Annual Report 2002

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ACTIVITIES OF SIDI AND ITS PARTNERS IN 2002

INTERNATIONAL SOLIDARITY FOR DEVELOPMENT AND INVESTMENT

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TABLE OF CONTENTS TABLE OF CONTENTS MESSAGE FROM THE PRESIDENT .....................................................................Page 3 RESULTS OF THE 2000-2002 STRATEGIC PLAN ........................................................Page 4

PARTNER SUPPORT AND FINANCING IN 2002..........................................................Page 6 SIDI’S ACTIVITIES IN 2002 ...................................................................................................................

6

SIDI AND ITS PARTNERS .......................................................................................................................

9

FOCUS ON NEW PARTNERS ....................................................................................................................

18

SIDI’S INSTITUTIONAL ACTIVITIES ...........................................................................Page 22

SIDI’S FINANCIAL STATEMENTS AS OF 31 DECEMBER 2002....................................Page 24

GLOSSARY ACAD : Arab Center for Agricultural Development (Palestinian Territories) AFD : Development French Agency (France) ACB : Akiba Commercial Bank limited (Tanzania) AMOS : Oued-Srou Microfinance Association (Morocco) ASPRODEB : Senegal Association For Promotion and Development à la Base (Senegal) BAEF : Banque for women investment (North Kivu) BANCOSOL : Banco Solidario (Bolivia) CCFD : Catholic Committee against Hunger and for Development (France) CCSP : Credit Co-operative to support Small Producers (Laos) CCG : Cooperative for guarantee security and management (Haiti) CDC : Caisse des Dépôts et Consignations (France) CEP : Capital aid fund for Employment of the Poor (Vietnam) CERUDEB : Centenary Rural Development Bank (Uganda) COD-EMH : Co-ordination of Development Operations - Methodist Chruch (Haiti) CONSOLIDAR : Cooperativa CORFAS de Credito Solidario (Colombia) CORDAID : Catholic Organisation for Relief and Development (Holland) CORFO : Corporación de Fomento a la Producción (Chile) CRG : Rural Credit Union of Guinea (Guinea) EDAPROSPO : Equipo de Aseroramiento a Actividades Productivas de Sectores Populares (Peru) EMT : Ennatien Moulethan Tchonnebat (Cambodia) ESD : Saving Solidarity Development Association (France) FC : Co-operative Fund (Laos) FIDI : Ivorian Investment and Development Fund FONHSUD : Haitian Fund to promote Local Development in the Southern Province (Haiti) FPH : Fondation pour le Progres de l’Homme (France) GRAIFSI : Support group for integrating the women of the informal sector (Haiti)

IMOFOR : Mobil Institute for training (Haiti) INDES : Inversiones para el Desarrollo (Chile) KNFP : National Councial for Grassroot financial system (Haiti) KOKARI : Co-operative of intermediation in rural credit services (Niger) LA-CIF : Latin American Challenge Investment Fund (South America) MAE : Ministry of Foreign Affairs (France) MAIN : Microfinance African Institution Network MENNGOS : MicroEnterprise Network NGOs (South Africa) MPDF : Mekong Project Development Facility MUFEDE : “Women and development” Credit Union MUSO : Solidarity Credit Union NGO : Non Government Organisation OMIPA : Oruchinga Microfinance Agency (Uganda) PROFUND : Investment Fund in South-American Microfinance Institutions SAINDESUR : Inversiones para el desarrollo (Uruguay) SAPCA-EGAS (ex UGIE) : Société d’Approvisionnement, de Production, de Commercialisation et de Conseil Agricole des Ententes des groupements associés du Sénégal (Senegal) SCC : Swedish Co-operative Center (Sweden) SFI : International Financial Society SIPEM : Investment Company for Investment Promotion in Madagascar (Madagascar) TISE : Investment Company for Social and Economic initiatives (Poland) TITEM : Union of credit and savings local associations (Madagascar) TOUIZA : National Volunteers Association (Algeria) UE : European Union UGPM : Union of Peasant Associations from Meckhe (Senegal) URCSONA : Regional Union of Sourou and Nyala Credit Unions (Burkina Faso) WAGES : Women Association for both Gain Economic and Social (Togo)

Cover photos: Signing a loan contract, Morocco (photo AL AMANA). The harvest (photo CIRIC). Seminar in Addis Ababa (photo SIDI). A green box (for members’ contributions) at a solidarity credit union, Senegal (photo SIDI).

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MESSAGE FROM THE PRESIDENT MESSAGE FROM THE PRESIDENT 3 The last three years have been very busy for SIDI. Huge challenges have emerged in the fields of development and human solidarity, to which all of us have made a small contribution in order to improve the well-being of all.

Giving expression to solidarity in the field of financing SIDI is contributing in a unique way to the promotion of solidarity by helping poor populations to break out of under-development and to shape their own initiatives. Solidarity financing circuits are helping to change the living conditions of thousands of people by backing income-generating and job-creating activities, the proceeds of which are used to improve access to health care, housing and education, etc. In further developing its solidarity financing activities, SIDI, along with the Catholic Committee against Hunger and for Development (CCFD), has continued to mobilise members of the public who are sensitive to inequalities in the world and concerned about the future we are preparing for our children. They express their solidarity with the poor countries through a range of means other than direct donations to humanitarian and international solidarity organisations. Several thousand savers and solidarity financial institutions are joining forces because they are convinced that development financing requires community solidarity savings facilities. In spite of the difficult climate and the downturn on the financial markets, the promotion of the Faim et Développement investment fund has moved ahead, thanks to the mobilisation of 20 SIDI/CCFD regional correspondents in liaison with Diocesan Committees and the local staff of CCFD. Over the course of the past three years, SIDI’s partners have demonstrated their commitment to incorporating their financial approach into a broader vision. They believe that financial services are not the only tool that can ensure an immediate and sustainable development start and genuine improvements in the populations’ living conditions, although financial services do empower them. In Africa and on other continents, SIDI’s partners are exchanging experiences, testing innovative methods and are attaining their goals in spite of the hardships caused by natural disasters such as drought in the Sahel, political and social upheaval in Madagascar, the Great Lakes region, Haiti and Palestine, and imbalances in producer prices in Senegal.

