SIDI - Annual Report 2010

20 10
ivities The actIDI and of S ers its partn

INTERNATIONAL SOLIDARITY FOR DEVELOPMENT AND INVESTMENT
Table of Contents
A brief guide to SIDI Glossary Review of the work carried out in 2010
Solidarity financing in 2010 A portfolio of 10.4 million euro invested in 64 partners in 30 countries Investment in line with strategic priorities Solidarity support in 2010 Support that solves partners problems Twofold support by the Solidarity Chain for Financing
A brief guide to
SIDI
Sharing risks fairly and patiently

Investing in partners equity Lending in local currency
SIDI, International Solidarity for Development and Investment, is a social investor that falls under the category of solidarity company. It was created in 1983 and is now a subsidiary of a development NGO, CCFD -Terre Solidaire*. SIDI promotes a social and solidarity economy via the development of individual and collective economic activities, which are initiated locally, in the countries of the South. Its activity consists of giving financial and technical support to its partners, the Local Financing Services (LFS), which provide financial services tailored to groups excluded from traditional banking circuits. SIDI also supports initiatives designed to increase the income of small rural producers. SIDIs goal is to promote the development of these structures in order to guarantee the sustainability of services, such as savings, loans, training, market access and the sharing of risk, that SIDI provides to their beneficiaries and to contribute to development. SIDI backs its partners via two additional means: By offering tailored technical support to overcome problems relating to governance, strategy, management, training, diversification, networking, etc. By increasing their financial resources, in the form of equity financing, loans, guarantees and searches for additional resources from international institutions. In 2001, SIDIs capital was invested in 64 partners in 30 countries; its support and consultancy budget for partners amounted to 1.66 million euros. Its activities, managed by a team of 13 desk officers, assisted by 15 volunteer experts, are intended to generate social value-added in order to further the wellbeing of populations in a sustainable way. SIDI is active in solidarity financing as well as mobilising individuals and institutions in the North who choose to give SIDI the financial means to carry through its actions without setting as a priority a financial return but rather a human, social and environmental return. Therefore, SIDIs shareholders take a share of the risk borne by the institutions in the South in order to offer access to high-quality financial services. Furthermore, savers in the Faim et Dveloppement mutual investment fund share their proceeds to enable SIDI to provide locals with accessible technical support. This Solidarity Chain for Financing enables SIDI to take sustainable action with its partners without the fear of innovation-related risks, so as to promote their self-sufficiency. *ccfd-terresolidaire.org
Providing accessible and flexible support

Promoting supervision of the social dimension Supporting partners experiencing difficulties
Adapting the range of services to the local context

Promoting value-added in rural areas Promoting solidarity credit unions
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Creating support mechanisms

Investing in refinancing instruments Networking and collaborating with other alliances
12
Ensuring the partners institutional viability and social purpose

Defending a social vision within the structures Reinforcing governance
14
Financial Statements Maps and List of partnerships at 31/12/2010
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18
ACP: Africa, Caribbean, Pacific CEECs: Central and Eastern European Countries CGAP: Consultative Group to Assist the Poor (www.cgap.org) DRC: Democratic Republic of Congo ESD: Epargne Solidarit Dveloppement, grouping of SIDIs individual shareholders JIF: Joint investment Fund LFS: Local Financial Services MIX: Microfinance Information eXchange (www.themix.org) MFI: Microfinance Institution MFIC: Microfinance Institution engaged in a process of consolidation MFIP: Microfinance Institution with a high potential Leverage effect: When each SIDI financial contribution is accompanied by financial contributions from other public or private sources. MUSO: Solidarity Credit Union NGO: Non-Governmental Organisation PO: Producers' Organisation PAVRA: Promotion of Added Value in Rural Areas PARMEC: Programme supporting the regulation of Solidarity Credit Unions SCF: Solidarity Chain for Financing SMEs: Small and Medium-sized Enterprises TA: Technical Assistance VSEs: Very Small Enterprises Umbrella: so-called secondary level institution whose role is to support MFI
Glossary
INTERNATIONAL SOLIDARITY FOR DEVELOPMENT AND INVESTMENT

www.sidi.fr
2 The activities of SIDI and its partners in 2010
Chairmans
Dear friends, dear solidarity shareholders,
Message
We are midway through our 2009-2012 development plan. Once again, over the course of these two years, we have seen not only the immense challenges of development, but also the expression of human solidarity, which allows everyone to make a progressive contribution to the efforts designed to bring about well-being for all. The evaluation of SIDIs role as a solidarity investor during this period is based upon areas that determine the social added value of its activity: n risk-sharing in an appropriate and patient manner; n providing accessible and flexible technical support; n adapting the provision of financing to the local context and to partners needs; n creating a leverage effect and mobilising complementary resources for the partners; The 5 dimensions of SIDIs n ensuring the institutional viability and the social purpose of our partners. social added-value All of these focal areas may be applied to the main objective of promoting the longterm improvement of income levels for rural producers. In order to achieve this objective, the SIDI team has reinforced the integration of the rural dimension within RISK its actions and has developed partnerships with new actors in this field (such as producers organisations and small and medium-sized processing and marketing enterprises in rural areas). There was a need to simultaneously provide guarantees, monitoring activities and communication around the social added value and environmental SUPPORT GOVERNANCE responsibility of both SIDI and its partners. Within SIDI, a task force is continuously working on the social added value in order to support each desk officer. In this context, our commitment towards our shareholders and savers is designed to guarantee the balance and the long-term financial and social continuity of SIDI by: TAILORED LEVERAGE SERVICES EFFECT n establishing a pool of partners that is sufficiently diversified in order to implement a balanced investment policy; n further improving the instruments it uses to monitor financial and social indicators; SIDI generates its social value-added from n adjusting the policy it uses to manage its operating income on an annual the activities it carries out as a social investor basis, both in terms of the portfolio and the realistic timeframe for the transfer through the Solidarity Chain for Financing. of shares, as well as the sometimes lengthy negotiation of co-financing with This value-added encompasses the following public and private financing bodies. five dimensions: risk, support, tailored services, However, there is one question that must be addressed: what can be done in order the leverage effect and governance. In the to achieve these goals, which are both quantitative and qualitative, in the face of the following pages, the social responsibility report, many social, financial and even ecological crises? SIDI is well aware of the limitation of which is detailed in the following pages, seeks its own financial means and has played a significant role in the creation of an investment to elucidate these dimensions. fund that is centred on these objectives. The FOPEPRO support fund for producers organisations in the Andes began its activities in January 2010 and the FEFISOL fund for Africa, whose main priority is the financing of the rural world, will be created in 2011. These two programmes place SIDI in the position of a high quality financial intermediation institution, which is able to respond to the needs of public donors and of other institutional investors. In 2011, SIDI will continue to pursue its mission as a solidarity investor and will continue to adopt a long-term vision in its work with its partners. The crisis currently being faced by the microfinance sector in some parts of the world has shown, in particular, that certain abuses do exist: SIDI is convinced that it is not microfinance that is being called into question, rather it is the practices of certain commercial MFIs, whose aim is to maximise their profit at any price. In this general context, SIDI firmly believes that rather than being focussed, first and foremost, on reducing poverty, the real debate should centre upon the generation of wealth by allowing access to financing that has been adapted to meet the needs of those who are excluded. SIDI must continue to act in areas where others do not go: in the lesser-favoured rural or crisis areas, in the financing of production and in order to go even further, SIDI and CCFD-Terre Solidaire wish to create an Ecological Transition financial instrument, in order to provide support for partners who wish to focus their efforts on rural development that generates a high degree of social and environmental added value. Thank you very much indeed for placing your trust in us. Yours, in solidarity
Christian Schmitz Chairman of the Board

The activities of SIDI and its partners in 2010 3
22
Review of the work carried out

in 2010
The microfinance sector pursued its path of growth in 2010, with more investment and around 190 million clients served, of whom 128 million were poor, according to figures from CGAP and MIX. On the other side of the coin, the sectors reputation was tarnished by several crises demonstrating that microfinance does not automatically generate well-being among the populations, in particular when the operators are motivated solely by profit. In addition, the number of delinquent clients in the zones under consideration increased, indicating a problem of excessive debt and, more broadly, a decline in the quality of service. Against this backdrop, SIDI used its Solidarity Chain for Financing model and its patient and supportive financing to devise ways to intervene that are tailored to each context and thus focus on its partners long-term financial, social and institutional viability, especially in rural areas.
Solidarity financing in 2010

