene education with equity and inclusion.
To what extent did the financing of LMDF help you and what are your ambitions for the future?
The LMDF funding has been fundamental in the institutional growth of Pana Pana and
for the growth in the number of custom- ers. Through the Rosita office, which was opened with a loan from the LMDF fund, we are now serving the town of Bonanza in the mining triangle with the development of small businesses, agricultural activities, housing improvement and small industries.
LMDF’s financing has also been a source of representation to project within the Microfi- nance Industry nationally and internationally, increasing the possibility for Pana Pana to acquire other funding. This has resulted in strengthening the financial capacity to meet Pana Pana's financial and social goals, which are now projected to reach more people and remote areas so that they can have access to microcredit.
In the near future, we plan to extend to the South Caribbean of Nicaragua where, as in the North Caribbean region, live indigenous people and ethnic communities that demand funding to improve their living conditions. We plan to help these poor families to fulfil their dreams. Continuing to work with LMDF al- lows us to achieve the goals we have set for the year 2016 onwards.
Translated from Spanish into English by LMDF
Due to the construction of wells, women and children don't have to carry water anymore over long distances // Pana Pana
Rainwater recuperation systems are one of the products the institutions offers to their clients living in isolated areas// Pana Pana
The institution's sanitation awareness campaign// Pana Pana Installation of ecological toilets improved the health situation
and hygiene in clients' homes // Pana Pana
Board of Directors // Conseil d’administration Chair - Président
Kenneth Hay Independent
Vice chair - Vice présidente
Hedda Pahlson-Moller Independent
Members - Membres
Viviane Clauss Banque de Luxembourg
Gilles Franck(1) * ADA - Appui au Développement Autonome asbl
Michel Haas(2) Ministry of Finance
Frédérique Lifrange(1) * Independent
Max Meyer(1) * ADA - Appui au Développement Autonome asbl Raoul Stefanetti Banque Internationale à Luxembourg Manuel Tonnar(2) Development Cooperation Department,
Ministry of Foreign Affairs
Paolo Vinciarelli Banque et Caisse d'Épargne de l'État
Kaspar Wansleben Executive Director
Investment Committee Risk Committee
Comité d'investissement Comité de risque
Marc Elvinger(3) Kenneth Hay
Gilles Franck(1) Max Meyer(1)
David Goebbels(4) Raoul Stefanetti
Michel Haas(2) Paolo Vinciarelli
Olivier Selis Raoul Stefanetti Kaspar Wansleben(1)
Marketing Committee Employment Committee
Comité de marketing Comité d'emploi
Viviane Clauss Marc Elvinger(3)
Hedda Pahlson-Moller Kenneth Hay
Manuel Tonnar(2)
(1) From 2/07/2015 (2) From 24/04/2015
(3) From 2/07/2015, independent external committee member
(4) From 7/07/2015, external committee member from the Ministry of Foreign Affairs
*pending notification of non-objection by the CSSF
Registered Office // Domicile 2, place de Metz
L-1930 Luxembourg
Trade Register Number // Registre de commerce et des sociétés
R.C.S. Luxembourg B 148.826
Statutory information
Organisation
Custodian and Paying Agent Administrative Agent, Registrar and Transfer Agent Banque dépositaire et agent de paiement Administration centrale et agent de transfert Banque et Caisse d’Épargne de l’État European Fund Administration S.A.
1, place de Metz 2, rue d’Alsace
L-2954 Luxembourg L-1017 Luxembourg
Auditors // Réviseur d’entreprises agréé Legal Advisors // Conseiller légal KPMG Luxembourg, Société coopérative Elvinger, Hoss & Prussen
39, Avenue John F. Kennedy 2, place Winston Churchill
L-1855 Luxembourg L-1340 Luxembourg
Distributors // Distributeurs Banque de Luxembourg S.A.
14, boulevard Royal L-2449 Luxembourg
Banque et Caisse d’Épargne de l’État 1, place de Metz
L-2954 Luxembourg
BGL BNP Paribas S.A.
50, avenue J.F. Kennedy L-2951 Luxembourg Fortuna Banque s.c.
