Microfinance: An Overview

Ben Ridley
Regional Head of Sustainability Affairs, Asia-Pacific

Hong Kong, 18 March 2009

Microfinance: An Overview
Introduction Economic Context Microfinance Capacity Building Initiative responsAbility Social Investments AG

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Microfinance: An Overview
Introduction Sustainability Affairs Microfinance at Credit Suisse Microfinance: The Essentials Economic Context Microfinance Capacity Building Initiative responsAbility Social Investments AG

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Sustainability Affairs
Sustainability Governance
Sustainability Commitments (UN GC, UNEP FI, ISO 14001) RRSC

Issue Management
Climate change Human rights Water

General public (via CCR)

Clients
I SR tors es nv I
NGOs

Sustainability Risk Management

RRRP Industry policies Value-added client services

Media ( Corp C via o mms ) Employees

Global Initiatives
CS Cares for Climate Microfinance Capacity Building

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Microfinance at Credit Suisse

2003: Joint founder of responsAbility a social investment platform aimed at bridging the gap between the financial market and development cooperation 2007: Credit Suisse closed the first global IPO of a microfinance institution, in Mexicos Banco Compartamos 2008: Credit Suisse supports Microfinance organization capacity building in developing markets through the Microfinance Capacity Building Initiative 2008: Microfinance AuM
SRI Assets under Management
Vehicle 2008 2007 Volume in mio in CHF

responsAbility Global Microfinance Fund responsAbility Microfinance Leaders Fund responsAbility Mikrofinanz Fond (USD) responsAbility BOP Investment

399 212 80 34

217 177 95 35

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Microfinance Essentials
Investment Investors Interest Microfinance fund

Interest Interest & Principal Microentrepreneurs Micro loan

Financing

Microfinance institutions

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Microfinance Essentials

Financial Return

Corporations

Socially Responsible Companies

Social Entrepreneurs

Social Return

Charity

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Microfinance Essentials
Origins In 1976, Muhammad Yunus forms Grameen Bank (Nobel Peace Prize in 2006) South Asia is the worlds largest microfinance market Traditionally focussed on women-owned enterprises Performance Fixed-income funds yield ~5-6% Default rate on micro-loans is ~3% Growth Currently ~$25bn at work in microfinance loans Extra $250bn funding needed to make MF services available to worlds poor

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Microfinance: An Overview
Introduction Economic Context Microfinance Capacity Building Initiative responsAbility Social Investments AG

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The World Economy: 2007

Source: Angus Maddison, IMF, Credit Suisse

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The World Economy: 2030

Source: Angus Maddison, IMF, Credit Suisse

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Despite such growth, many still live in poverty...

Poverty measured by HDI

Where business is fighting poverty Endemic poverty

Source: UN, World Economic Forum
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...with over 1.4 bn people living on <USD 1.25/day

100% 90% 80% 70%
Population
5.6bn 5.1bn 4.8bn 3.8bn 3.3bn 1.3bn

5.2bn

60% 50% 40% 30% 20% 10% 0% USD 1.00 USD 1.25 USD 1.45 USD 2.00 USD 2.50 USD 10.00
.9bn 1.7bn 1.4bn 3.2bn 2.7bn

World population % above poverty live World population % below poverty line
Source: World Bank Development Indicators 2008
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Progress is being made...

UK Germany

USA
Canada Japan

Norway

45000

40000

Low-income countries Middle-income countries High-income countries

35000

25000

20000

15000

China
Bangladesh Tanzania Sudan India

Brazil

10000

5000

500

1000

1500

2000

2500

3000

3500

4000

4500

Population (million)
Source: IMF World Economic Outlook
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GDP per capita USD PPP

30000 Korea South Africa Poland

...consumption is still skewed

Worlds richest 20% consume 77%
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

20% 77% 60% US consumption has risen while population has fallen 20%
Population Poorest Middle Rich

22%
Consumption

19.0% 18.5% 18.0% 17.5% 17.0% 16.5% 16.0% 1970 1975 1980

US household consumption expenditure as % of world GDP (lhs)

5.9% 5.7% 5.5% 5.3%

Source: World Bank Development Indicators 2008, Credit Suisse

US population as % of world (rhs)

5.1% 4.9% 4.7% 4.5%

1985

1990

1995

2000

2005

Source: United Nations, Credit Suisse

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Women still earn much less than men...

MENA South Asia LATAM Sub-Saharan Africa Industrialized nations CEE/CIS East Asia and Pacific 0% 10% 20% 30% 40% 50% 60% 70%

Percentage of men's earnings

Source: UNICEF, State of the Worlds Children, 2007, Credit Suisse
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...many children remain disenfranchised

16 Populations (millions) 14 12 10 8 6 4 2 0
Yearly deaths immunized Children HIV/AIDS Deaths due to & sanitation
Source: UNICEF, Credit Suisse

15m

10.6m

2.2m

1.4m

Deaths in 2003 before age 5

due to not being orphaned due to inadequate water

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Microfinance: An Overview
Introduction Economic Context Microfinance Capacity Building Initiative responsAbility Social Investments AG

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Microfinance Capacity Building Initiative