Figure 1 - Destination by region of the portfolio in 2010 CEECs Mediterranean 9% Basin 9% Caribbean 1%
with 44% of the portfolio, a four-point relative decrease caused by the delay in the launch of FEFISOL.
Asia 6%
Latin America 32%
Africa 43%
Figure 2 - Destination by type of investment Securities Equity financing Equity financing 10% in local currencies in hard currencies 39% 13%
Loans in hard currencies 24%
Loans in local currencies 14%
SIDI seeks to contribute stable resources that provide solidarity to its partners. To that end, its portfolio was invested as follows: 52% in equity financing (45% in 2009). This sharp increase is attributed to new opportunities in Africa (SMF A portfolio of 10.4 million euros invested EA, SINERGI, etc.), to the strategy to set up the FOPEin 64 partners in 30 countries. PRO fund and to conversions of loans into capital. At 31 December 2010, SIDI held a portfolio of 10.4 million 54% in local currencies; this percentage fell 6 points in euros, an increase of 10% over 2009. This increase is attri- one year owing to the increase in investment in regional buted to new and larger commitments of 3 million euros in funds that are denominated in hard currencies. 2010 compared to 2.2 million in 2009, although this figure is 25% below forecasts owing to the delay in launching the Lastly, SIDI devoted 60% of its investments to institutions FEFISOL investment fund, which will begin its activities in undergoing consolidation, i.e. institutions that fulfil one or mid-2011 (see p. ). more of the following: A level of activities designed to promote development Two new partners received financing in 2010: the rural MFI that has yet to cross the threshold of profitability; ISHAKA in Burundi and PHILEOL, a castor oil processing An effort to provide the necessary sustained techniplant in Madagascar, in addition to the Ugandan rural MFI cal assistance OMIPA that was already a SIDI partner but had not been Potential for institutional development and growth in receiving financing for several years. These three partners the identified activity; account for 5% of the years investments, the remainder In certain cases, an economic, social or political being devoted to 17 partners who had already received ficontext that objectively hampers the institutions denancing in 2009. velopment. Disinvestment in 2010 amounted to 2.1 million euros, i.e. 76% of the amount forecast. SIDI withdrew financially from SIDIs financial commitments are in keeping with its solifour organisations: JEMENI in Mali, ETC in Niger, TIMPAC darity financing remit. Nevertheless, disproportionate risk to in Togo and ALAOTRA/SILAC in Madagascar. capital investment by the shareholders should be avoided The average amount invested per partner increased to in order to ensure the durability of SIDIs mission over the 162,000 euros. long haul. SIDI is therefore well aware that a modicum of balance must be achieved in its financial commitments and Investment in line with strategic priorities to that end has done the following: Of the twenty partners financed in 2010, 19 work in rural 32% of its portfolio is invested in MFIs with strong areas. At the end of 2010, support for rural areas ac- economic and social potential, six of which paid out divicounted for 64% of SIDIs portfolio and, more specifically, dends in 2010; agriculture and fisheries accounted for 37%. 36% is invested in funds or umbrella organisations (21% in 2009), ensuring a local leverage effect at miniSub-Saharan Africa is still the leading investment zone, mum risk; Under its strategic plan, SIDI devoted the bulk of its investment to structures that together improve rural income and it boosted its presence in regional funds that generate a leverage effect for rural financing.
No one country receives more than 10% of total investment; No partner, excepting funds, receives more than 8% of the portfolio. Lastly, SIDIs support to its financed partners produces indepth knowledge of the latters intervention context, their activities and their difficulties. This reassures SIDI that its capital will be under minimum risk. Thanks to this balance, knowledge of its investments and the good performance of several partners, SIDI was able to turn a profit of some 300,000 euros in 2010. The shareholders agreed to allocate all of that amount to its reserves, which enabled SIDI to take on a certain level of risk in difficult contexts without posing major risks to its activities.
Solidarity support in 2010

SIDI supported 88 partners in 33 countries in 2010. More specifically, 67 partners received technical assistance provided during field missions, which amounted to 1,283 work days. Support that solves partners problems Apart from monitoring of the structures in which it invests, SIDI provides technical assistance services to its partners so that they may develop, improve and continue to provide services into the future. In 2010, this support, provided by the internal team assisted by 15 volunteers, financial experts, banks and companies, was equal to 2,334 work days i.e., on average 24 days per partner, broken down as follows: identification of new partnerships and monitoring of existing partnerships, 32%; participation in decision-making bodies such as boards of directors, shareholder meetings, etc., 13%; support for long-term viability problems such as governance, strategy, innovation and institutionalisation, 21%; support for internal organisation in accountancy, IT systems, human resources and training, 14%; support for negotiations to attain additional resources from local or international bodies, 12% support for portfolio analyses and products, 7%; specific support for the reflection on Social Value-Added, 2%. Finally, employees and volunteers devoted 921 additional days of work to horizontal themes, focusing mainly on strategy, organisation, alliances with SIDI and subjects requiring a well thought-out and concerted approach such as the Social Viability initiative (p. 8), support for Solidarity Credit Unions (p. 11), the reflection on Fair Trade and the Promotion of Value-Added in Rural Areas (p. 10).
Twofold support by the Solidarity Chain for Financing SIDIs partners benefit from a la carte backing in many areas (see above), which is provided cost-free to the partners. SIDIs economic policy is founded on the Solidarity Chain for Financing (see fig. page 16), which serves to mobilise funds in the North and support partners in the South in the following ways: First, CCFD-Terre Solidaire financed SIDIs technical assistance mission to the tune of 1.2 million euros, equal to 73% of support expenditure, in particular thanks to shared income from the Faim & Dveloppement mutual fund. Next, SIDI successfully negotiated with eleven donors the amount of 429,640 euros in cofinancing, a sharp increase over 2009 (see p. 12). SIDIs other income was generated by the following investment activities: The SIDI portfolio (loans and equity financing) generated income of 638,000 euros in 2010, compared to 496,000 euros in 2009, thanks mainly to the boost in dividends, which accounted for 65% of this income, and to interest collected from loans. Income from the cash account (439,000 euros), a 37% increase over the previous year. Financing of SIDIs partners is guaranteed until 2012, owing to the latest capital increase of 4-million euros. SIDI is looking into a change of status that would enable it to be more flexible in future when raising capital. As a result of extensive work over the past five years to mobilise several institutional investors, 2010 saw the startup of the FOBEPRO investment fund. This fund, along with the FEFISOL fund that is slated to be created in mid2011, will mean that SIDI, which created these two funds along with Alterfin/Belgium and Etimos/Italy (for FEFISOL), will be able to achieve significant leverage effect, with 60 million euros expected by the end of 2012.
Figure 3 - Destination by category of the portfolio
Network PME PAVRA 0% 9% 0% UMBRELLA 14%
MFIP 33%
Funds 22% MFIC 20%
SMEs 0%
Figure 4 - Destination of TA days by region in 2010
Eastern Europe 3% Asia 4% Med. Basin 4%
Caribbean 5%
Latin America 12%
Africa 70%
Figure 5 - Destination by typology (in volume) of SIDIs portfolio at the end of 2010 PAVRA MUSO 1% 9%
PO 1%
Funds 22%
MFIC 20% MFIP 33%
UMBRELLA 14%
Sharing risks
fairly and patiently
As a solidarity investor, SIDI contributes long-term resources under conditions tailored to each partner. SIDI agrees to share some of the risk inherent in their activities, in accordance with the remit that the shareholders have assigned to SIDI.
Investing in partnersequity
CCRD in RDC, CONSOLIDAR in Colombia, CREDIFLORIDA in Peru, SMF EA in Uganda, FOPEPRO in Latin America, FORTALECER in Peru, ISHAKA in Burundi, MICROINVEST in Moldavia and SINERGI in Niger. Acquiring a stake in the capital of local financing structures is SIDIs preferred means of intervention because it provides sustainable and low-cost development of their activities. Until an institution receiving this kind of financing has achieved considerable financial independence, SIDI tries to maintain a durable stake in the capital and encourages a fair sharing of the value-added. Over the year, SIDI has boosted its equity stake in several structures. In Niger, it took part in the capital increase of the private equity firm SINERGI that provides technical and financial support to small and very small enterprises in the formal and informal economies across all sectors of activity. In Central Africa, SIDI converted a loan to SMF EA into capital, thereby nearly tripling its stake in this regional fund that supports MFIs in Uganda, Kenya, Tanzania and Southern Sudan (see inset p. 13). Similarly, in the DRC, SIDI converted a loan into a stake in CCRD, which refinances solidarity credit unions in North Kivu. In Colombia, SIDI bought 30% of the shares held by Cordaid in the CONSOLIDAR institution in order to facilitate its withdrawal without compromising CONSOLIDARs social vision. In Moldavia, the shareholders
of MICROINVEST joined together to remedy the institutions challenging situation by increasing its capital, in which SIDI participated. This change in the underwriting group diluted SIDIs share, although it continues to sit on the board as an observer at the invitation of other shareholders and the management team. In Peru, SIDI carried out two investments in 2010. First, it increased its participation in FORTALECER, a national network of 37 social MFIs, of which it was also elected director, and SIDI invested in the capital, via a loan conversion, of the rural MFI CREDIFLORA, which was created in 2005 by a co-op of coffee growers with the support of SIDI and today is a profitable concern. Lastly, SIDI responded to capital mobilisation by the investment fund FOPEPRO for Andean farmers, which began its activities in 2010. In 2010, SIDI also took part as a founding shareholder in the institutionalisation of the microcredit programme of a local NGO in Burundi, COPED, which has been backed by SIDI since 2008. The MFI thus created, called ISHAKA, which intervenes in rural zones in the south of the country, will have an easier time pursuing its development in an environment with few microfinance players. At the end of 2010, 52% of SIDIs portfolio was invested in equity financing. SIDI is a shareholder in 26 structures of which it holds, with few exceptions, less than 20% of the capital, in keeping with its aim to be a minority but significant shareholder.
Lending in local currency

