Microfinance Social Investor Roundtable

1. Microfinance Social Investor Roundtable Jordan, June 5, 2012

2. Agenda • Trends in Investment and Updates on RF Initiatives (MIX, Smart, SPTF, GIIN,PIIF; Results MFI survey) • From Consensus to Actions and Accountability Lunch • Balanced Returns • Role of Investors in Client Centric Financial Inclusion

3. Trends in microfinance investment Findings from CGAP analysis of 10 largest MIVs • Growth rate on the rise (7.2% - 2011; 4.1% - 2010) • Decreasing returns (over last 4 years – stable 2010/11) • Increase in equity funds,- investments and local currency funding (e.g. MFX 3x 2010 volume) • More focus on underserved markets (SSA, rural) • Diversification in impact investment (ag, SME) • Credit risk still concern in some markets • More attention for SP and OI in particular

4. Updates from RF initiatives • MIX • Smart Campaign • Social Performance Task Force • GIIN • UNPRI/PIIF

5. Responsible investment initiatives in microfinance - Retail providers - Level of engagement Client protection (‘do no harm’) Social commitment (‘do good’) Smart Campaign (Smart) Paris Appeal Public endorsement SPTF Universal Standards for SPM MIX MFT Smart toolkits Tools for Implementation and Self Assessment MFT Measuring progress and reporting - externally Smart Certification Latin American Certifications Seal of Excellence MIX SP Certificate of Data Quality Certification Microfinance Institutional Rating Social ratings Audit / rating Social audits ------ in development

6. Responsible investment initiatives in microfinance - Direct investors / MIVs - Level of engagement Client protection (‘do no harm’) Social commitment (‘do good’) Smart Campaign (Smart) Paris Appeal Principles for Investors in Inclusive Finance Public endorsement Smart toolkits MFT Tools for Implementation and Self Assessment IRIS Luminis * Measuring progress and reporting - externally Symbiotics (MIV Disclosure Guidelines)* Certification LuxFlag * Audit CERISE Social Audit* Assessment / rating Social ratings (inc. GIIRS, M-CRIL, Luminis) * * for funds (MIVs) only

7. Responsible investment initiatives in microfinance - Indirect investors - Level of engagement Client protection (‘do no harm’) Social commitment (‘do good’) Paris Appeal Smart Campaign Principles for Investors in Inclusive Finance Public endorsement Tools for Implementation and Self Assessment Measuring progress and reporting - externally

8. Agenda • Trends in Investment and Updates on RF Initiatives (MIX, Smart, SPTF, GIIN,PIIF; Results MFI survey) • From Consensus to Actions and Accountability Lunch • Balanced Returns • Role of Investors in Client Centric Financial Inclusion

9. Four action groups of the SPTF Social Investor Working Group • Reasonable covenants – Dina Pons (Incofin) • Harmonization of due diligence on social performance questions - Christophe Bochatay (Triple Jump) • AvOID (over-indebtedness) – Lisa Sherk (Blue Orchard) and Rocio Cavazos (Deutsche Bank) • Implementation of the Principles for Investor in Inclusive Finance – Emilie Goodall (UNPRI/PIIF) and Antonique Koning (CGAP)

10. Reasonable Covenants

11. Reasonable Covenants

12. Reasonable Covenants

13. Harmonization of due diligence on social performance questions

14. Harmonization of due diligence on social performance questions Client feedback Product range and quality Non-financial products and services Women representation Environment Vision & mission Monitoring results Staff appraisal and incentives Prevention of over-indebtedness Transparency

15. Harmonization of due diligence on social performance questions

16. Overindebtedness

17. Overindebtedness

18. Overindebtedness

19. Implementation of PIIF

20. Steps towards implementation

21. Agenda • Trends in Investment and Updates on RF Initiatives (MIX, Smart, SPTF, GIIN,PIIF; Results MFI survey) • From Consensus to Actions and Accountability Lunch • Balanced Returns • Role of Investors in Client Centric Financial Inclusion

22. Standards on Balanced Returns • For information: relationship between client protection and financial performance, research update • For discussion: exploring the Universal Standards for SPM, Section 6: Balance Financial and Social Performance • Linking to PIIF Principle 6: Balanced Returns

23. Universal Standards, Section 6 6.a. Growth rates are sustainable and appropriate for market conditions, allowing for high service quality. 6.b. The institution’s financing structure is appropriate to a double bottom line institution in its mix of sources, terms, and desired returns. 6.c. Pursuit of profits does not undermine the long-term sustainability of the institution or client well-being. 6.d. The institution offers compensation to senior managers that is appropriate to a double bottom line institution.

24. PIIF Principle 6: Balanced returns We will strive for a balanced long-term social and financial risk-adjusted return that recognizes the interests of clients, retail providers, and our investors. Possible actions: • Exercise voting rights when available. • When investing in equity, develop an engagement capability with investees to achieve a reasonable and fair alignment between the social impact and the financial return requirements of shareholders; i.e. focusing on long-term rather than short-term returns.

25. PIIF reporting framework questions

26. PIIF reporting framework questions