The results of the 2000-2002 plan The completion of the 2000-2002 action plan was marked by a number of remarkable accomplishments for SIDI. We gained further experience in providing services to our partners, who in addition have taught us a few things, and we have consolidated our shareholders’ trust and relations around a common vision of development. Three major achievements should be highlighted : - The capital was increased from 3.35 million Euro to 5.32 million Euro through the issue of 13,000 new shares. - The solidarity investment portfolio was increased by more than 1 million Euro, reaching 3.3 million Euro at the end of 2002. Total financing (equity investments and loans) over the same period reached 2.5 million Euro, 63% of which in the priority geographic areas of Africa, the Mediterranean basin and Haiti. - The resources mobilised to support the partnerships reached 2.7 million Euro, one-third of which came from international sources. More important than the figures, is the consolidation of partnerships. Thanks to their diversified and complementary skills, SIDI’s permanent staff, backed by dedicated volunteer consultants, has put together technical support mechanisms that are highly appreciated by the partners. The staff, assessing the achievements from the 2000-2002 period and on the basis of the exchanges and reflections which occurred during the SIDI Workshop of October 2001, carried out extensive work to draw up a new strategic plan for the 2003-2005 period, approved by the Supervisory Board, in February 2003.

Defining a new plan for 2003-2005 SIDI is reaffirming its specific solidarity financing objectives and plans to do the following : - Finance and support providers of community financial services to small urban and rural producers. - Be part of development activities that stem from demand rather that the supply side of financial services. - Develop partnerships with the same dynamics as the Solidarity Chain for Financing. - Pursue objectives that are consistent with those of the CCFD, in order to promote globally a solidarity economy and society. - Support local empowerment and the emergence of enterprising indiv duals who are able to take the initiative to change their living conditions. To achieve these goals, the 2003-2005 action plan will focus on 5 leading actions : - Reinforce and diversify the partnerships and the portfolio : The goal here is to consolidate openings in the geographic areas of Africa and the Indian Ocean, the Maghreb and the Mashriq, the Mekong countries, the Andean countries and Haiti, by achieving regional and sub-regional consistency, by strengthening the multipartnership strategy and by responding to requests for alliances. While priority will be given to financing in the rural areas, particular attention will be paid to local partnership organisations wishing to diversify the range of financial services they provide, to include areas such as health care, housing, assistance to migrants, etc. The exchange of practical knowledge via networks will be supported in order to advance toward the resolution of common regional and sectoral problems, with special attention to the dynamics of groups promoting a solidarity economy, such as the MAIN network in Africa and the Foro Lac in Latin America. - Make use of solidarity financial engineering The aim would be to capitalise on and promote savings and loan instruments that are adapted to the needs of the populations and that are particularly appropriate for isolated areas. We will work with the partners to define an innovative policy on the cost of resources and financial services. The objective is to present a well-founded argument for reducing interest rates for the benefit of both the clients and the community-based financial institutions. - Successful teamwork The range of SIDI’s human resources, i.e. its permanent staff, volunteer consultants and local support, will be optimised and expertise will be shared along with the CCFD’s thematic skills in the solidarity economy and food sovereignty. - Working in alliances We intend to mobilise local resources from the donors to shore up the partnerships in the South, and show them how to monitor new opportunities, and train them in responding to donors policies and instruments, to ensure appropriate cofinancing applications. - Foster and expand the Solidarity Chain for Financing By defining the notion of social viability and the related methodologies, SIDI and its partners will be in a position to strengthen these aspects, thereby incorporating them as a basic principle in its actions. In 2003, thanks to an on-going climate of trust, we will further develop fair partnership relationships and remain open-minded about learning from one another in order to make best use of expertise and to evaluate the social viability of actions in the field. Broadening access to financial services that meet the real needs of the populations will mean that all the links in the Solidarity Chain for Financing will be better able to pursue their commitment in the future. Christian Schmitz Chairman of the Board of Directors Paris, 5 June 2003

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RESULTS OF THE 2000-2002 STRATEGIC PLAN RESULTS OF THE 2000-2002 2000-2002 STRATEGIC PLAN This 2000-2002 activity report shows the abundant progress achieved, in the form of renewed trust from the shareholders, experience in serving the partners, learning from them, as well as in the relationships created around a common vision of development. More important than the figures are all the people who mobilised alongside SIDI, shareholders, savers, volunteer consultants, local supporters, etc. joining forces to make a success of this plan that has enhanced genuine solidarity and promoted sustainable well-being for populations.

Financing in the service of partnerships At the close of the 2000-2002 plan, the portfolio figures show a real increase of 65% in financing activities. At 31 December 2002, SIDI’s gross portfolio amounted to 3.261 million euro, while at 31 December 1999, it stood at 2.13 million euro. The 2000-2002 plan therefore brought in a net increase of 1.131 million euro. The sum of 2.486 million euro was granted during this period, after reimbursements and disinvestments to the tune of 1.105 million euro. SIDI’s financing activities comprised the following :

• Increased activities in priority areas In its 2000-2002 plan, SIDI opted to shore up its activities in priority areas of Africa, the Mediterranean basin and Haiti. This choice is the result of a desire and a commitment to achieve solidarity that goes beyond financial investment. In making that choice, SIDI chose to work in the particularly difficult field of extreme poverty and amid political, financial and macroeconomic instability as well as in crisis areas, economic as well as social, including violence and insecurity in areas such as Palestine, Algeria, in the Great Lakes region and in Haiti, where tension is rife. No less than 1.569 million euro, 63% of the financing granted by SIDI (see table on page 5) was mobilised for these priority areas, which, at 31 December 2002, accounted for 57% of SIDI’s entire portfolio (see graphs 1 and 1 bis). • Minimal-risk

financial support terms

In these priority areas, some partners suffer from the effects of frail institutions and unstable environments. Consequently, they required tailor-made financial support. The amounts invested are generally low, in order to meet the financial needs and ensure that the risks are covered. SIDI’s support of these institutions is mindful of the need to strengthen their structure and internal capacities by means of made-to-measure support. This type of activity places big demands on SIDI’s human resources, despite the fact that the financial investment is low.

