Incofin cvso recently extended a loan to Kyrgyz Bailyk Finance – with over 45,000 customers and 43 offices, one of the largest microfinance institutions in the country. Bailyk Finance was founded in 2011 with the mission to create affordable financial solutions for rural and small cities’ residents to improve their quality of life. Reaching small entrepreneurs and farmers at the bottom of the social ladder is one of the key objectives of Bailyk Finance.

Most people in Kyrgyzstan work in the agriculture and livestock sector. Young farmer Choro Baarov is one of them. Choro’s childhood wish came true when he could start his own farm raising cattle and horses. Thanks to a loan from Bailyk Finance, he was able to expand his stables with two horses and seven cows, which enable him, for instance, to sell more milk and to increase his profits.

Incofin cvso’s financing allowed Bailyk to issue loans to clients like Choro, who want to invest in the development of their business or to renovate their homes.

 

Incofin IM raises more than 50 million euros in a first investment round for its new impact fund focused on rural development and financial inclusion in India. The fund makes private equity investments in the Indian agri food value chain and in financial inclusion for rural entrepreneurs in India. The fund made its first investments in three growing enterprises. 

India as an impact investment destination holds great promise. It is a country with an aspirational, young population (86% of the population is younger than 55 years) focused on enriching their lives through hard work and entrepreneurship. At the same time, the country faces serious challenges like inequality (gender, education, family wealth) and a lack of technology,  organised supply chains, and access to capital. Although 65% of India’s population lives in rural areas, private equity investments have largely focused on urban companies. As a result, many budding entrepreneurs fail to realise their full potential.

The Incofin India Progress Fund (IPF),  wants to change this and supports these promising entrepreneurs to increase their chances of success through patient capital, mentoring and access to a global network. IPF will focus on two sectors which make the deepest social impact in the Indian context – financial inclusion and the agri-food value chain.

The committed capital comes from a diverse set of private and institutional investors including Korys, CDC, Proparco, the Belgian Investment Company for Developing Countries (BIO), the SDG Frontier Fund, the King Baudouin Foundation and several Belgian family offices.

Agri Food Value Chain

Today, vegetables or grains often have to go through many intermediaries before they get from the producer to the store shelves. The long food chain leads to higher costs and generates significant food waste. There are plenty small agro-tech companies that can shorten the supply chain but they have difficulty accessing capital. The Incofin India Progress Fund intends to fill the gap. A more efficient supply chain with fewer handling points will also lead to more transparency and a reduction in food wastages.

The fund has made its first two investments in the young agro-technology companies Unnati (https://www.unnatiagri.com/) and SuperZop (http://www.superzop.com/).

Unnati is Hindi for “progress”. The company, founded in 2010, lives up to that name by guiding farmers through the entire agricultural process more easily using digital means.

This can range from providing quality seeds and other agricultural inputs at cheap prices, to advice on which inputs to use at a particular time, to how to protect their plants and maximize the production.

Through the uStore app, the farmer has access to a network of more than 11,000 points of sale – one of the largest networks of its kind in India. In this way, 4 million farmers find a market for sugar cane, maize , wheat, cotton, mustard and pulses.

SuperZop

 

Financial inclusion

According to the World Bank, in 2017, India still had some 190 million adults who did not even have a bank account. The only country with more people without access to financial services is China. India has made good progress in this area in recent years, but it is mainly entrepreneurs in rural areas who are finding themselves closed to reliable capital sources and financial services.

Entrepreneurs therefore often fall back on informal sources of credit, which greatly increases the cost and risk of financing. In rural India, 84% of the credit needs of independent traders and SMEs are met informally. Traditional banks are more interested in large loans and are not very keen on doing business with rural customers. Using their services in rural India is much more complex and expensive than in cities: in an environment where business is often done informally, it is not easy to be able to produce formal documents.

Namdev Finvest is the first entity in which the fund has invested to increase financial inclusion.

 

More about Incofin India Progress Fund

Incofin invests USD 4.7 million in Series A round of the Indian financial services provider Namdev. This investment is done from the recently launched Incofin India Progress Fund (IPF).

Jaipur-based Namdev Finvest Private Limited (Namdev), was founded in 2013 and has rapidly established itself as one of the leading non-banking financial companies in North West of India. The company focuses on impact lending to micro, small and medium enterprises (MSMEs) and has presence in rural and semi-urban areas in the northwestern region of India. Namdev services currently more than 13,000 borrowers and aims to reach 100,000 clients in the next five to seven years. Founder and Managing Director of Namdev, Jitendra Tanwar labels this investment as a milestone for Namdev: “We are glad to partner with a world class impact investor as Incofin IM. The funding from IPF will strengthen our organic expansion plans. We would leverage Incofin’s strategic and deep impact support in our mission to provide affordable and qualitative financial services to our clients.