Our mission is to contribute to the quality training of thousands of microfinance staff, to foster research, innovation and constructive dialogue in order to spread best practices and to facilitate access to financial services for hundreds of thousands of poor individuals and small enterprises in the developing world through partnerships with key NGOs. Our partners: ACCION International FINCA International Opportunity International Swisscontact

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Microfinance Capacity Building Initiative

By mid 2009 Credit Suisse programs will have directly supported and measured:
Capacity Building # training manuals/presentations developed # assessment tools developed # training programs conducted # participants trainedwho report improved productivity and efficiency Innovative Solutions # electronic wallet transactions

SME development # SME applicants for mentoring program # SMEs mentored and accessing loans

CS Staff Engagement # Credit Suisse staff signed up as MF Advocates # hits on Credit Suisse intranet website # staff volunteer hours Helping Millions Help Themselves - The Art of Microfinance exhibit

Increased Dialogue (MF and Banking) # of persons attending microfinance cross collaboration events # research items quoted

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Credit Suisse Supports Country Programs

Ukraine

China India Ghana Rwanda Brazil

South Africa Accion International Swisscontact Opportunity International FINCA International

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Partners
ACCION International (Strategic Partner)

CS is a founding partner for the Center for Financial Inclusion, a unique

solutions lab engaging microfinance organizations, the private sector, policy makers and practitioners

CS is the premier partner in the launch of ACCION training centers in India

and China. These centers will provide training in credit methodology, management, and best practices to staff at all levels

FINCA International (Strategic Partner)

CS is a premier partner for the Global Training Initiative to improve the skills
of approximately 800 global staff and increase staff by 40%
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Credit Suisse Supports ACCIONs Center for Financial Inclusion and FINCAs Regional Training Hubs

Washington DC
Global Center for Financial Inclusion

Ukraine
(Eastern Europe)

Guatemala
(Latin America)

Uganda
(Africa)

Accion International FINCA International

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Partners
Swisscontact (Regular partner)

The Ukraine Training in Financial Management program will provide up to 12

workshops by senior Swisscontact experts for staff from Ukrainian banking institutions and small and medium sized enterprises

Opportunity International (Regular partner)

CS will support the launch of the Electronic Wallet programs in Ghana and
Rwanda providing new access points to MF services for low income customers using a mix of delivery channels (mobile banks, cellular banking, etc).

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Microfinance: An Overview
Introduction Economic Context Microfinance Capacity Building Initiative responsAbility Social Investments AG

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responsAbility Global Microfinance Fund

responsAbility Social Investments AG established in 2003 Global MF is the largest of 4 active funds Funding >40 countries Funding >180 institutions
Eastern Europe 21% Central America 15% Other 11% South America 9% MENA 1% East, SE, South Asia 32% Sub-Saharan Africa 1%

Central Asia 21%

Average loan disbursed: USD 2,100 240,000 clients (50% rural; 60% women)

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Volume growth, despite turbulent times

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Positive performance
USD EUR

CHF

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Consistently positive returns

Monthly Returns USD
1.8% 1.6% 1.4% 1.2% 1.0% 0.8% 0.6% 0.4% 0.2% 0.0% -0.2% -0.4% -0.6% -0.8% -1.0%

Jan-04

Jan-05

Jan-06

Jan-07

Jan-08

Apr-07

Apr-08

Apr-06

Apr-05

Apr-04

Jul-04

Jul-05

Jul-06

Jul-07

Jul-08

Oct-04

Oct-05

Oct-06

Oct-07

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Oct-08

Disclaimer
This material has been prepared by CREDIT SUISSE or an affiliate or subsidiary thereof on the basis of publicly available information, internally developed data and other third party sources believed to be reliable. CREDIT SUISSE has not sought to independently verify information taken from public and third party sources and does not make any representation or warranty as to the accuracy, completeness or reliability of the information contain herein. This material is presented solely for informational purposes. It is not to be constructed as a forecast, recommendation, advertisement, solicitation or offer regarding any markets, securities or investment products. It is personal and confidential and may not be distributed to anyone or in any jurisdiction that would make such distribution unlawful. Nothing herein constitutes investment, legal, accounting or tax advice or a personal recommendation, and no representation is being made as to whether any investment or strategy is suitable or appropriate for a particular individual. Any views or opinions expressed are subject to change at any time without notice and may not reflect the views of CREDIT SUISSE as a whole. CREDIT SUISSE and its clients may have previously acted based on the information contained herein and may have previously or in the future take positions that are contrary to views or opinions expressed in this material. Any securities referenced may or may not be held by clients of CREDIT SUISSE and do not represent all of the securities purchased, sold or recommended for client accounts. Readers should not assume that any investments in securities, companies, sectors or markets identified or discussed were or will be profitable. Credit Suisse provides its clients with investment banking, private banking and asset management services worldwide. The asset management business of Credit Suisse is comprised of a number of legal entities around the world that are subject to distinct regulatory requirements; certain asset management products and services may not be available in all jurisdictions or to all client types. There is no intention to offer products and services in countries or jurisdictions where such offer would be unlawful under the relevant domestic law.

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