• The right financial tools for the partners During the preceding plan, SIDI reviewed and reflected on its financing in rural areas. The setting up of partnership contracts with producer organisations, cooperatives, credit unions, etc. has strengthened this desire to reach out. Nevertheless, the status of these organisations generally does not allow equity investing. Therefore, SIDI began to grant more and more loans. In light of changes in the portfolio during the 2000-2002 plan, SIDI decided to examine the following points : - the cost of financial resources made available to the partners. Some partners benefit from non-remunerated stable resources, as in the case of equity investment, while others only have access to resources with a cost, i.e. loans at interest rates that take into account the financial means and the environment of their clients. - the imperative need, in the start-up and consolidation phases of the partnerships, to find additional resources (subsidies) both for training and for institutional capacity-building (see chapter III). - the need to develop concerted synergies with the CCFD in order to enhance complementarities for the benefit of our partners.

Graph 1 : Geographic breakdown of the portfolio at 31 December 1999 Asia 21%

Europe 5% Caribbean 3%

Africa 19%

Latin America 49%

Mediterranean basin 3%

Graph 1 bis : Geographic breakdown of SIDI’s portfolio at 31 December 2002 Latin America 32%

Asia 8% Mediterranean basin 8%

Africa 40%

Caribbean 9%

Europe 3%

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Established and recognised support

Enhanced shareholder confidence via reinforced institutions

The financial resources committed for partner support amounted to 2.749 million euro of the 3.05 million euro earmarked. These resources mainly came from the CCFD and the shared revenue from the Faim et Développement investment fund, but also from external resources mobilised in the form of additional financing (cofinancing) that amounted to 918,000 euro, equal to 33% of all resources committed. The priority areas received 69% of SIDI's support resources, including additional financing, totalling 1.164 million euro. The completion of the 2000-2002 plan firmly anchored SIDI’s support activities around three focal points: • Reinforced

partnerships

An important change also occurred during the 2000-2002 plan. SIDI’s total balance sheet doubled, to 9.8 million euro, at 31 December 2002. Shareholder capital accounted for 50% of the balance and the FID (Development Incentive Fund), 26%. Moreover, the confidence and commitment of SIDI’s shareholders was clearly expressed during the three institutional events that were held in the 2002-2002 period. • The

capital increase of October 2001

At the Extraordinary General Meeting held in October 2001, SIDI’s capital was increased, to meet its partners’ financial needs, to 5.32 million euro, a 60% increase, which received the broad support of SIDI’s shareholders.

SIDI made a deliberate choice to support a variety of approaches that match the socio-economic and cultural setting of each initiative. Financial institutions, associations that grew out of the institutionalisation of projects, private limited companies, credit unions, producers’ organisations, etc. make up the array of SIDI’s partners and are indicative of the wide range of its partnership relations.

• The

• New

- in the North, shareholders and savers provide SIDI with its financial, moral and spiritual foundation. They donate their savings or share their income so that SIDI’s work could be pursued. - in the South, the highly diversified partners deploy a broad range of financial intermediation services for disadvantaged communities. They form the heart of SIDI’s activities by asserting their vision of sustainable well-being. Thanks to the real-life accounts heard at the Workshops, the partners active in the Chain got to know each other better. SIDI’s staff, made up of permanent employees and assisted by deeply committed volunteer consultants, had the task of fostering the link between the mobilisation of solidarity savings and its use by microfinance institutions active in promoting access to financial services for disadvantaged populations.

themes

The partners in the priority areas appealed to SIDI for help with the new, locally-expressed needs. Thanks to the partners’ willingness to listen and an in-depth inventory, SIDI got involved in rural areas by financing cooperatives, small farmers’ organisations, etc. More recently, requests from partners and appeals from shareholders have prompted SIDI to enter other fields, such as the financing of housing, health care and medium and long-term financing. • Diversified

services for the partners

In its 2000-2002 plan, SIDI intensified its intra-country multipartnership strategy. SIDI is an advocate of development, and based on its experience, elaborates a commitment and partnership strategy that goes beyond project financing and the provision of services. SIDI is being sought after to develop partnerships for the long-term that express a shared vision and promote shared actions.

SIDI Workshops of October 2001

In October 2001, when the capital was increased, the SIDI Workshops were held, during which the concept of the Solidarity Chain for Financing was reaffirmed. The Chain is made up of the following solidarity links (see sidebar 4, page 23):

• The creation of FID (the Development Incentive Fund) in 2000 In order to cover portfolio risks, in particular the exchange rate losses incurred, the FID was capitalised to the tune of 2.59 million euro. The resources generated by this fund over the past two years have helped to set up the necessary provisions, without increasing the cost of SIDI’s support of its partners.

Table 1: Completion of the 2000-2002 investment plan

Projected investment in 2000-2002 Participatory

Loans

Total

In thousands of euro West Africa Rest of Africa Mediterranean basin Caribbean Latin America Asia Europe Total Total priority areas

318 418 238 150 70 141 0 1335 1124

141 451 608 315 25 0 0 1540 1515

Actual investment in 2000-2002 Participatory

Loans

Total

In thousands of euro 459 869 846 465 95 141 0 2875 2639

18 576 0 0 412 217 0 1223 594

350 49 277 298 0 288 0 1263 975

368 625 277 298 412 505 0 2486 1569

Analysis Rate of Structure attainment 15 25 11 12 17 20 0 100 63

% % % % % % % % %

80 72 33 64 > 100 > 100 100 86 59

% % % % % % % % %

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PARTNER SUPPORT PARTNER SUPPORT ANDFINANCING FINANCING IN 2002 AND

SIDI’S ACTIVITIES IN 2002 SIDI’s unique place in today’s solidarity financing SIDI is a development promoter and has chosen to pursue a unique strategy for partnerships and commitments, which goes beyond project financing and the provision of services. SIDI’s strategy is designed to ensure sustainable, longer-term active partners. Thanks to the reflections carried out by its partners and associates, over the years, SIDI has built a unique NorthSouth partnership which it calls the Solidarity Chain for Financing. This Chain carries out the solidarity development vision promoted by CCFD in the field of solidarity financing. In the North, this Chain focuses on the mobilisation of people and groups who are willing to share their income or their savings and who opt for responsible investment by investing in SIDI’s capital and organising actions in the fields of education and development (see ch. IV). As a result of the mobilisation of capital in the North, SIDI is given the opportunity to finance partners in the South, in the form of loans or equity investing, thus enabling them to consolidate their financial resources.