130, boulevard de la Pétrusse L-2330 Luxembourg
Foreign Currency Settlement Agent // Agent de compensation en devise INTL FCStone Ltd,
Moor House, 1st Floor, 120 London Wall London EC2Y 5ET
United Kingdom
Foreign Currency Hedging Provider // Contrepartie de couverture de risque de change MFX Solutions, Inc.
1050 17th St. NW, Suite 550 Washington DC, 20036 United States of America
Banque et Caisse d’Épargne de l’État
1, place de Metz L-2954 Luxembourg Identity numbers // Code d’identité
Class B shares Class C shares
ISIN: LU0456966935 ISIN: LU0456967404
Bloomberg: LMDSVCB:LX Bloomberg: LMDSVCC:LX
Telekurs: 10633787 Telekurs: 10633788
Microfinance expertise // Expertise en microfinance Arranger and Servicer to Micro, Small &
Medium Enterprises Bonds S.A.
Symbiotics SA 75, rue de Lyon CH-1203 Geneva
General Partner of the Higher Education Finance Fund LP
OMTRIX Inc.
Oficentro La Virgen No.2, Edificio 1, Piso 1 Zona Industrial de Pavas,
San José, Costa Rica Investment advisor // Conseiller en investissement
ADA - Appui au Développement Autonome asbl 39, rue Glesener
L-1631 Luxembourg
Assets – Actif Notes EUR Shares (and equity-type securities) in regional microfinance 1 408,592 investment vehicles
Actions (et instruments similaires) dans des structures régionales d'investissements en microfinance
Shares (and equity-type securities) in microfinance institutions 175,494
and service providers
Actions (et instruments similaires) dans des institutions de microfinance et structures de support
Loan agreements with microfinance institutions 6 15,924,407
Contrats de prêt avec des institutions de microfinance
Notes backed by loans to microfinance institutions 7 1,164,353 Notes financées par des prêts aux institutions de microfinance
Unrealized appreciation on swap contracts 5 10,403
Plus-value non réalisée sur contrats de swap
Cash at banks 3,203,309
Avoir en banques
Savings account 205,352
Compte d’épargne
Net interest receivable on portfolio 313,526
Intérêt nets à recevoir sur le portefeuille Interest receivable on bank accounts and term deposits 1,024
Intérêts à recevoir sur avoirs en banque et dépôts à terme
Receivable on matured investments 476,388
A recevoir sur portefeuille
Other receivable & assets 8 17,115
Autres actifs
Total assets 21,899,963
Somme d'actifs
The accompanying notes form an integral part of this report.
Unaudited semi-annual financial statements Etats financiers semestriels non révisés
as at 30 September 2015 // au 30 septembre 2015
// 1 Statement of net assets
État des actifs nets
Liabilities – Passif Notes EUR
Accrued expenses 8 216,910
Provision pour frais à payer
Unrealised depreciation on forward foreign 5 185,656
exchange contracts
Moins-value non réalisée sur contrat de change à terme
Payments received in advance 100,314
Paiements reçus d'avance
Total liabilities 502,880
Somme des passifs
Net assets at the end of the period 21,397,083
Actifs nets à la fin de la période
A Class shares outstanding 168,238.537
Nombre d’actions en circulation de la Classe A
Net asset value per A Class share 25.62
Valeur nette d’inventaire par action de la Classe A
B Class shares outstanding 136,338.200
Nombre d’actions en circulation de la Classe B
Net asset value per B Class share 107.91
Valeur nette d’inventaire par action de la Classe B
C Class shares outstanding 22,143.484
Nombre d’actions en circulation de la Classe C
Net asset value per C Class share 107.25
Valeur nette d’inventaire par action de la Classe C
Shortage of safe water and improved sanitation affects the level of poverty in indigenous communities in rural and peri-urban ares // Pana Pana
Income – Revenus Notes EUR
Interest on microfinance loan agreements 738,543
Intérêts sur contrats de prêt en microfinance
Net interest paid on swap contracts (16,484)
Intérêts nets payés sur contrat swap
Net interest on microfinance loan agreements 722,059 Intérêts nets sur contrats de prêts en microfinance
Commission on microfinance loan agreements 34,687
Commission sur contrats de prêts en microfinance
Interest on bank accounts and term deposits 1,597
Intérêts bancaires et dépôts à termes
Other proceeds 0
Autres produits
Total income 758,343
Somme des revenus
Expenses – Frais
Advisory fees 3 154,640
Frais du conseiller en investissement
Salary and wages of the fund management 3, 11 97,898
Charges salariales de gestion du fonds
Custodian fees 9,440
Commission de la banque dépositaire
Central administration costs 38,848
Frais de l’administration centrale
Banking charges and other fees 1,525
Frais bancaires et charges liées
Transaction fees 11,500
Frais de transaction
Audit fees 13,188
Frais de révision
Other administrative costs 8 54,629
Autres charges administratives
Subscription duty 4 0
Taxe d'abonnement
Total expenses 381,668
Total des frais
Net investment income 376,675
Résultat net d’investissement
The accompanying notes form an integral part of this report.
