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NORSAD finance services for SADC SMEs

Get information about NORSAD finance services for SMEs in the SADC region. Learn about financing options, eligibility criteria, and the value NORSAD adds to projects.

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NORSAD finance services for SADC SMEs

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  1. NORSAD finance services for SADC SMEs AFRICA SMME CONFERENCE 25th of October 2007 Sari Nikka

  2. Denmark • Finland • Norway • Sweden Funded by: • Angola • Botswana • Lesotho • Malawi • Mauritius • Mozambique • Namibia • Swaziland • Tanzania • Zambia • Zimbabwe Eligible for NORSAD finance: NORSAD in brief • Development Finance Institution (DFI) established in 1991 by 4 Nordic and 11 SADC member countries • Support for SADC SMEs • Financing intermediaries • Direct financing to SMEs • Operates in 11 SADC countries • Head office in Lusaka, Zambia • 6 investment professionals • 11 country advisors in SADC • Loan portfolio and commitments USD 69.5 million (03/2007)

  3. NORSAD SME Financing in SADC region • Financing through financial intermediaries • Lines of Credit, Agency Lines and Guarantee Lines • Direct financing for SME projects • Senior Loans • NORSAD financing principles: • Commercially viable private sector or privatization projects and business ventures • Projects having positive development impact • Financed projects shall comply with International Social and Environmental Standards (IFC/WB) • Offers innovative and flexible financing solutions • Expertise in SADC – Nordic Joint Venture projects

  4. NORSAD adds value to projects Eligible projects NORSAD projects • Long term sustainable financing • Access to technical assistance through NORSAD partners • Professional commercial advice & business linkages • Assistance with social, HIV/AIDS and environmental guideline compliance • Assisting in co-financing with NORSAD partners – European and SADC DFIs • SADC – Nordic JVs expertise • Match-making– identify suitable Nordic business and technical partners in specific cases • Private sector SMEs • Financial intermediaries financing SMEs • Viable business plan, with positive development impact • Comply with social and environmental guidelines • Project promoters have a relevant track record and capacity to add value within the industry • Debt to equity ratio 50/50 • Project can provide sufficient collateral over 1,5 times loan amount

  5. NORSAD Financing Instruments for Intermediaries I • Line of Credit (LOC) terms: • Maximum amount USD 5 million • Term: maximum 7 years with grace period up to 2 years • Lending currency: EUR, USD, ZAR, GBP, DKK, SEK, NOK • Interest rate: fixed or variable based on commercial and political risk – market based pricing • Front end fee of 1 % (50% paid upfront) • Commitment Fee of 1% p.a. • Repayment: Quarterly on interest and principle • Collateral: Assets of beneficiary SMEs and/or third party guarantees

  6. NORSAD Financing Instruments for Intermediaries II • Agency Line (AL) terms: • Co-financing of SMEs • Maximum line USD 5 million • Term: maximum 7 years with grace period up to 2 years • Lending currency: EUR, USD, ZAR, GBP, DKK, SEK, NOK • Interest rate: fixed or variable based on commercial and political risk – market based pricing • Front end fee of 1 % (50% paid upfront) • Commitment Fee of 1% p.a. • Repayment: Quarterly on interest and principle • Collateral: Project assets and/or guarantees shared pari passu

  7. NORSAD Financing Instruments for Intermediaries III • Guarantee Line (GL) terms: • Guarantee up to 50 % of realised losses on SME project • Exposure: up to 50 % of debt and not exceeding USD 500,000 per individual project • Maximum line USD 5 million • Term: maximum 7 years • Lending currency: EUR, USD, ZAR, GBP, DKK, SEK, NOK • Guarantee fee: Based on cost of funds and lending rates • Front end fee of 1 % (50% paid upfront) • Collateral: Assets and/or guarantees from beneficiary SMEs, shared proportional and pari passu

  8. NORSAD Financing Instrument for SMEs • Direct Loan (DL) terms: • Loan amount from USD 500,000 to USD 3 million • Term: maximum 7 years with grace period up to 2 years • Lending currency: EUR, USD, ZAR, GBP, DKK, SEK, NOK • Interest rate: fixed or variable based on commercial and political risk – market based interest rate • Front end fee of 1 % (50% paid upfront) • Commitment Fee of 1% p.a. • Repayment: Quarterly on interest and principle • Collateral: Assets and/or guarantees