Aditya Bhandari, Regional Director Asia for Incofin comments: “Namdev provides a rare combination of deep social impact, a solid management team and a strong balance sheet. This is our first investment out of our new India focused equity fund IPF. India’s growth story depends largely on tech-enabled solutions for MSMEs and in-turn for rural prosperity. We are pleased to collaborate with Namdev in its vision to support first-time borrowers and women entrepreneurs in rural India.

Incofin has a strong presence in India with two local offices (one in New Delhi and one in Chennai). Besides Namdev, current investments in India include Sohan Lal Commodity Management (agri-to-finance integrated group), SAVE Solutions (one of the largest business correspondent networks), Faircent (largest peer-to-peer lending platform) and Light Microfinance (leading microfinance company focused on rural women entrepreneurs).

Incofin cvso disburses a EUR 1.7 million loan to Bina Artha, the financial institution that, through micro-loans, allows hundreds of thousands of entrepreneurial women in Indonesia to build a better future for themselves.

Indonesia is not only known for its idyllic beaches, but also for impressive economic growth rates since the Asian crisis in 1997. The economy is now part of the top 20 largest economies in the world. This growth went along with important poverty reduction, with a poverty rate at 10% in 2020, while at the turn of the century that group was still twice as large. However, there are still around 26 million people living below the poverty line. The consequences of COVID-19 – which might push between 5 and 8 more million Indonesians into poverty – is therefore a setback. It shows that economic progress is still very fragile for a large part of the population.

While Covid-19 is having a significant impact on the Indonesian economy, Incofin CVSO has at heart to support microfinance institutions (MFI) even in times of crisis. In this context, CVSO has provided a loan of EUR 1.7 million to PT Bina Artha Ventura (Bina Artha) at a time of tight liquidity management and operations stabilization efforts from the MFI. The support from its international lenders partly explains Bina Artha’s resilience during the crisis.

Bina Artha – founded in 2011 – is one of the biggest institutions in Indonesia in terms of portfolio size. The MFI brings micro-credits to more than 350,000 low-income households in rural communities – increasing financial inclusion. In Indonesia, 51% of the adult population still do not even have an account in a financial institution. Therefore, with a total population of 270.6 million, there is a huge market growth potential for microfinance.

Especially low-income women have barely access to the formal financial sector because they lack independence and education. That is why microfinance institution Bina Artha focuses mainly on women who don’t have or have only partial access to the formal financial sector.

By increasing the access to capital, Bina Artha supports the income generation of entrepreneurial women, such as Bu Sabaria Bunga Lele. I used to sell my vegetables with a cart going around from place to place. At the end of 2017, I decided to take a loan from Bina Artha and open a shop on the road side near my house. Now, I provide a wide selection of fresh vegetables, spices, dried fish and other products. The people of the community around my shop buy their necessities from my stall and lots of cars stop with people from further afield as well. Thanks to the strategic location, my store is also doing fine despite the pandemic.

Incofin cvso believes that Bina Artha is well positioned to efficiently and rapidly grow further, thanks to its business model, support from its Credit Access network and investments in technology. They have for example integrated third party payment services into their core banking system.

“Bina Artha has been very transparent in dealing with clients and funding partners and therefore continues to gain support. Incofin is a proud partner of Bina Artha, via them we can deliver our impact and open up opportunities to many Indonesians for a better livelihood”says Vuthy Chea, Deputy Regional Director Asia of Incofin Investment Management.

The regions where Bina Artha operates are in dark blue.

Incofin IM, together with Triodos Investment Management, BlueOrchard, Developing World Markets, Microvest, Oikocredit, responsAbility, Triple Jump and Symbiotics signed a Memorandum of Understanding (MoU) for coordination in response to COVID-19 to support the microfinance sector.

 

Together, these nine investment originators and fund managers in impact investing have about USD 15 billion of assets under management in financial inclusion, invested in more than 80 emerging and frontier markets across Africa, Asia, Eastern Europe, the Middle East, the Caucasus, Central Asia and Latin America.

Measures taken locally to reduce the spread and impact of COVID-19 can affect clients, operations and liquidity of Microfinance and SME finance institutions. The Memorandum aims to coordinate efforts in the provision of ongoing refinancing in a responsible manner, thereby enabling these institutions to adequately respond to temporary changes in business conditions.

The MoU notably emphasises: “Microentrepreneurs and SMEs will form a vital basis for social and economic recovery. Supporting Financial Inclusion and preservation of the strong foundations that have been built over recent years is therefore of vital importance. This calls for enhanced cooperation within our sector. We have learned from previous experience that through transparency and close cooperation we can best help our partners and our own organizations through challenging times.”

The MoU is not legally binding but forms a strong basis for coordination over the coming months, with pragmatism, transparency and tolerance as key principles. The MoU also serves as a basis for dialogue with other stakeholders, such as multilateral and development finance banks and policy makers.

The signatories welcome additional impact fund managers to join the initiative in the coming weeks, as many have expressed interest. Strong alignment among market protagonists is the best possible way to safeguard the interests of impact investing, and ultimately the social impact and benefits that the sector offers to low income households and small businesses in low- and medium-income economies.