MOGTEDO in Burkina Faso, NIAKO in Mali, KOKARI in Niger, OMIPA in Uganda, CGRH, CREC, ESCALES, MEC PROPEM and UGPM in Senegal, FECECAV and UCMECS in Togo, AMRET in Cambodia, FONDS COOPERATIF in Laos, HIEP THAN in Vietnam, EACD in Egypt, AL AMANA in Morocco and FONHSUD in Haiti. At the end of 2009, according to a CGAP study, microfinance investment funds devoted more than 5 billion dollars to the sector, mainly in the form of loans. These loans, which are the primary financing source for MFIs in the South, were nearly all denominated in euros or dollars. As a result, the lender avoids exchange rate risks but requires the MFI to take on that risk, at a cost. SIDI now wants to share this risk. That is why it has set up a guarantee fund endowed with two million euros, called the Development Incentive Fund, the income of which covers exchange rate losses. At the end of 2010, 36% of these loans were denominated in local currencies. Of these active loans, three were disbursed in 2010. SIDI renewed its annual loan to the Burkina Faso rice growers co-op, MOGTEDO, for the purchase of inputs (23,000 euros in CFA francs). It also granted the equivalent of 152,000 euros in local currency to UCMECS, a rural MFI in northern Togo (see inset). Thirdly, SIDI granted a loan of 50 million Ugandan shillings (18,000 euros) to OMIPA, a rural MFI and SIDI partner since 2002.
Financing institutions in the process of consolidation: UCMECS and FECECAV in Togo

Despite a recent recovery, Togo is faced with a difficult economic context as a result of an environmental policy which, for more than 15 years, has had a damaging impact upon the economy and, notably, upon the agricultural sector, which provides employment for more than half of the population. Nevertheless, the microfinance sector is very active, although it does continue to be concentrated in the south of the country and its client base is essentially to be found in urban areas. In this context, SIDI has chosen to focus its efforts on the provision of support to two institutions, which have been chosen for their work in rural areas and which have both expressed the need for consolidation, namely UCMECS and FECECAV. UCMECS is a network of eight mutual funds that operate in the northern rural and disadvantaged region of Togo. Its mission is to support the village banks, which have been created and are managed by the local communities. Today, the network has 7,561 members, including more than 1,000 groupings. In 2010, SIDI decided to increase its support for UCMECS. It approached the networks historical partner, Louvain Dveloppement, in order to exchange information and to establish a coherent, partnership-based, approach. Together, the two structures introduced new partners to UCMECS: respectively, Alterfin (financial support) and the Belgian Raiffeisen Foundation (technical support). SIDI also assisted in the establishment of the new business plan and, in this context, responded positively to a request for financing for an amount of 100 million CFA francs, thereby increasing its financial support following the repayment of two loans (for a total of 60 million CFA francs) in 2009 and 2010. Finally, it has signed an agreement with UCMECS and the other partners regarding the development of new products for people in rural areas and on the measurement of the institutions social performance. The long-term aim is to ensure the financial autonomy of UCMECS through the opening of banks that are more profitable, in order to guarantee that the network is able to continue to carry out its activities in difficult areas in the long-term. FECECAV is a mutual institution that has a two-tier structure composed of an umbrella body and a network of 12 local banks. It operates primarily in rural areas (45% of the portfolio) in the south of the country and has some 50,000 customers. The umbrella organisation refinances the local banks and provides them with management and internal auditing services. SIDI has been supporting FECECAV since 2008, notably with a view to improving its management tools and the systems it uses to guide its activities, but also through the provision of two loans over the course of three years, which were granted in 2008 and 2009 for a total of 75 million CFA francs. In 2010, this support was further reinforced by a mission to provide technical assistance regarding the improvement of internal auditing and the definition of a human resource policy. SIDI also introduced FECECAV to Alterfin in 2010 and worked with them on the issue of a guarantee that would make it possible to negotiate a loan at the local level: SIDI and Alterfin were successful in obtaining a guarantee from BNP and Fortis for a total amount of 100 million CFA francs, which enabled a local bank, the BTCI, to grant a loan of 300 million CFA francs to FECECAV. In this way, SIDI was able to devise an innovative financial package capable of responding, with a leverage effect, to the financial needs of a partner faced with the challenge of pursuing the development of its activities in order to achieve financial equilibrium.
Social responsability report

RISK
RISK Share of SIDIs portfolio in local currency in equity financing in crisis zones* (political conflicts or natural disasters) in Sub-Saharan Africa for financing rural areas for financing agricultural and fishing activities** for financing developing institutions***
* Guatemala, Haiti, Niger, Madagascar, Palestine, Guinea, Colombia, DRC and Lebanon.
2010
2009
54% 52% 20% 43% 65% 21% 60%
60% 45% 24% 49% 62% 36% 57%
** This figure does not take into account the volumes of the partners portfolio and the share of SIDI investment in the total amount of capital and loans mobilised by the partners for their activities. *** See p.4
Providing
accessible and flexible
SIDI strives to respond in an individualised way to its partners expectations. It tailors its services and the volume of its support to each partners acknowledged needs. This entails forging sustainable partnerships, taking time to understand the local contexts, building a relationship of trust with its partners as well as appreciating and promoting the social value-added of the partners vis-a-vis the beneficiaries. This is the subsidy facet of the Solidarity Chain for Financing, whose shared income from the Faim & Dveloppement investment fund is the main pillar (see details on p. 5) that makes flexible intervention possible. This enables SIDI to adapt the financial conditions of its technical assistance to the means and needs of its partners in the first instance and, secondarily, to the cost.
support
Promoting supervision of the social dimension

SIDI gives priority to partnerships that have structures with a strong social vision. The partnerships provision of financial and non-financial services must not be an end in itself, but rather a means to contribute to the wellbeing of the beneficiary populations. It is therefore important to bring their practices on the ground into line with this social vision. That is what the Social Viability Initiative, started in 2001 by SIDI, is all about. It helped define an intervention framework in the following ways: by supporting partners definition and clarification of their social goals; by setting out a work plan in keeping with these goals; by supporting them in their application and follow-up of this plan. What is most important for SIDI is that each partner take an interest in overseeing the social dimension, which is useful in gauging the sustainable improvement in the wellbeing of the beneficiaries and, as a result, the relevance of their work. In 2010, SIDI made progress in formalising its approach by ensuring the ongoing monitoring of initiatives led by experts and research workers in this field. SIDI also set up a methodological guide of existing tools, enabling the team to provide responses to the partners that are adapted to their difficulties. To that end, SIDI continued to provide assistance for the definition of criteria used to measure social goals and took part in the work of the South American network of the MFI FOROLACFR designed to set up a system for the Certification of Social Performances to be adopted by all its members. In Peru, SIDI participated in the reflection on social performance criteria, led by the countrys social MFI association, FORTALECER. SIDI also led the final workshop that validated criteria and indicators, which was held at the end of 2010 and brought together 20 rural MFIs. Lastly, in Cambodia, SIDI responded to a request from HATTHA KAKSEKAR concerning the definition of a social performance analysis. The institution will be carrying out a social rating at the start of 2011. Work on the social dimension also continued with the following partners who have made headway towards the creation of their tools: At a workshop with SIDI in attendance, RED FASCO in Guatemala completed the process to define common social performance criteria for Maya community associations, of which RED FASCO is the financial backer; eight of the ten associations incorporated the criteria into their monito-
ring tools. CAC la FLORIDA along with SIDI began a zone-byzone vulnerability diagnosis of the families of coffee growers who are members of the co-op in the wake of the survey conducted in 2009. The goal set for 2011 is to enable each zone to plan its social activities on the basis of this diagnosis. Lastly, SIDI initiated a reflection on how to secure links between the farmers and the partners who work for the Promotion of Value-Added in rural areas. A reflection along these lines is already underway with PHILEOL in Madagascar (see p. 11) and with BIOSUSTAIN in Tanzania.
Supporting partners experiencing difficulties