from 1 April 2015 to 30 September 2015 du 1er avril 2015 au 30 septembre 2015
// 2 Statement of operations and other changes in net assets
État des opérations et des variations des actifs nets
Net realised gain/(loss)
Bénéfice/(perte) net(te) Notes EUR
On investments 0
Sur investissements
On forward foreign exchange contracts 802,028
Sur contrats de change à terme
On foreign currency transactions 113,670
Sur transactions en devises
Realised result 915,698
Bénéfice/(perte) net(te) réalisé(e)
Net variation of the unrealised gain/(loss)
Variation de la plus-value/(moins-value) nette non réalisée On investment portfolio / Sur portefeuille d'investissements
Variation of impairment on microfinance loans 6 (10,131) Variation de provisions sur prêts microfinance
Variation of valuation of equity investments 77,017
Variation de la valorisation des investissements en capital
Variation due to changes in the foreign exchange rate (933,945) Variation due à l'évolution du taux de change
Total variation on investment portfolio (867,059) Variation totale sur portefeuille d'investissements
On forward foreign exchange contracts (125,957)
Sur contrats de change à terme
On cross-currency swap contracts 62,251
Sur contrats de swap de taux et change à terme
On foreign exchange transactions (11,141)
Sur transactions en devises
Unrealised result (941,906)
Bénéfice/(perte) net(te) non réalisé(e)
Result of operations 350,467
Résultat net des opérations
Subscriptions 1,221,113
Souscriptions
Redemptions 0
Rachats
Total changes in net assets 1,571,580
Variation globale de la valeur nette d’inventaire
Total net assets at the beginning of the period 19,825,503 Valeur nette d’inventaire au début de la période
Total net assets at the end of the period 21,397,083 Valeur nette d’inventaire à la fin de la période
Total net assets – Actifs nets EUR
As at 30/09/2015 21,397,083
Au 30/09/2015
Number of A Class shares – Nombre d’actions de la Classe A en circulation
Outstanding at the beginning of the period 168,238.537
Au début de la période
Issued during the period 0.000
Émises durant la période
Redeemed during the period 0.000
Rachetées durant la période
Outstanding at the end of the period 168,238.537
À la fin de la période
Net asset value per A Class share
Valeur nette d'inventaire par action de la Classe A
As at 30/09/2015 25.62
Au 30/09/2015
Number of B Class shares – Nombre d’actions de la Classe B en circulation
Outstanding at the beginning of the period 129,279.922
Au début de la période
Issued during the period 7,058.278
Émises durant la période
Redeemed during the period 0.000
Rachetées durant la période
Outstanding at the end of the period 136,338.200
À la fin de la période
Net asset value per B Class share
Valeur nette d'inventaire par action de la Classe B
As at 30/09/2015 107.91
Au 30/09/2015
The accompanying notes form an integral part of this report.
as at 30 September 2015 // au 30 septembre 2015
// 3 Statistical information
Informations statistiques
Number of C Class shares – Nombre d’actions de la Classe C en circulation
Outstanding at the beginning of the period 17,715.880
Au début de la période
Issued during the period 4,427.604
Émises durant la période
Redeemed during the period 0.000
Rachetées durant la période
Outstanding at the end of the period 22,143.484
À la fin de la période
Net asset value per C Class share
Valeur nette d'inventaire par action de la Classe C
As at 30/09/2015 107.25
Au 30/09/2015
70% of the MFI's clients are women who often engage in small trading activities // Pana Pana