Table 2 and graph 2 : Geographical breakdown of SIDI resources for counselling and support to partners in 2002 TOTAL in TOTAL in 2002 in t K 2001 in t K Africa

654 58

66

Caribbean

74

51

Eastern Europe

13

14

133

167

Latin America

89

82

Research / Developpement

50

55

1071

952

280

332

Asia

TOTAL (of which additional financing)

Asia 12%

Furthermore, SIDI posted 400,000 euro in provisions and in exchange rate losses resulting from its portfolio activities. These resources came from financial proceeds generated by its capital and from the FID (the Development Incentive Fund), which helped to cover exchange rate risks, and 25% of expenditure.

Mediterranean basin Recherche et 5% développement 5%

Africa 62%

Caribbean 7% Latin America 8%

In the South, this Chain is made up of a variety of institutions that develop community-oriented financial services for disadvantaged populations.

In all, SIDI works with 41 institutions, located in 30 countries, and three continent-wide institutions – the MAIN network, LA-CIF and PROFUND. In 2002, SIDI’s activities called for 1.5 million euro to support and finance its partners. These resources came from : - shared revenue in the form of solidarity investment offered by CCFD (1 million euro), covering 55% of total expenditure. - international financial partners (300,000 euro) covering 15% of expenditure. - financial proceeds from its portfolio (100,000 euro), covering 5% of expenditure.

518

Mediterranean basin

Eastern Europe 1%

Supporting partners SIDI managed to maintain the same momentum for support in 2002 as in 2001, mobilising slightly more than 1 million euro (see table 2). This year SIDI reinforced its priority commitment in Africa via the creation of partnerships in new countries – Togo, Guinea, Burkina Faso and the Great Lakes region – and the strengthening of multipartnerships in Senegal as well as the identification of opportunities in Mali and Mozambique. In 2002, the priority areas of Africa, the Mediterranean basin and Haiti together received 67% of the partners’ support resources (see graph 2). SIDI’s support missions were diversified in two ways : - via institutions for whom support is tied to financing. This year, SIDI brought together new partners with 5 community financial institutions: WAGES (Togo), CRG (Guinea), SAPCA/EGAS (Senegal), AL AMANA (Morocco), Fonds Coopératif (Laos) and CCG/INDEPCO (Haiti).

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- via emerging decentralised support structures that seek to enhance their capacity to provide financing to disadvantaged populations or to carry out initiatives in disseminating information. These organisations are generally in a transitional phase, and are not yet institutionalised. Therefore, it is probably too early to provide them with financial resources because of their stage of development and the level of risk they would pose for SIDI. In 2002, SIDI diversified its support mission to Burkina Faso (with URCSONA and MUFEDE), in Senegal (with ASPRODEB), in the Great Lakes region (with BAEF and the partners involved in the Great Lakes Convention) as well as in Haiti (KNFP/IMOFOR) in order to start a training programme for microfinance institutions.

5% 0%

Total (280 €K) including transfers to partners : 178 €K

10%

Latin America (10 €K)

15%

Laos (21 €K)

20%

Madagascar (35 €K)

25%

South Africa (33 €K)

30%

MAIN Afrique (177 €K)

35%

Africa of the Great Lakes (4 €K)

Graph 3 : Geographic breakdown of additional financing in 2002

The section on SIDI’s Partners, Africa (see page 9), illustrates the diversity of SIDI’s ways and means to provide support, both via institutions (participating in governance, training administrators) and via the management of microfinance activities (monitoring and computerisation of the portfolio, diversification of products, staff training, etc.). In addition, thanks to the mobilisation of new financing, supplementary, to that from the CCFD (co-financing) and thanks to the building of strategic alliances, SIDI has the wherewithal to boost support to its partners. In 2002, the funds received by SIDI from French or international organisations reached 280,000 euro, which enabled it to cover 26% of its support activities. That was less than in 2001, owing to the fact that some negotiations did not reach finalisation. The sum of 178,000 euro of the additional financing was used for the completion of specific projects led by the partners (see graph 3): training in South Africa, in the Democratic Republic of the Congo and in Laos. Sizeable financing obtained from the French Foreign Ministry and from several European partners helped to boost training and networking activities that were carried out by the MAIN network. This consisted of four training seminars that were held in Abidjan, Dakar, Kampala and Addis Ababa, for which SIDI submitted reflections and helped in event coordination.

Financing the partners SIDI made good use of resources contributed by shareholders in the North by consolidating the finances of its partners in the form of loans or equity investment, in order to meet their growth needs. This financial relationship continues as a partnership that accords priority to the strengthening of institutional capacities. It is also meant to accompany the quest for subsidies to pay operational costs and institutional capacity-building (see ch. IV). SIDI gives priority to equity investment in order to make long-term resources available to the partners, without incurring financial costs. However, when the status of certain institutions, such as associations, credit unions and cooperatives, is not conducive to equity investment, a loan can be provided. SIDI’s financial commitment at 31 December 2002, which demonstrates this element, amounted to 3.2 million euro (a 21% increase over 2001), 68% of which is in the form of equity investment and related claims, and 32% in the form of loans (see graph 4 and SIDI’s portfolio table on page 25). The African continent is now benefiting from SIDI’s expanded commitment, receiving 40% of the total, a 65% increase over 2001. The financial commitments to the Mediterranean basin, another priority area, have increased by 74% over 2001.