SIDI intervenes with partners who, by their very nature, e.g. structures going through consolidation (see p. 4) or because of their intervention context, which may include economic crises or excessive debt of customers, might encounter problems that jeopardize their growth and even their existence. For that reason, SIDI seeks to specifically support troubled local financing structures in order to discover the causes of their problems and try to come up with durable solutions. In 2010, this particular task first focused on partners grappling with a sharp increase in their risk portfolio, i.e. unpaid debts. In Kosovo, the economic crisis and a problem of fraud in several local associations seriously weakened KRKs portfolio. SIDI, as chairman of the board of directors, worked with other shareholders and the management team on a series of recovery measures and devised the following long-term solutions to its predicament: technical assistance for recovery procedures, a change in the loan-granting procedure to be handled henceforth by KRK instead of by local associations and strengthened human resources. The board had to deal with a negative 2010 accounting period but the portfolio is no longer deteriorating and is on the mend. In Moldavia, SIDI took part in the rescue plan for the MICROINVEST institution alongside other shareholders. The plan includes an increase in capital (see p. 6) and enhanced technical assistance. SIDI also faced serious difficulties in the Senegalese solidarity restaurant chain, ESCALES JAPOO, which experienced a deficit in 2010 owing to a fall in the countrys tourism and to a poorly adapted expenditure structure. SIDI therefore recommended a cost-cutting programme, including the closure of a restaurant, and took on a share of the losses. It got JAPOO DEVELOPPEMENT deeply involved in the revamping of the structure, which is an NGO of local development people for whom the Escales Japoo are a source of employment. In Senegal, the MEC PROPEM fishermens savings and loan
mutual became involved in a networking project with other fishermens savings and loans and, as the leader of the network, MEC PROPEM began in 2010 to refinance other savings and loans. Because of the weakness of several of these entities, the time was not ripe for refinancing, which caused some difficulties for MEC PROPEM. A SIDI evaluation mission was sent out to find solutions with the partner. The networking project was temporarily suspended without, however, questioning its relevance and SIDI agreed to renegotiate the terms of the existing loan. In DRC, the CCRD, a solidarity mutual refinancing institution (see p. 11) in North Kivu, experienced problems due to hasty growth that overstretched its management capacities, in particular owing to a lack of adequate leadership. SIDI contributed significant support for the creation of IT systems and a reorganisation of the structure. SIDI also agreed to transform the repayment of its loan into supplementary shares, a move that is expected to support capital growth by giving a greater stake to SIDI and consequently reducing significantly CCRDs debt. In Haiti, the earthquake of 12 January 2010, caused serious damage to the workshops of the seamstress federation, INDEPCO, as well as the loss of their premises and many sewing machines. While the $100,000 loan granted by SIDI in October 2009, helped to finance the purchase of cloth and other material, INDEPCO nevertheless experienced repayment difficulties. Following a field mission, during which it became clear that INDEPCO was enjoying a vigorous recovery, SIDI agreed to re-
schedule the debt and in December granted a new loan of $50,000 for the purchase of raw material. With the support of foreign donors and SIDI, which is the sole lender, INDEPCO was able to resume its activities and fill large orders for uniforms for schools and large companies, which will provide jobs for 600 workshops that are members of the federation and located in cities or in the countryside.
SUPPORT
SUPPORT Total number of days of support (including 22% volunteer consultancy vs. 23% in 2009) Percentage of days devoted to technical assistance Percentage of technical assistance for partner beneficiaries Percentage of days devoted to technical assistance for developing partners Percentage of days devoted to technical assistance in the field in support of the social dimension Number of days devoted to horizontal reflection (TA excl.) Average length of (current) partnerships Average length of financial relationships with (current) partners
2010
2009
2,315 2,222 55% 56% 67% 53% 72% 86% 2% 8% 683 529 7 years 7 years 6 years 6 years
Making a development programme sustainable through electrification: KAYER in Senegal

The UGPM (Union des Groupements Paysans de Mckh) has been developing the Jarioo Jant Bi (lets use the sun in Wolof) programme in Senegal since 2010. This programme is designed to provide access to photovoltaic solar energy in rural areas through the development of local skills and appropriate financing solutions. The programmes aim is to: 1. improve living and production conditions for people in rural areas through the installation of solar systems that provide energy for production, enjoyment, communication and lighting; 2. proactively introduce forms of renewable energy as a vector of longterm development, whilst at the same time protecting the environment; 3. develop economic opportunities and local skills around solar energy so as to promote the growth of an economic fabric that is capable of generating wealth and employment for young people living in the rural areas. The introduction of the Jarioo Jant Bi programme has led to the creation of a workshop, employing three technicians and a supervisor, which is responsible for the promotion, installation and maintenance of the equipment, as well as the development of a new financial product (the solar credit, which is refinanced by SIDI) at the Cooprative Rurale dEpargne et de Crdit (CREC), thereby permitting the purchase of solar equipment through microfinance at a reduced rate. After four years of activity, almost 4,000 people have benefitted, either directly or indirectly, from this programme. The customer satisfaction level regarding the quality of the equipment is very high and the loan default rate is very low (<3%). As a response to the success of the workshop and in order to ensure that its actions may continue in the long-term, the UGPM has decided to create KAYER, an enterprise that specialises in supplying products and services that are required to access energy. This institutionalisation project has received a great deal of support from UGPMs partners, Fratelli dellUomo, Italy, the General Council of the Midi-Pyrenees region and Enea Consulting, as well as from SIDI, which seconded a project officer to work on this project at the local level for a year. This enhanced form of technical assistance, combined with the UGPMs own resources, made it possible to carry out a market survey (in 2009), to formulate a business plan and to look for new potential investors and donors. In particular, this led to the decision taken by Schneider Electrics Energy Access fund to invest in the capital of KAYER. The KAYER enterprise was finally established in September 2010. It positions itself as a social and environmental enterprise by its vocation and wishes to contribute to efforts being made to ensure access to clean energy for everyone, as a factor of development. SIDI will continue to provide its support to KAYER. Furthermore, it would like to draw upon the experience gained in this area in order to develop similar initiatives with its partners, notably in Mali and Togo. Indeed, with this in mind, several meetings have already been organised at the local level with members of the KAYER management team.
Adapting the range of services

to the local context
Microfinance is particularly well adapted to medium-risk activities and to short-term loans. For that reason, some 80% of the beneficiaries of loans are located in urban areas. But microfinance services and those offered by conventional banks are still out of synch. Small and very small enterprises and producer organisations have a hard time getting financing, despite the fact that local banks are awash in cash. That is why SIDI has decided to respond to these requests for financing that have high social interest by focusing on rural areas. The aim is not to expand beyond SIDIs field of expertise, but rather to make financing available to entities outside the realm of MFIs. SIDIs work with producer organisations and provision of input financing, as well as its experience in supporting rural microfinance, have enabled it to formalise in rural areas its Promotion of ValueAdded, whose goal is to locate local players of any status in order to increase and secure farmers income. Finally, SIDI also backs the development of solidarity mutuals that, because they are self-managed and decentralised, have established themselves in far-flung rural areas.
Promoting value-added in rural areas

ADAPS and PHILEOL in Madagascar, BIOSUSTAIN in Tanzania, MOGTEDO in Burkina Faso, AOPP in Mali, ETC and SINERGI in Niger CGRH NIANING, ESCALES, JAPPOO DEVELOPPEMENT and UGPM in Senegal, MAPTO in Togo, FENACOOP in Nicaragua, ANED in Bolivia, CORECAFE and FAPECAFES in Ecuador, CAFEPERU and CAC LA FLORIDA in Peru and LAO FARMERS PRODUCTS in Laos. A recurring problem for producers in the South is their low capacity to turn a profit from their own production. Farmers suffer from raw materials price instability and have difficulty finding local or export outlets. As a result, it is a challenge to bring about lasting change solely through the contribution of financial services because an increase in production will not always mean a similar increase in revenue. That is why SIDI decided to work on the Promotion of Value-Added in Rural Areas, known as PVAR. It specifically targets producer organisations and businesses working with rural areas to develop their processing and marketing capacities in an environmentally-friendly way. More specifically, SIDIs support seeks to do the following: Identify local marketing circuits or quality importers, such as organic circuits and fair trade, among others, who may be interested in products, introduce them to producers and support the process; Conduct searches for subsidies for organic conversion or certification and grant pre-financing; Support agricultural processing projects; Back producers who create financial services for their members or who bring them into contact with MFIs (Madagascar, Morocco, Lebanon, Tanzania and others). Back organised producers in the creation of financial services for their members or who bring them into contact with MFIs In 2010, SIDI devoted 26% of its time to this approach, working with the following existing partners:
KAYER in Senegal, a business now being created to supply solar energy to farmers (see p. 9). BIOSUSTAIN in Tanzania, an organic cotton export and processing company, which managed to buy its own cotton gin and double its production. SINERGI, a Nigerian investment firm that supports small companies, in whose capital SIDI has increased its stake. FAIR TRADE LEBANON, an association that markets fair trade products, finds outlets for beneficiary co-ops and provides training, technical support and helps improve quality. SIDI took part in discussions on how to transform it into a company in a way that would help it develop its activities. SIDI would like to become a founding shareholder of the new company.
TAILORED SERVICES
ADAPTING OUR RANGE OF SERVICES
2010
2009
Amount of loans granted during the year (in Euros) 1,327,784 of which % dedicated loans (by number, otherwise 24% in amount) 44% Share (by number)* of new loans devoted to: Medium-term financing (> 3 years) 40% Financing of productive investment 60% Financing of rural businesses 20% Financing of organic farming 0% Financing of renewable energy 10% Financing of fair trade 10%
829,152 63% 14% 27% 26% 7% 0% 26%
*In 2010 but not in 2009 - there may have been loans allocated to several areas and therefore the total is higher than 100%.
SIDI has also set up the following new partnerships: With PHILEOL, a company that processes and markets castor oil produced in the south of Madagascar (see inset). With the NGO APFFH in Algeria, which is seeking to improve employment, recognition and status of women working in income-generating activities, such as in a couscous co-op and stock breeding with fodder provided when a sale is made, a sewing workshop, etc., and in 2010 SIDI supported its professionalization of financing searches management. Furthermore, SIDI negotiated a subsidy from the French Embassy for vocational training schemes. With COPROBICH in Ecuador. This rural company located in the poorest region of Ecuador has done well in the production, collection and marketing (organic and fair trade) of quinoa for the benefit of local member communities. To further develop this activity, the company applied for an $80,000 seasonal loan from SIDI to replenish its working capital. The application was approved in December 2010.
tain financial and institutional independence. SIDI also achieved progress in the following projects: The identification or the structuring of networks of solidarity credit union promoters in the Great Lakes region. One example is the RPMS network in South Kivu that consists of 15 promoters. It provides training for leaders and managers in the region and it applies for support from important donors interested in the network. In future, the goal of its members will be to use this network as their own technical assistance tool. Securing support for FNGN, the federation of farmers groups in the north of Burkina Faso for the start up of 12 pilot solidarity credit unions, monitored by the federations network of savings and loans (UBTEC). The advantage of the arrangement is that solidarity credit unions complement the development tools set up by the FNGN, in particular for women in areas far from the UBTEC savings and loans. Today, SIDI has recorded more than 5,000 solidarity credit unions bringing together around 100,000 members in eight countries: Senegal, Burkina Faso, Mali, Rwanda, Burundi, DRC, Madagascar and Haiti.
Promoting solidarity credit unions

