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Why Invest in Financial institutions

Why Invest in Financial institutions. How financial institutions contribute to development. Access to finance. Employment. Corporates > 300 employees Medium-sized businesses 50 – 300 employees USD 3 – 15 mill in revenues Small businesses 10 – 5 0 employees

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Why Invest in Financial institutions

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  1. WhyInvest in Financial institutions

  2. How financial institutions contribute to development Access to finance Employment 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 Povertyreduction Banks More than 50% of SMEs identify access to finance as a key constraint Creatingjobs in economicallysustainablebusinesses The missingmiddle • Total credit gap USD 1.3 trillion Increasedtax base Micro- finance Source: World Bank

  3. Core norfund focus : funding of sme-banks • Corporate banks • Microfinance banks • Non-bank FIs • … seen as a growth area Few pure SME-banks Norfund contribution Several inhibitors for SME-banking • Different skill set required • Bank access to finance • Bank ownership • Regulations • 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

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

  5. Currentnorfundfiportfolio Direct Norfund • 30 loans • 9 equity investments • 4 FI funds 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 MNOK 3 240 MNOK 1 220 MNOK 590 Asia Central America Africa SECTORS COMMITMENTS 5,048 MNOK (~650 MUSD) as of 31.12.2016

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