The year’s investment and the portfolio revenue The year 2002 was very busy. More than 1 million euro was invested in 12 countries in Africa, the Mediterranean basin, the Caribbean, Asia and Latin America, without counting the loan made to the CCSP network in Laos, which was converted into capital. The total of new investment and loans in 2002 was 1,228,000 euro, an increase of 85% compared to 2001 (see graph 5). The increase in these funds was the result of identification work conducted during 2001. Nearly 50% of the funds was committed to Africa, which confirms SIDI’s solidarity investment priority.

Graph 4 : SIDI’s portfolio at 31 December 2002 (loans, equity investment and claims)* 1400 Kt

1305

1200 Kt 1034

1000 Kt 800 Kt 600 Kt 400 Kt 200 Kt 0 Kt

258

288

265 111

n asi .b d Me

a ca an ric eri be Af b m i r A Ca tin La

e ia As rop Eu

* This graph accompanies table 3 “SIDI’s gross portfolio”, p. 25

Furthermore, for the first time, under new investment carried out in 2002, the amount committed in loans was greater than the figure for equity investment, 657,000 euro and 571,000 euro, respectively.

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In 2002, the revenue generated by SIDI’s portfolio was 91,400 euro, a 4% increased over 2001. The return from loans was 42,700 euro. Dividends were also issued in the amount of 48,700 euro (PROFUND, INDES, CERUDEB and TISE).

Graph 5 : Breakdown of SIDI’s resources in 2002: new investments with partners

The global economic context has had a big impact on financial results. The fall in the US dollar in relation to the euro has meant an accountancy loss of more than 130,000 euro. The coverage of financial risks arising from our activities in developing countries has required the following provisions : - to cover this year’s large exchange rate losses - on equity investment and loans, of a lower amount than in 2001, thanks to a relatively high-quality portfolio

TOTAL in 2002 in t K

TOTAL in 2001 in t K

597

137

Mediterranean basin

220

27

Caribbean

103

0

Asia

192

268

Africa

Latin America

116

231

1228

662

of which loans

657

312

of which shares and associated entities

571

350

TOTAL

Nevertheless, this year’s financial results are positive and amounted to 156,143 euro, thanks in part to the revenue from the FID (the Development Incentive Fund), to which the CDC made a contribution, and which ensured the coverage of 50% of risks arising from loans and equity investments. SIDI ended the year with a net result of 77,815 euro.

Mediterranean basin 18%

Latin America 9%

Africa 49%

Caribbean 8% Asia 16%

SIDI AND ITS PARTNERS

TISE (POLAND)

NAJDEH

COD/EMH - FONHSUD GRAIFSI - KNFP - CCG (HAITI)

TOUIZA

AMOS - AL AMANA (MOROCCO)

ASPRODEB - UGPM SAPCA/EGAS (COSTA-RICA)

(BURKINA-FASO)

KOKARI (NIGER)

CRG (GUINEA)

BANCO SOLIDARIO (ECUADOR)

WAGES

CONSOLIDAR-SERFINDES

(TOGO)

(COLOMBIA)

FIDI (IVORY COAST)

EDAPROSPO - LA-CIF (PERU)

BAEF (DR OF CONGO)

CEP - WUSOP

(URUGUAY)

MENNGOS - TEMBEKA (SOUTH AFRICA)

(VIETNAM)

CCSP (LAOS)

MAIN NETWORK (AFRICA)

CERUDEB - OMIPA (UGANDA)

AKIBA (TANZANIA) (MADAGASCAR)

SAINDESUR (CHILE)

(PALESTINE)

SIPEM - TITEM

BANCOSOL (BOLIVIA)

INDES

ACAD

MUFED - URCSONA

(SENEGAL)

PROFUND

(LEBANON)

(ALGERIA)

EMT HATTHA KAKSEKAR (CAMBODIA)

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SIDI AND ITS PARTNERS 9

AFRICA

SIDI intensified its efforts to further open up and diversify its partnerships in new countries in Africa, a key priority in its 2000-2002 action plan. SIDI’s partners on the African continent include microfinance institutions, local self-managed organisations, producers’ associations and those that have developed a micro credit component. Each has a broad range of financial intervention activities for the disadvantaged. In 2002, SIDI shored up its alliances in order to achieve better synergies for community partners. In addition, the current reflection on rural financing and social viability will bring the 2000-2002 plan to a close on a high note of hope for SIDI and its partners.

West Africa In order to understand the issues of this subregion, the West Africa coordination team brought together a group of desk officers who, by adapting to the regionalisation process, helped to expand activities significantly in the eight countries of the West African Economic and Monetary Union (WAEMU). The exercise was reinforced by the introduction of a cooperation process between SIDI and CCFD for this region. SIDI also oversaw the creation of a regional instrument, which grouped leaders of craftsmen and farmers’ networks in this region, to strengthen the economic activities of farmers’ organisation. In the year 2002, the following also took place: - new partnerships were begun in other countries, i.e. Togo, Guinea and Burkina Faso); - support for existing partners was reinforced, both institutionally and technically, in Senegal and elsewhere ; - feasibility missions were undertaken in Mali and Burkina Faso to open up new areas of intervention.

New partnerships in Guinea and Togo SIDI’s participation in the equity and on the board of directors of the Crédit Rural de Guinée-SA (CRG-SA), a leading player in rural financing in Guinea, benefitting 100,000 borrowers, led the CRG to reflect on the functions and the role of its board of directors. This privileged role enabled SIDI to fine-tune its knowledge of the issues in the world of rural financing, in particular in the design of innovative financial products, including the financing of multi-activities, fisheries and income-producing sectors, as well as on the subject of governance. The CRG was initiated ten years ago, on the Grameen bank model. It has evolved towards a joint management system, both in the community banks that are managed by representatives elected by the borrowers and employees, and in the membership of the board of directors (40% participation by local banks, 35% by employees and 25% by external partners, including SIDI).