West Africa (Senegal, Mali and Burkina Faso), Central Africa (DRC, Rwanda and Burundi), Haiti and Madagascar. The Mutuelle de Solidarit (MUSO) is a unique organisation set up by Senegalese farmers in 1995, and subsequently extended by SIDI to other countries. MUSO is a grouping of people from the same area who have decided to join together to manage a simple, flexible and supportive system revolving around three separate funds: a green fund that collects contributions for setting up the credit fund. These savings are recoverable, e.g. upon retirement. Next a red fund collects non-recoverable contributions and is used as an emergency fund in the event of fires, disease, etc. Thirdly, a blue fund can receive funds from abroad and provides other services. Rules for the safety of funds (creation of funds via company meetings, the holding of accounts, separation of roles, credit unions and keys) are inviolable. All other decisions are taken by the shareholders meeting, such as the frequency and amount of contributions, allocation of loans, sharing of expenses, use of the red fund, etc. SIDI is working on training, an IT system, strategy and financing with around a dozen organisations that promote solidarity credit unions, particularly in far-flung rural areas. In 2010, SIDIs effort focused mainly on the organisation of a workshop for the exchange of experiences, bringing together all those involved: SIDI, the promoters from the eight concerned countries and CCFD-Terre Solidaire and its researchers. The workshop took stock of good practices, regulatory issues, the problem of refinancing solidarity mutuals, relations between SIDI and CCFD for technical support and the subsidising of promoters, training and monitoring software. The goal of the workshop, after 15 years of development, is to make progress in coordinating those involved in order to ensure that the promoters at-
Supporting the development of a rural enterprise: PHILEOL in Madagascar

The population in the south of Madagascar live in highly vulnerable conditions due, amongst other things, to the recurring natural and climate-related constraints, as well as the absence of asphalted roads (which, in turn, makes trade difficult), the lack of schools PHILEOL was created in this context in 2008 by a chemist and two agricultural engineers from Madagascar, out of a desire to develop the local production of castor oil with a view to selling it to industry, in full respect of the local farming communities and the environment. PHILEOL has based its business on the purchase of locally produced castor beans, which it then processes, in its own factory, into high quality caster oil destined for sale to industry. Furthermore, it provides the farmers with seed (and small-scale equipment) free of charge and also provides them with training activities on how to grow castor beans, thanks to a subsidy obtained by the French investor, I&P. This partner, which was introduced to SIDI by I&P (one of its founding shareholders), has provided SIDI with the opportunity to respond to the issue of finding outlets for the activities carried out by farmers in this difficult area. Moreover, the company has a well developed sense of social and environmental responsibility (one example of this is to be found in its reforestation initiative). That is why SIDI entered into a technical assistance relationship with PHILEOL in 2010, based on contractual relations between the company and the producers. SIDI also provided the company with a loan of 40,000 Euros to purchase processing equipment. Finally, it supported PHILEOL during the economic difficulties it experienced as a result of the drought, by keeping a close eye on its cash flow situation and also by providing a 100% guarantee (for a total of 70,000 Euros) for a bridging loan granted by a local bank. This innovative approach has been carried out in close cooperation with CCFD-Terre Solidaire, particularly with regard to the companys social and environmental responsibility. Today, PHILEOL has become well established at the local level: it purchases its raw materials from more than 6,000 producers and processes it in its own factory before selling the oil to a French importer. It has also diversified its activity through the purchase of other oil-producing crops in the area and has the intention of developing the production of similar crops in order to guarantee food security for the local community.
Creating support
mechanisms
As an actor of social development, SIDI actively seeks to mobilise the efforts of other institutions, both to promote its own vision of solidarity financing and to acquire complementary resources for its partners. Indeed, whilst its own resources are solid and stable, on their own they are not sufficient to respond to the needs expressed by the partners. Furthermore, SIDI would like to reaffirm the need to support the local development actors, particularly the rural actors who, despite their social usefulness and potential, require both financing and subsidies in order to strengthen their activities, whilst many donors and financing investors are interested primarily in profit-making institutions.
Investing in refinancing instruments

TEMBEKA in South Africa, SMF EA and FEFISOL in Africa, BMS in Mali, SINERGI in Niger, RED FASCO in Guatemala, FENACOOP in Nicaragua, FORTALECER in Peru, FOPEPRO and ACEROLA in Latin America, Guarantee Fund in Palestine, FRICS in Haiti, SEFEA in Europe SIDI invests in refinancing funds, thereby generating a leverage effect to provide support for the LFS (see Focus). Amongst the actors identified by SIDI, it accords priority, notably, to the instruments created by the local institutions themselves, since they have first hand knowledge of their operating environment and are capable of working together. RED FASCO is a network of rural community associations, which has been able to become a shareholder in a local bank (BANRURAL) thanks to a loan provided by SIDI. Its position as a shareholder allows RED FASCO to take part in the governance of the bank and to facilitate the disbursement of loans to its members. It is able to achieve this, on the one hand, through the knowledge that the network has gained of the BANRURAL and on the other, because the granted loans are guaranteed by its participation in the bank. In 2010, SIDI granted a further loan to RED FASCO in Guatemala of $125,000 over a five year period, in order to establish a fund to finance the associations that are not yet eligible for bank financing, but which need to develop their microcredit provision. SIDI has also continued its work with the KNFP in Haiti in the aftermath of the earthquake, through the establishment of the FRICS, a financing fund for rural activities. It has incorporated the dividends received from FORTALECER in Peru into the capital of the structure. It has continued to provide management assistance to the BMS in Mali, which is now a profitable institution that is recognised for its financing of the countrys MFIs. SIDI wishes to develop the links between the bank and the POs and has, in particular, favoured the financing of the AOPP, which is a network of 170 POs, representing one million farmers, by the BMS. Together with SIDI, the CCFD has transformed a subsidy granted to the AOPP for the development of the cultivation of cowpeas into a guarantee lodged with the BMS and this has enabled 200 producers, who had previously been dependent upon aid, to finance their activities on a long-term basis. Furthermore, FOPEPRO, the fund for rural producers in Latin America, which was created by SIDI and Alterfin, began its activities in 2010, with a starting capital of $2.5 million, which was provided by its creators and Fogal. A second call for investors has now been completed and this has led to a further capital injection of $2 million, provided by DID and BIDFOMIN. Loans for a total of $4.5 million had already been approved by the end of the year (see focus).
Finally, the call for investors for the creation of FEFISOL, the investment fund for Africa, has been completed and the three founders (SIDI, ETIMOS, ALTERFIN): the European Investment Bank, DID/Canada, Crdit Coopratif, Caritas Foundation/France, SEFEA, NMI/Norway, the French development agency and its subsidiary Proparco. FEFISOL will be in a position to begin its activities by mid-2011, in accordance with its policy to provide support, in particular, to institutions that target Africas poorest populations, notably small rural producers. The dual originality of the fund is to be found in the fact that it wishes to finance not only MFIs in the process of consolidation, but also POs and rural enterprises, as well as providing these structures with technical assistance services.
LEVERAGE EFFECT
LEVERAGE
Number of partners who have benefitted from leverage generated by SIDI
2010
2009
5%
8%
Mobilisation of capital, loans, guarantees or subsidies acquired through SIDI
Amount of subsidies obtained as a result of SIDIs intermediation 429640 125 332 Amount of loans mobilised as a result of SIDIs intermediation amongst allies in the North 530,000 1.3 M Number of days devoted to the search for complementary funding for the partners 269 210 Share of SIDI in partners debt 42% - Amount of new guarantees committed by SIDI 506,325 760,000 Amount mobilised from banks at the local level 658,774 1,020,000
For a leverage effect of 1.35 (1.30 in 2009)
751,216 Number of active end borrowers 1,280,067 1,330,840 Number of producers who are members of partner Producer Organisations and other beneficiaries of rural enterprises 36,694 37,301
Number of end clients of the umbrella organisations and funds 817,226
Networking and collaborating with other alliances