  9. NORSAD Case: Intermediary Financing I ICC - Leasing finance institution serving SMEs • Local leasing company in better position to reach out to a larger number of SMEs than NORSAD direct loans • With NORSAD loan the Leasing company has been able to help small and medium size companies to become reliable suppliers to the mining industry • Terms of financing: • USD 5 million Line of Credit, 5 year maturity, 1 year grace • Collateral: assignment of all leases, securities taken by the leasing company in respect of leases financed under the LOC, cession over insurance policies • Financial covenants: D/E ratio, Liquidity ratio, Capital Adequacy ratio • Other terms: NORSAD endorsement on leases (incl. pricing and terms) under the LOC

  10. NORSAD Case: Intermediary Financing II ICC - Leasing finance institution serving SMEs Development impact: • More competition by increasing capacity of mining sector SMEs – linkage of SMEs to main stream mining sector • Development of local resources • Employment effect: created more than 700 jobs • NORSAD loan influenced leasing company to improve the environmental compliance of their clients • Impact on diversification and strengthening of the finance sector • Impact on diversification of the leasing company credit allocation towards mining SMEs

  11. NORSAD Case: Direct Financing I Agricultural and Meat Processing Company • Privatization project with rehabilitation and expansion of existing operations • Company buys cattle from local farmers, fattens them at its feedlot station and later slaughters and processes the meet at the abattoir • NORSAD assisted to get TA and capacity building from APDF at the time of Business Plan preparation • Terms of financing: • USD 1.5 million direct loan, 6 year maturity, 1 year grace • Collateral: First mortgage bond and specific charge on fixed assets, floating charge on movable assets, personal guarantee from sponsors • Other terms: Ownership change clause and dividend restrictions

  12. NORSAD Case: Direct Financing II Agricultural and Meat Processing Company Development impact: • Regional diversification - earnings to local small-scale farmers • Employment creation: 120 direct jobs, 500 indirect jobs • Foreign currency generation and savings: exports and imports substitution • Improve local populations access to quality food products • NORSAD loan facilitated the growth of business and creation of linkage from cattle breeders to meat producers • NORSAD assisted to get TA and capacity building from APDF at the time of Business Plan preparation

  13. Owners/Management Organization NORSAD Experience: Elements for Success • Adequate accounting systems and financial reporting • Proper working capital management and control systems • Resource planning for input and output • Good HR policies, training and incentives for employees • Good Corporate Governance • Hands on experience and technical know how • Correct business attitude • Have strong management team consisting of • Administration • Financial • Production, Sales

  14. NORSAD Project Process 1- 3 weeks 1 -3 months 1 – 7 years Timing Exit - loan repaid Negotiation and contract Implemen- tation and operation Project identification Investment appraisal Screening • Sponsor presents: • Business Plan • Sponsor information • Audited accounts Initial evaluation done within short period of time • Approval in principle by Norsad management Detailed investment and market study (“due diligence”) Meet local partner in target country Agree on terms and define roles Board approval Sign contract Disbursement after conditions are met NORSAD assisstance on TA and social & environmental issues No board level participation Value enhancement perspective The speed of the process is depended mostly on the sponsor making information available

  15. NORSAD Contact Details Sari Nikka, Chief Executive Officer Mobile: +260 966 866 030, e-mail: sari.nikka@norsad.org Patience Matshe, Chief Investment Officer e-mail: patience.matshe@norsad.org Alice Zulu, Senior Investment Officer (Angola, Lesotho, Tanzania) e-mail: alice.zulu@norsad.org Edward Mulilo, Senior Investment Officer (Botswana, Mozambique, Swaziland) e-mail: edward.mulilo@norsad.org Justin Nthala, Investment Officer (Mauritius, Malawi, Namibia) e-mail: justin.nthala@norsad.org Rosemary Liywalii, Senior Portfolio Officer e-mail: rosemary.liywalii@norsad.org Mulenga Bwalya, Assistant Portfolio Officer (Zimbabwe) e-mail: mulenga.bwalya@norsad.org Tel: +260 1 255663/4 or 255773/4 Fax: +260 1 255432 www.norsad.org norsad@norsad.org Anglo American Building, 74 Independence Avenue P.O. Box 35577, 10101 Lusaka, Zambia 

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