In Togo, SIDI began cooperating with WAGES, an active member of MAIN. The boosting of its loan fund capital, thanks to the SIDI loan that was topped up by another loan from Alterfin, has helped WAGES to expand its loan portfolio to around 9,000 urban clients, mainly women, organised in solidarity groups.

Support for new partners in the Ivory Coast and Burkina Faso The identification missions conducted in 2001 to Burkina Faso led to two new partnerships. The first was set up with MUFED, a member of MAIN, which has around 15,000 members. SIDI paid close attention to this credit union which started as a local initiative and was guided by an association of women that started loan activities with members’ savings, with little outside support. The second was set up with URCSONA, a network of rural credit unions that grew out of a farmers’ movement in the northwest of the country. Because of the civil war of September 2002, the partnership in the Ivory Coast was prematurely suspended. It was taken up again by FIDI, a recently restructured microenterprise financing institution, SIDI, the EU and OIKOCREDIT. Nevertheless, SIDI is particularly keen on staying in touch with FIDI.

Support for Kokari’s services in Niger Thanks to the involvement of its member-employees, from its donors (the French Foreign Ministry, AFD and others), as well as its work as an intermediary for development programmes, KOKARI has succeeded in anchoring its credit and support services for rural organisations, via thirteen offices distributed around Niger. SIDI stepped up its efforts in 2002 in three areas: on the technical side, with support for the accountancy department, on the institutional side, with participation in a debate on whether to open the cooperative to its clients and to external partners, including SIDI, and the mobilisation of specific subsidies, via the European Union-ACP Business Assistance Scheme. That subsidy paid for the training of loan officers, a financial audit and improvements in accountancy.

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Initiatives for rural financing in Senegal SIDI is continuing its actions in Senegal in the farming sector and in particular, family farms. In November 2002, in order to continue supporting the groundnut sector, which is experiencing a number of difficulties, SIDI persuaded CORDAID to renew its loan to UGIE, since renamed SAPCA-EGAS. SIDI topped up this loan to 115,000 euro. This support for SAPCA-EGAS in its groundnut marketing activities has enabled SIDI to become more familiar with the problems experienced in developing and financing a particular sector of activity. Cooperation with UGPM, which started with a financing programme for solidarity credit unions located in more than 80 villages, was strengthened in 2002 by the joint creation of a financing programme for family farms. SIDI decided to finance the experimental phase of the programme with a 61,000 euro loan.

East Africa and the Great Lakes region

In June 2002, OMIPA, a network of 22 rural savings banks, celebrated its first year of operations after the ACORD programme withdrew from the region. Thanks to the quality of the support provided by the OMIPA staff to the savings banks, and thanks to the strong involvement of its members, who are all farmers, in guiding the institution, OMIPA now has good development potential that SIDI has sought to reinforce. The release of a loan in two instalments in 2002, in the amount of US$ 44,000, increased its loan portfolio by nearly 90% compared to 31 December 2001. At the same time, CERUDEB, a commercial microfinance bank that today has 19 branches, renewed its board of directors and appointed two new directors (an executive director and a director who will handle strategy). Having achieved very positive results, the bank is now examining how to deploy its new growth strategy to diversify its clientele. This stage will include the continued pursuit of services to rural populations, improvements in operational efficiency via modern technology and the development of new services and products tailored to the needs of the customer base. The participation of SIDI on the board of directors, with a volunteer consultant to support the desk officer, is proving its worth and will facilitate a review of the bank’s new mission.

The boosting of partnerships continued in Uganda and Tanzania, with the emphasis on institutional participation in governance. The important identification work carried out in the Great Lakes area consolidated SIDI’s commitment above and beyond its activity as a social investor in a region that is being economically and socially rebuilt.

In the Great Lakes region1 The field missions conducted in 2002, under the regional Great Lakes Convention that was cofunded by the French Foreign Ministry, helped to jointly define, along with the CCFD, a strategy focusing on the consolidation of financial institutions and a broader use of the solidarity credit union instrument. This financial tool is particularly well-adapted to far-flung areas and the poorest populations. The signing of a partnership agreement with BAEF, an organisation that grants small loans to women in the city of Butembo in northern Kivu, is expected to consolidate the institution, technically and financially, and, consequently, its independence. Four institutions involved in the Great Lakes Convention - LIDE (North-Kivu), ADI-Kivu (South-Kivu), CECM (Burundi) and PREFED (Rwanda) – took part in a study trip in November 2002 to Senegal to visit the UGPM, a SIDI partner that promotes solidarity credit unions.

1 This Convention covers four areas: North Kivu (Democratic Republic of the Congo), South Kivu (Democratic Republic of the Congo), Burundi and Rwanda.

Shoe-repairer in Uganda

Developing a community bank in Tanzania In 2002, the AKIBA Commercial Bank stepped up its efforts to further mobilise both local and foreign shareholders. SIDI then had to relinquish its seat on the board of directors, because its investment is currently less than 10% of the equity capital. However, SIDI remains in touch with events via cooperation with other directors. Through a new branch that was opened in 2002, the AKIBA Commercial Bank was able to reinforce its activities in the poor areas of the capital city and generate positive results, as was the case in the previous year.

Photo : SIDI

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Support for two partners in Uganda

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Southern Africa and the Indian Ocean Against a backdrop of a political crisis in Madagascar – the worst this country has known since independence – and diplomatic initiatives in South Africa, which were reported on the continent, SIDI is maintaining its strong commitment to serving its partners.

South Africa Encouraged by the confidence expressed by the South African founding shareholders of TEMBEKA, SIDI decided to revive TEMBEKA, at a heavy cost in technical and institutional support. TEMBEKA was created in 1997 as a credit guarantee system, but because of the local context, never had the opportunity to really get off the ground. As a result, it became a refinancing institution starting in 2002 and developed products such as equity investment and refinancing of existing organisations that offer community financial services. The organisations financed in 2002 include Spazatainer, which rents small containers for small microenterprises and craftsmen in the townships, and Kuyasa, which grants loans for home improvement in working-class neighbourhoods. SIDI is currently TEMBEKA’s majority shareholder and only investor but would like to expand the concept of the Solidarity Chain for Financing, which enjoyed broad support from the South African partners during the Workshops held in October 2001, in Paris. In addition, the year 2002 marked the end of the association with MENNGOS, which now enjoys institutional independence, and benefits from the support of SIDI, in close cooperation with CCFD, and the mobilisation of substantial resources from the French Foreign Ministry.