CCFD-Terre Solidaire, Frres des Hommes Italie, Misereor, AFD, SICAV Nord/Sud, Epargne Sans Frontires, Fondation Gilles, Merkur Bank, Cordaid, SOS Faim, Ministre des Affaires Etrangres, Feu Vert pour le Dveloppement, F3E, Conseil Gnral de Midi-Pyrnes CCFD-Terre Solidaire, Fratelli dellUomo, Italy, Misereor, AFD, SICAV Nord/Sud, Epargne Sans Frontires, Fondation Gilles, Merkur Bank, Cordaid, SOS Faim, Ministry for Foreign Affairs, Feu Vert pour le Dveloppement, F3E, General Council of the Midi-Pyrenees Region In 2010, SIDI continued its efforts to work together with partners in the North: its allies, who share its vision of development, notably the CCFD-Terre Solidaire, and donors who work with specific partners. SIDI and the CCFD-Terre Solidaire are continuing the development of joint partnerships, in keeping with the desire expressed by the two institutions to work in a more complementary fashion in the field, by adopting an approach that combines financing, technical assistance and subsidies, with a view to promoting fair development: in 2010, 26 partners benefitted from joint support provided by SIDI and CCFD-Terre Solidaire. Furthermore, in 2010, the work devoted to the mobilisation of the donors for the benefit of the partners represented 12% of the time spent by SIDI on technical assistance. As a result of these
efforts, SIDI was able to negotiate the granting of 429,640 Euros for its partners, essentially for the MAIN network, which benefitted from subsidies for its training courses for managers and loans officers, and for KAYER, which received financing to subsidise the installation of solar platforms in the villages (focus page 9). SIDI has maintained its involvement in several networks, enabling it to hold exchanges regarding its practices, to meet other actors and even to develop joint projects. In 2010, SIDI - provided substantial support to the MAIN network in its efforts to look for financing (making it possible to complete the members subscriptions for the provision of training services), notably through the checking of an application to the AFD, which was accepted at the beginning of 2011; - took part in several board meetings as the only non-African member; - finally, it promoted an exercise designed to transfer competence to the accounts department of MAIN; - participated in the work carried out by FOROLACFR, a network of close to 400 social MFIs in Latin America, regarding the definition of social performance indicators. - maintained its active presence within the structures of INAISE, the worldwide network of actors in the social and solidarity economy, the European Federation of Ethical and Alternative Banks (SEFEA is a project promoted by the members of this federation) and of Epargne Sans Frontires.
Working with refinancing institutions in order to reach out to new customers

SIDI has decided to finance regional, or so-called secondary level, funds (or investment companies) since they enable it to effectively extend its actions on a coherent basis, together with its other partners in the field: they general a leverage effect through the mobilisation of funds from other donors they make risk-sharing possible they provide for a better identification of the actors in the target area they make it possible to support the structures or countries to which SIDI does not provide direct support. FOPEPRO, which began to provide financing in 2010, has already financed several SIDI partners, such as ANED in Bolivia, FAPECAFES in Ecuador and CAFEPERU and CREDIFLORIDA in Peru, which now benefit from supplementary resources. FOPEPRO has also undertaken its own initiatives to identify potential beneficiaries and is financing several POs in the coffee and cocoa sectors (APAVAM and TOCACHE in Peru, ASOCAFE in Bolivia, FCCEG in Guatemala, for example), as well as bean producers in Bolivia. SMF EA provides refinancing to MFIs in five central and eastern African countries, namely Uganda, Tanzania and Rwanda, as well as in two countries in which SIDI is not present, Kenya and Sudan. It finances several MFIs that are already established, such as PRIDE or BRAC, which operate in several countries in the region, as well as small MFIs that are in the process of consolidation and to which SMF EA also provides technical assistance (notably regarding the formulation of business plans). Finally, through its partners, the fund supports the notion of Community Managed Micro Finance, in other words, groups of 20 to 30 people from a poor background who are not served by conventional MFIs and who instead pool their savings and grant loans to one another. At the end of 2010, SMF EA was providing support to 14 partners who had adopted this approach (notably through the provision of management assistance), thereby reaching out to some 30,000 customers. In Europe, SEFEA provides financing to organic and fair trade organisations, such as Ethiquable, Biocoop or Alter Eco, cooperatives in disadvantaged areas (in Bosnia and in the south of Italy) and to microfinance institutions in eastern Europe, with Integra in Slovakia and KRK in Kosovo. SEFEA enables SIDI to establish a link with solidarity financing in Europe. Finally, SINERGI in Niger is an investment company that invests in very small, small and mediumsized enterprise, with a particular focus on the agriculture and agri-food sectors, through the provision of financing and assistance in the areas of management and the search for technical and commercial partners. SINERGI has already made several investments since its creation in 2006. For example, it has financed Compost Niger, which makes organic fertilisers, ETC which processes and sells cereals (SIDI provided it with direct financing in 2009 and then sold its shares to SINERGI). Similarly, Laitire du Sahel or the African Trade Company, which sells dried meat, received approval for financing in 2010, subject to the revision of their business plan. Finally, one of the first companies to receive financing paid out a dividend to SINERGI in 2010, which proves the effectiveness of this model in a complex environment: the company in question is called Unifam, which manufactures metal-based products. Rather than distancing SIDI from the local level, this type of partnership enables SIDI to develop a more detailed knowledge of the local actors and challenges, whilst at the same time lowering the level of risk and increasing efficiency through the leverage effect. Furthermore, the creation of the FOPEPRO and FEFISOL funds by SIDI represents an extension of this important strategic focus.
Ensuring the partners

institutional
The role of SIDI as a patient investor is to work alongside the partner LFS in order to ensure that they are able to provide their customers with appropriate and longterm financial services. This means that SIDI has to support them in their process of institutionalisation, in the use of tools to direct and to monitor their activities, in the definition of their strategic priorities and, finally, to ensure their good governance. In structures in which SIDI is a shareholder, then it systematically asks to be represented on the decision-making bodies so that it has a say in the decisions that are taken to implement the general policy. This means that SIDI must ensure that it has an active presence on the 27 boards of directors of which it is a member, as well being involved in their preparation and the implementation of their decisions, alongside the other members of the board.
viability and social purpose
Defending a social vision within the structures

