SAMAIF Fund Investment Strategy
We prefer to start greenfield operations that use our in–house operating systems. In such cases we take, where legally allowed, a 100% stake in the equity and exert full control over the strategy of the investee company, the appointment of management, systems and any and all operating aspects of the business. We usually fund the investee’s operations making loan facilities available to the investees and take pledges over all assets of the investees. Capital is kept to the legal minimum.
When we lend funds to existing businesses we always take a blocking minority shareholding which allows us to exert significant influence over the investee’s strategy and operating policies. To the extent possible and acceptable to the majority shareholder we would wish them to implement our in-house operating systems. Funding would be similar to that for fully owned businesses with pledges over assets in place to secure the value of the loan.
It is not our policy to provide unsecured loans to any party.
We carry out due diligence, mostly financial, tax and legal but sometimes also operational, the initial part being done in-house as a desk review followed up by a review in the field by our own people. When these procedures give a satisfactory conclusion we shall use one of the big-4 international accounting firms with which we have a preferred supplier relationship, to carry out the formal in-depth due diligence review.
We will always wish to have a say about the choice of management.
We do not invest in countries that are or have been at war in recent years and in countries that are economically or politically seriously unstable and countries where law and order cannot be guaranteed by the authorities.
SAMAIF Annual Review 2014
2014 has seen the global microfinance sector grow significantly due mainly to ongoing recovery of the global economy and SAMAIF in particular has experienced another fantastic year, increasing its investment diversification over 3 continents and generating strong non-volatile returns for its investors. 2015 is forecast to continue in the same vein and we are likely to experience further significant growth as the important position microfinance holds in the financial sector is further acknowledged by Governments and investors alike as they look to generate positive investment returns whilst improving the lives of the others. The estimated sector demand for 2015 will increase to c.$6.9bn* only serving to highlight the attractiveness and the scalability of the investment opportunity for SAMAIF and its investors.
In the 12 months to 31st December 2014, the assets under management (AUM) of the Fund increased from USD3mn to USD16.05mn. The annual targeted return of + 8% was comfortably exceeded, with a year-end return of 11.57% and cumulative returns since inception now reaching +31.94%.
SAMAIF continued its outreach to new microfinance initiatives and was able to diversify and extend its portfolio, adding further projects in an additional two countries – Ghana and Suriname. At the same time it expanded operations in its already established locations.
The managers are pleased to confirm that a new SAMAIF-backed MFI (Microfinance Institution) in Ghana is now operational and will be servicing the strong requirement for localized micro loans in the region in 2015.
The financing of a vehicle leasing business in Suriname is proving to be another success story – creating over 125 much needed local jobs and providing pleasing returns to the Fund. Expansion plans have been given provisional approval by the Fund for 2015.
Direct funding provided by SAMAIF helped finance various small business start-up situations in 2014, supporting economic prosperity and growth in local communities. This approach will continue to form a significant part of the SAMAIF strategy in 2015. The high quality of the existing portfolio is providing a sound foundation for expansion into new territories and projects.
The number of individual micro loans dispersed by SAMIAF-backed institutions (SBIs) reached over 6,000 in 2014 with over 82% of these loans to women**.
It is noteworthy that to date there have been no write-offs in the portfolio. This excellent record is attributed to the intensive micro credit review procedures applied, and the fact that all microfinance loans are secured with some form of collateral. (The average collateral value to loan ratio is approx. 230%.)
According to the International Monetary Fund, economic growth in the 20 most important microfinance markets will increase from 4.4% to 4.8% in 2015. This suggests the markets in which SAMAIF invests are likely to grow at a significantly higher rate than that of the of developed economies.
The size of the global microfinance market is expected to grow by 15-20% in 2015. Asia is displaying the strongest growth momentum, with countries in Southern and Central America also well placed to benefit from microfinance investment. It is expected that Africa will play a big part and undoubtedly has huge potential for investment. SAMAIF is well positioned in these regions already and the managers will seek to maintain this alignment moving into 2015.
Improving regulatory environment
Necessary reforms in regions where microfinance is most needed have moved forward during 2014 with the outlook positive that this will continue into 2015.
The 32 regional experts interviewed in the writing of responsAbility’s “Microfinance Market Outlook 2015” believe that the institutional environment for MFIs is improving – both in terms of regulatory supervision by the authorities and market infrastructure.
SAMAIF future plans
SAMAIF expects to make further strategic investments in 2015, and will continue the focus on green-field MFI operations using its proven methodology, templating existing successful operations and replicating infrastructure using the latest cloud-based IT and loan book systems. Plans to establish a presence in Madagascar, along with two new branches of an existing MFI in the Philippines, are in the final stages. Further start-up projects are set to be funded in Suriname, and the Fund has two excellent impact investment opportunities in Mexico and St Vincent that will continue to be developed into the New Year. The SAMAIF business development team is working on reports for a further seven prospective projects in 2015.
* Microfinance Outlook 2015, responsAbility
**This is in line with the accepted methodology of the microfinance industry generally. (Estimates within responsAbility’s Microfinance Market Outlook 2015 suggest that over 70% of MFI loans are to women.)