Madagascar Despite the crisis that left it paralysed last year for a sixmonth period, SIPEM managed to generate positive results in 2002 without endangering its future. Furthermore, SIPEM showed a great deal of understanding towards its customers who were harmed by the crisis and forewent charging late payment penalties. SIDI has continued to provide technical support, thanks to the deep involvement of a volunteer consultant who supports the desk officer, as well as institutional support, with the Chairman of the Board regularly taking part in the board of directors. While the amount of arrears resulting from the crisis has decreased, the issue has yet to be resolved in 2003. Despite that, a new office in a city in the Majunga province will be opened this year, the capital will be increased and new financial backers will be sought to meet the needs in the areas of growth and alliances. However, the crisis has had more serious repercussions in the rural areas of Madagascar, requiring TITEM to adjust its geographical radius to three regions.

Thanks to an alliance with CORDAID (the Netherlands) and ENTRAIDE ET FRATERNITE (Belgium), SIDI was able to closely oversee TITEM’s operations in order to set in motion a new development stage, complicated by the local methodology that required revamping and the introduction of management tools and new financial products. A big challenge for 2003 will be to find technical and financial allies to enable TITEM to pursue its development. SIDI will endeavour to build new alliances, because the complexities of solidarity financing call for serious reflection and concerted actions.

At the continental level Today, the MAIN network, comprising some 40 member institutions, is shaping a system of exchange and training among its African members. A solid partnership was set up with the Martyr's Catholic University, in Uganda and each summer a training seminar is held for microfinance institution managers, a unique event on the African continent. This initiative was supported by the workshop that was held in December 2002 in Addis Ababa, during which some hundred participants, nearly half of whom were from Ethiopia, exchanged views on financing and rural development, with particular attention being paid to mediation between farmers’ organisations and financing institutions. Africa is a priority area, where activities feature the diversification of partnerships, financing and support for new partners in Guinea, Togo, Burkina Faso and the Great Lakes region, as well as the identification of new opportunities in Mali and in Mozambique. SIDI and its allies are convinced that partnership relationships with community members committed to promoting greater economic solidarity will bear fruit. SIDI will pursue its efforts to innovate in the field of rural financing and will enter new areas, such as financing of housing, health care, production, etc., in response to the wishes expressed by the people involved in the Solidarity Chain for Financing.

Photo : SIDI

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Participants at the workshop held in Addis Ababa, Ethiopia

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ASIA

In Asia, SIDI’s actions are concentrated in the countries along the Mekong River, where it has managed to put together a network of quality partners. The 2000-2002 plan enabled SIDI to advance towards its ambitious goals of participating in the institutionalisation of organisations in Vietnam and Cambodia and taking part in the creation of refinancing organisations in Laos. The year 2002 brought greater technical and institutional support for SIDI’s partners in this region.

Laos The consolidation of the CCSP cooperative network, to which SIDI contributed actively throughout its 20002002 plan, as well as the creation of the umbrella structure, the Cooperative Fund, marked the success of a community development process that began nearly ten years ago, in the wake of support from CCFD that ran until 1996. With 9 cooperatives located in seven of the country’s provinces, the CCSP network today is the only microfinance network created by Laotians that is active nationally, serving nearly 1,000 small microentrepreneur. At its constituent general meeting held on 26 January 2002, which officially created the Cooperative Fund, SIDI converted part of its outstanding loans, totalling US$ 200,000, into equity investment (US$ 147,000). Official certification from the banking authorities is still being negotiated, but the authorities have already confirmed their interest in this initiative. ALTERFIN has also confirmed its decision to convert the balance of its loan into equity investment. The Cooperative Fund will play a key role in the development of the network and will be entrusted with training to the cooperatives, their refinancing and the financing of small microenterprises. The financing plan underscored the need for US$ 200,000 in lending funds and US$ 300,000 in subsidies, over three years, to pay for training and technical assistance. SIDI has already mobilised several European partners to back the consolidation of this Fund starting in 2003. The CCSP network has initiated negotiations with a regional programme of the IFC (MPDF), to support technical assistance.

Cambodia SIDI is consolidating its multipartnership strategy and is strengthening its support for EMT and HATTHA KAKSEKAR, which are both involved in the process of institutionalisation. EMT continued its robust growth in 2002 and confirmed the good results of the previous year, which will strengthen its position as the country’s biggest microfinance institution. In terms of the number of clients, in September 2002, EMT’s share accounted for 27% at national level. The year 2002 also saw the start of an integrated MIS (management information system), which will allow the decentralisation of certain activities to the provincial branches, in order to promote growth. With the arrival of new shareholders, such as Lafayette Finance and PROPARCO, a private sector subsidiary of AFD, EMT has diversified its shareholders and increased its capital. Today, EMT’s main concern remains the quest for refinancing in order to maintain to its portfolio growth target, which was set out in its 2003-2005 business plan. With the help of its well-trained managerial staff, EMT is preparing for the withdrawal of the technical assistance that GRET is still providing. In keeping with its mission and vision, EMT also initiated, starting in January 2003, a cut in the interest paid by its clients. The year 2002 was a little more unsettling for HATTHA KAKSEKAR. Its shareholders mainly consist of the founding NGO and the staff association, which together hold 5 of the 7 seats on the board of directors. Its first year of operations closed with balanced books. However, at the start of 2002, HATTHA KAKSEKAR pursued an ambitious growth policy, which, unfortunately, led to a large increase in arrears, a situation that the MFI had problems incontrolling. After receiving a warning from the National Bank of Cambodia either to overcome its weaknesses or lose its certification, the general management of HATTHA KAKSEKAR made an effort to remedy matters. SIDI, concerned about this urgent situation that jeopardized the viability of a partner, provided HATTHA KAKSEKAR with the means to negotiate with the authorities. With the collaboration of experienced and devoted consultants SIDI agreed to carry out technical support missions, to draw up a mediumterm action plan, to revise the methodology and to seek public and private financing. This technical support is helping give HATTHA KAKSEKAR a second chance. Photo : Guy SPICA