In its role as an active social investor, SIDI is particularly attentive to the need to ensure that a good degree of coherency exists between the partners social vision and their effective practices. In 2010, SIDI devoted 13% of its working time preparing for, and participating in, board meetings. It has reaffirmed the social vision of SIPEM in Madagascar, notably with regard to the decisions to be taken concerning the sharing of the added value, and it continues to closely monitor the implications of institutional change. SIDI has also taken part in the preparation of the capital increase of the CRG in Guinea (which is to take place in 2011), according particular attention to the adjustment in the balance of power that may ensue as a result of this operation (see Focus) At the general assembly of CONSOLIDAR in Colombia, SIDI once again reiterated the utility of developing the provision of loans in a context in which the institution is more focussed upon responding to public tenders in order to subsidise those who have been displaced by the conflict. Furthermore, together with the other board members of TEMBEKA, it has validated a project designed to finance rural enterprises with a social vocation in South Africa. It has adopted a similar approach to the BMS in Mali, where the financing of POs viable economic projects is now on the agenda. Finally, together with another shareholder, it has encouraged the board of Centenary Bank to adopt a positive position regarding the financing of small MFIs and POs in Uganda.
Reinforcing governance
In order to ensure the long-term coherence of the development of the structures of which it is a member, SIDI devotes a substantial amount of time supporting the efforts undertaken to define their strategic priorities: to this end, it has taken part in the formulation of the business plans of KOKARI in Niger (with the intention of not only making sure that the structure conforms with the new framework law on microfinance, but also of developing non-financial services), of the UGC-CPC in Mozambique (of which it is the only partner) and of TEMBEKA in South Africa. In Peru, by taking a stake in the capital of CREDIFLORIDA, a rural MFI created by CAC LA FLORIDA, a coffee growers cooperative, SIDI has been able to participate in the work designed to update its strategic plan. It has adopted a similar approach to its relations with FORTALECER, a cooperative of rural MFIs, since its election to the board has enabled it to initiate a process to strengthen the institution (business plan, strategic plan, a plan to mobilise resources). SIDI also sits on the loans committees of the SMF EA in Uganda and of SINERGI in Niger and is therefore able to take part in the investment decisions. Similarly, it is also a member of the executive board of the Finance Commission of AL AMANA in Morocco, where it is monitoring the efforts made to aid the recovery of the institution (following the crisis in the sector due to an increase in the number of customers in a situation of over-indebtedness). Finally, SIDI has taken part in the definition of the human resource policy at the CRG in Guinea and at KOKARI in Niger, and also led a workshop on credit risk evaluation for the staff of the UGC-CPC in Mozambique.
Ensuring its long-term role as a board member: the Crdit Rural de Guine
The Crdit Rural de Guine (CRG), which has been a SIDI partner since 2002, is an umbrella organisation that groups together a network of 114 local savings banks located throughout the country (the savings banks are affiliated to the umbrella organisation by contract and are shareholders in it). For the most part, the savings banks are located in rural areas (representing 80% of the networks 150,000 member-borrowers), although they are also to be found in the medium-sized villages and, more recently, in the urban centres. In a highly difficult context, which has been fraught with a succession of both political (the succession of Lansana Cont) and economic (further exacerbated by the crisis in its neighbouring country, the Cte dIvoire) crises for several years, the CRG has always managed to maintain its mission to finance income-generating activities, particularly for small farmers. The CRG is an atypical institution in the sense that it has adopted a joint management approach: the activities of the savings banks are managed by both the elected representatives and by the workforce. This system is also adopted by the umbrella organisation and by the Board of Directors, where seats are allocated to representatives of both the workforce and the savings banks. In this way, it is possible to defend everyones interests in discussions with senior management. The fact that the CRG has chosen to focus its attention on rural activities, in a country that offers precious little prospect of financing for small farmers, together with the quality of its governance, led SIDI to take an 8% stake in the companys capital in 2002 (one year after the institutionalisation of the programme. This also means that SIDI has a seat on the board of directors. Since then, SIDI has attended each of the three annual board meetings, as well as the meetings of the commissions and the preparatory meetings. During these meetings it constantly strives to defend several strategic priorities: - the financing of agricultural activities, ensuring that the ceiling of 20% outstanding loans, which was decided upon by the board, is respected; - controlling expenditure: the CRG must strive to ensure that it maintains a balance in a context in which the AFD subsidies (for training and the introduction of IT systems) are no longer being provided; - training: the withdrawal of subsidies used to provide training for the workforce and for the members elected to sit on the board has undermined the culture of joint management, which continues to be endorsed by the majority of board member; - the search for new resources: the board has accepted a proposal to launch a new capital increase initiative in 2011. SIDI will take part in this initiative and will increase its share to 20%. - the reduction in the boards operating costs: with a view to generally limiting expenditure, SIDI would like the board to set an example by reducing daily allowances, keeping a close eye on situations in which a budget is exceeded and closely examining costs. - the continuation of the policy based on the decision not to distribute dividends. The fact that it attends the board meetings on a regular basis and that it maintains clear objectives, means that SIDI is considered to be a well-respected board member by the other members of the board and the senior management team. Furthermore, its position as a foreign investor means that it is able to distance itself from local issues. This means that the desk officer, who has represented SIDI since 2002 (making this person the longest-serving board member) is able to positively influence important decisions when there is tension amongst the other board members. Indeed, it is this very same person who has been training the new board members on an informal basis since the subsidies for this type of training have been withdrawn. She also proposed and obtained a slower turnover amongst the board members, so that they have the time required to learn how to exercise their powers. Over a ten year period, the board has become significantly stronger and it now represents a genuine governance body with a strong identity, which reflects the interests of the different actors, whilst at the same time defending the collective interests. Today, together with the general management, it is striving to effectively correct the current situation and is preparing a capital increase that is scheduled for 2011 and in which SIDI will take part.
GOVERNANCE
GOVERNANCE Number of partners with whom SIDI takes part in strategic reflection
i.e. 33% of the partners
2010
2009
29
28 23 434
297
Number of partners where SIDI is represented on the Board 21 Number of days devoted to governance 450
Including days spent participating in Board meetings 309
Number of days devoted to institutionalisation

Involving 10 partners in 2010 (same number as in 2009)
81
85
COMPLEMENTARY DATA
2010 2009
Percentage of partners in crisis areas

90% of which are in political crisis zones (86% in 2009)
32% 31% 12% 21%
Percentage of partners who have reduced their interest rates over the last 3 years
The interest rate has remained stable for 76% of partners (73% in 2009)
Financial data
448 M 492 M 284 M 333 M 1,4 MM 1 MM Percentage of partners who have increased 71% 44% their equity during the year Percentage of partners who have generated 49% 52% a positive result during the year Percentage of POs/ rural businesses that have improved 58% 25% their turnover during the year 70% Percentage of partners who have a social policy 77%
Total MFI loan portfolio Total MFI savings portfolio Total amount of partners assets
SIDIs 2010
financial statements
SIDIs balance sheet at December 31, 2010 in thousands of euro
ASSETS
2010 2009
LIABILITIES
2010 2009
Net intangible assets Net financial assets

of which shares and claims of which loans of which other financial assets
60 9,710 5,718 3,878 115 9,771
61 8,674 4,394 4,103 176
Capital Reserves Profit/loss for the year Total equities
2 These are provisions for risks and financial 14,007 13,701 provisions for exchange rate losses.
13,000 13,000 701 546 306 155
Total fixed assets
Claims (net value, including co-financing)
434
8,735 Provisions 2 Loans for activities CCFD-RURAL FUND 3 383
183 1,313 1,000
180 1,292
Cash assets 1
9,295
Cash (including F.I.D.), invested in ethical securities and investment real estate. Accruals TOTAL
4 Provisions on loans and equity investment have since 2004 been covered by the F.I.D., a hedging mechanism that 21 122 Accruals 247 224 applies, with a few 21,154 18,535 TOTAL 21,154 18,535 exceptions, to all investment conducted by SIDI. It comprises current "S.A. SOFIDEEC BAKER TILLY, external auditor, a member of CRCC in Paris, represented by its chairman accounts of shareholders Mr Fouad EL M'GHAZLI, has certified without reservations SIDI's annual accounts, ended December 31, 2010." who are convinced of the importance for SIDI to target difficult intervention areas.
9,295 Shareholders, current account FID 4 International guarantee fund C.D.C. Fund SAAP FEFISOL Fund
522 2,478 374 500
128 2,040 366 -
3 Resource provided by CCFD as part of the forthcoming Ecological Transition financial instrument (see p.3)
The solidarity chain for financing
FID
1,450 shareholders
5,000 savers
Capital
13 million euros
Income from the Joint Investment Fund and from CCFD

1.2 million euros/year
Mobilisation of funds from alliances
Refinancing fund
Technical Assistance fund
LFS
PO
LFS
LFS
PO
LFS
End beneficiaries
LFS : Local Financing Structures PO : Producers Organisations FID : Development Incentive Fund (guarantee mechanism)
SIDIs income statement at December 31, 2010 in thousands of euro

at December 31, 2010 2009
Income Total CCFD services Co-financing Export services Other products Provision reversal & transfer of expenses Charges Total Current operation income (of which technical operations in the amount of 69,175) Wages and salaries Depreciation expense Provision for charges Allocated grants Other expenses Operating profit/loss Income Total Income from portfolio (loans and shares) Investment income DIF resources Exchange rate gains Provisions reversal Other Charges Total Provision for financial risks, translation differential Provision for risks on shares and loans Loan write-down Interests on loans Disposal of shares, Investment securities Exchange rate losses Other Financial profit/loss Exceptional products Exceptional charges Exceptional profit/loss Income taxes Net profit/loss
1,629 1,185 276 25 37 106 2,261 668 1,241 21 3 249 78 -632 1,077 638 39 67 122 205 7 144 5 79 27 0 34 933 7 2 5 306
1,568 1,185 116 64
This heading mainly comprises contributions received from the CCFD to finance support activities (1,2 million euro). Most of these resources are provided to the CCFD from the proceeds of the Faim et Dveloppement investment fund resources from international partners, which are either transferred to the partners or are spent on financing SIDI support.
65 Other proceeds include fees for attending board meetings, application fees, etc. 138 2,043 722 1,147 20 These are co-financings from international 96 partners transferred directly to the partners for their projects. 58 -475 985 556 38 Mainly recovery of provisions 42 on cash 325 investments. 0 24 339 5 195 30 16 75 18 646 142 158 -16 155
pargne Solidarit Dveloppement 28%
(ESD grouping of 1,270 individual shareholders)
Breakdown of SIDIs capital at 31/12/10
Other 4% Northern Partners 5% French Financial Institutions 12%
CCFD-Terre Solidaire 22% and 14 religious congregations 29%
FONHSUD FRICS INDEPCO KOFIP KNFP / IMOFOR HAITI RED FASCO GUATEMALA FENACOOP NICARAGUA
Map
of SIDIs
financial partners*
FOROLACFR Latin America
CONSOLIDAR BANCOSOLIDARIO COLOMBIA CORECAFE FAPECAFES GRUPPO SALINAS ECUADOR CAFEPERU CONFIANZA CREDIFLORIDA FORTALECER LA FLORIDA PERU ANED BOLIVIA
FOPEPRO Socit de gestion ACEROLA Pays Andins - Amrique Centrale
in 2010
INDES CHILE SAINDESUR URUGUAY
* and Southern networks
SEFEA Europe
MICROINVEST MOLDAVA KOSOVO 7000 AL AMANA AMSSF MOROCCO CGRH CREC ESCALES JAPPOO DEVELOPPEMENT KAYER MEC PROPEM UGPM SENEGAL CRG FPFD GUINEA FAIR TRADE LEBANON NAJDEH LEBANON APFFH ALGERIA ETC KOKARI MECREF SINERGI TAANADI NIGER ASIENA FNGN BTEC MOGTEDO BURKINA FECECAV MAPTO TIMPAC UCMECS WAGES TOGO EACD EGYPT FONDS COOPERATIF LAO FARMERS PRODUCTS LAOS HIEP THAN VIETNAM ACAD ASALA Guarantee Fund PALESTINE KRK
7000
AOPP BMS SA NIAKO MALI
AMRET HATTHA KAKSEKAR CAMBODIA
SMF EA Africa FEFISOL Africa MAIN Network Africa
ADI-KIVU CCRD COOCEC COODEFI DEMOCRATIC REPUBLIC OF CONGO
CENTENARY BANK OMIPA UGANDA IMPUYAKI RWANDA AKIBA BIO SUSTAIN TANZANIA CAPAD COPED COSPEC ISHAKA BURUNDI
UGC-CPC MOZAMBIQUE ADAPS PAMF PHILEOL SIPEM TITEM MADAGASCAR
TEMBEKA SOUTH AFRICA
AREA
Africa
PARTNERS
SMF EA MAIN FEFISOL ASIENA FNGN BTEC MOGTEDO CAPAD COPED COSPEC ISHAKA ADI-KIVU CCRD COOCEC COODEFI CRG FPFD ADAPS PAMF PHILEOL SIPEM TITEM AOPP BMS NIAKO UGC-CPC ETC KOKARI MECREF SINERGI TAANADI IMPUYAKI CGRH CREC ESCALES JAPPOO DEVELOPPEMENT KAYER MEC PROPEM UGPM TEMBEKA AKIBA BIO SUSTAIN FECECAV MAPTO TIMPAC UCMECS WAGES Centenary Bank OMIPA FOROLACFR FOPEPRO ACEROLA ANED INDES CONSOLIDAR BANCO SOLIDARIO CORECAFE FAPECAFES GRUPPO SALINAS RED FASCO FENACOOP CAFEPERU CONFIANZA CREDIFLORIDA FORTALECER LA FLORIDA SAINDESUR AMRET HATTHA KAKSEKAR FONDS COOPERATIF LAO FARMERS PRODUCTS HIEP THAN APFFH EACD FAIR TRADE LEBANON NAJDEH AL AMANA AMSSF ACAD ASALA Guarantee Fund in Palestine INDEPCO KNFP / IMOFOR FONHSUD FRICS KOFIP SEFEA KRK MICROINVEST TOTAL
COUNTRY
Africa Africa Africa BURKINA BURKINA BURKINA BURUNDI BURUNDI BURUNDI BURUNDI DRC DRC DRC DRC GUINEA GUINEA MADA MADA MADA MADA MADA MALI MALI MALI MOZAMBIQUE NIGER NIGER NIGER NIGER NIGER RWANDA SENEGAL SENEGAL SENEGAL SENEGAL SENEGAL SENEGAL SENEGAL SOUTH AFRICA TANZANIA TANZANIA TOGO TOGO TOGO TOGO TOGO UGANDA UGANDA Latin America Latin America Latin America BOLIVIA CHILI COLOMBIA ECUADOR ECUADOR ECUADOR ECUADOR GUATEMALA NICARAGUA PERU PERU PERU PERU PERU URUGUAY CAMBODIA CAMBODIA LAOS LAOS VIETNAM ALGERIA EGYPT LEBANON LEBANON MOROCCO MOROCCO PALESTINE PALESTINE PALESTINE HAITI HAITI HAITI HAITI HAITI Europe KOSOVO MOLDOVA
CATEGORY
FUND NETWORK FUND MUSO MFIC PO MUSO MUSO MFIC MFIC MUSO MUSO MFIC MFIC MFIC PO PO MFIC PAVRA MFIP MFIC PO UMBRELLA MFIC MFIC PAVRA MFIC MFIC FUND MFIC MUSO PO MFIC PAVRA PAVRA PME MFIC PO UMBRELLA MFIP PAVRA MFIC PO MFIC MFIC MFIP MFIP MFIC NETWORK FUND FUND MFIP MFIP MFIC MFIP PAVRA PAVRA PAVRA UMBRELLA UMBRELLA PAVRA MFIP MFIC UMBRELLA PO MFIC MFIP MFIP MFIC PAVRA PAVRA PAVRA MFIC PAVRA MFIC MFIP MFIC MFIC MFIC FUND PAVRA NETWORK MUSO UMBRELLA MUSO FUND MFIP MFIP
SIDIS PORTFOLIO AT 31/12/10. IN THOUSANDS OF EURO (CAPITAL, LOANS, GUARANTEES)
VOLUME OF SUPPORT IN TIME SPENT BY THE SIDI TEAM
Latin America
Asia
Medit. Basin
Caribbean
Europe
483 38 23 10 18 11 18 30 182 110 537 152 10 179 126 107 30 127 100 160 60 781 420 71 114 152 475 18 1416 2 146 85 100 165 14 65 236 130 344 142 143 193 109 97 238 190 54 23 264 119 28 246 101 72 99 66 29 135 649 187 10,429.10
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GOVERNANCE AT DECEMBER 31, 2010 BOARD OF DIRECTORS
SCHMITZ Christian
Chairman of the Board of Directors
GUENARD Genevive
Board Member
RICARD Xavier
Board Member SUPERVISORY BOARD
AURENCHE Guy
Chairman
MESNY Philippe
Vice-chairman
CAISSE DES DEPOTS ET CONSIGNATIONS

Represented by CHABRILLAT Pascale
CCFD - TERRE SOLIDAIRE

Represented by LESAY Martial
CONGREGATION DES SURS AUXILIATRICES

Represented by Sister Marie-Thrse GAUD
CONGREGATION DES URSULINES DE JESUS

Represented by Sister Christiane GROSSIN
CREDIT COOPERATIF
Represented by MORET Laurence
EPARGNE SOLIDARITE DEVELOPPEMENT

Represented by ANCELIN Pierre
BITSCH Grard
Member
The portfolio is invested as follows: 52% in equity capital, 38% in loans and 10% in guarantees. For further information, see www.sidi.fr
TERRE
TERRE
INTERNATIONAL SOLIDARITY FOR DEVELOPMENT AND INVESTMENT 12 rue Guy de la Brosse 75005 Paris tl. : 33(1)40 46 70 00 fax : 33(1) 46 34 81 18 info@sidi.fr www.sidi.fr
07-2011 - imprim sur papier recycl avec des encres vgtales. d1

SIDI - Annual Report 2010

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SIDI - Annual Report 2010

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20 10

ivities The actIDI and of S ers its partn

Sharing risks fairly and patiently

Providing accessible and flexible support

Adapting the range of services to the local context

Creating support mechanisms

Ensuring the partners institutional viability and social purpose

Financial Statements Maps and List of partnerships at 31/12/2010

INTERNATIONAL SOLIDARITY FOR DEVELOPMENT AND INVESTMENT

2 The activities of SIDI and its partners in 2010

Christian Schmitz Chairman of the Board

Review of the work carried out

Solidarity financing in 2010

Latin America 32%

Loans in hard currencies 24%

Loans in local currencies 14%

4 The activities of SIDI and its partners in 2010

Solidarity support in 2010

Figure 3 - Destination by category of the portfolio

Network PME PAVRA 0% 9% 0% UMBRELLA 14%

Funds 22% MFIC 20%

Figure 4 - Destination of TA days by region in 2010

Eastern Europe 3% Asia 4% Med. Basin 4%

Latin America 12%

MFIC 20% MFIP 33%

The activities of SIDI and its partners in 2010 5

Lending in local currency

Financing institutions in the process of consolidation: UCMECS and FECECAV in Togo

Social responsability report

54% 52% 20% 43% 65% 21% 60%

60% 45% 24% 49% 62% 36% 57%

The activities of SIDI and its partners in 2010 7

Promoting supervision of the social dimension

Supporting partners experiencing difficulties

8 The activities of SIDI and its partners in 2010

Social responsability report

Making a development programme sustainable through electrification: KAYER in Senegal

The activities of SIDI and its partners in 2010 9

Adapting the range of services

Promoting value-added in rural areas

Social responsability report

ADAPTING OUR RANGE OF SERVICES

829,152 63% 14% 27% 26% 7% 0% 26%

Promoting solidarity credit unions

Supporting the development of a rural enterprise: PHILEOL in Madagascar

The activities of SIDI and its partners in 2010 11

Investing in refinancing instruments

Mobilisation of capital, loans, guarantees or subsidies acquired through SIDI

Number of end clients of the umbrella organisations and funds 817,226

12 The activities of SIDI and its partners in 2010

Networking and collaborating with other alliances

Working with refinancing institutions in order to reach out to new customers

Ensuring the partners

viability and social purpose

Defending a social vision within the structures

14 The activities of SIDI and its partners in 2010

Social responsability report

Number of days devoted to institutionalisation

Percentage of partners in crisis areas

32% 31% 12% 21%

The activities of SIDI and its partners in 2010 15

Net intangible assets Net financial assets

60 9,710 5,718 3,878 115 9,771

61 8,674 4,394 4,103 176