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The Director of HATTHA KAKSEKAR, Cambodia

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study was conducted to clarify the financing needs expressed by the potential clients, SIDI increased its loan facility by US$ 10,000, bringing it to a total of US$ 30,000. The Women's Union of Soc Trang, a partner since 2001, on-lent the total amount of the of US$ 21,700 loan from SIDI, disbursed one year ago. The low pace of disbursement and the social circumstances of the clientele, mainly from the middle class, have raised questions about the microfinance institutions’ outreach to small microentrepreneurs real financing needs. In order to hear the views of international donors, such as the International Finance Corporation, BAD, AUSAID and others, SIDI is planning to build contacts, during future missions, which will help the donors to understand local circumstances and financing needs. Photo : Guy SPICA

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The EMT staff, visiting a client, Cambodia

Vietnam While SIDI has succeeded in creating a network of quality partners in the Mekong region, Vietnam has always required, and still does, a tailored approach because of the country's restrictive policies. Despite this, SIDI is persevering in this difficult setting and taking up the challenge to continue to provide support. The wealth of individual, family and business activities and the efforts deployed by small microentrepreneurs to make a success of their projects against a complex backdrop have convinced SIDI to forge ahead with its commitment. This is a challenge that requires support. SIDI has maintained its support to CEP, with which SIDI has had a partnership since 1999, and the Women's Union of Soc Trang. At the request of CEP, and after a

Thanks to the solidarity savings resources and to the diversification of human resources, SIDI today has the means, both human and financial, to build a support mission for its partners. The mission will help secure its portfolio and will assist the partners to achieve greater autonomy. Financing needs are still enormous in Southeast Asia, both on the side of the clients and the MFI themselves. SIDI, in cooperation with its allies, is considering the creation of, or participation in, a regional refinancing initiative, similar to PROFUND and LACIF in Latin America.

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LATIN AMERICA

The year 2002 was a difficult one for the entire region. On top of political turmoil, the global slump took its toll, bringing about an economic decline. Social unrest over access to drinking water and health care, in addition to demonstrations and strikes, aggravated the situation. While some institutions managed to maintain their level of activities, and a few even developed their activities, others felt the full force of the regional recession. SIDI focused its activities on partner support in Colombia, Ecuador and Peru.

Bolivia In recent years, Bolivia has been experiencing problems breaking free from its economic recession. The elections of July 2002 somewhat hampered economic recovery and the microfinance area has felt the impact of the sombre climate. While Bolivia is still a country where the small microentrepreneur can call on a range of institutions able to provide financial services, all the MFIs are going through a difficult time, despite efforts to increase productivity and offer new services to meets the clients’ needs. BANCOSOL went through a difficult patch when, in 2001, a local debtors' association rose up and demanded the government to cancel all their debts. Furthermore, in comparison with the previous decade, when BANCOSOL was established, the overall economic climate has worsened.. Moreover, BANCOSOL has to broaden its range of financial products in a highly competitive setting, because the solidarity group loan, the principal product it offered at the start, is no longer favoured by its clients. In light of the fact that BANCOSOL has attained a degree of institutional maturity, with more than 70,000 active clients, SIDI may consider selling its small stake in BANCOSOL and undertaking a more modest initiative (see sidebar 1).

Dans quel cadre la SIDI envisage-t-elle la sortie d’un partenariat ? In what circumstances does SIDI consider pulling out of a partnership? Under its 2000-2002 plan, SIDI held a discussion on the possibility of leaving some partnerships and on turnover of shareholders’ equity. That discussion will continue under its 2003-2006 plan and will culminate in the design and implementation of a withdrawal policy (see Chapter III, p. 23), as well as a scheme to capitalise on withdrawal experiences. Although SIDI’s commitments are offered for the long-term, i.e. more than 10 years, other reasons may arise that call for the withdrawal from a partnership at a particular time. Examples of these reasons are : - concern surrounding the turnover of SIDI shareholders’ equity for the benefit of other institutions, when the partnership has reached a good level of viability and autonomy. - the desire to allow an institution to forge other alliances. - changes in the institution’s vision that may no longer be in step with SIDI’s own vision.

Sidebar N°1

Chile Although Chile has continued to enjoy economic stability, the country has not been immune to regional complications. The fall in growth has had a particular

impact on microenterprises, owing to the slump in sales figures and pressure from clients to pay their bills over an extended period of time. As a result, microentrepreneur clients have put off decisions to invest in machinery and plant, an area in which INDES concentrates its leasing activities. This has meant that INDES’ leasing portfolio has shrunk, the impact of which is amplified in dollar terms devaluation of the peso of around 11% against the dollar. Thanks to the drive and determination of its new manager, INDES is staying the course and is gradually improving its performance and efficiency. In the month of June 2002, INDES initiated a series of studies to draw up a strategic and organisational plan for improved capacity-building and to draw up a business plan to achieve financial and operational autonomy, in the medium-term.

Colombia Colombia is still suffering from a guerrilla war and repression at the hands government forces. Because of kidnappings of local elected officials, skyjackings and frequent attacks on oil pipelines, foreign investors avoid the country . Every year, thousands of farmers leave their lands, fleeing threats of violence, and swell the ranks of the desplazados who flock to the fringes of large cities. In a region affected by the economic crisis in Argentina and the slump in the US economy, economic activity remains weak, which means more unemployment and a steady fall in the value of the peso. CONSOLIDAR’s 2001 figures foreshadowed a nearly balanced situation for 2002, however, the dismal climate in 2002 dashed any hopes of growth. Given these circumstances, the arrival of new investors and an increase in its portfolio to a level able to guarantee its viability are receding. At the end of the year, SIDI reinforced its stake in CONSOLIDAR by an additional US$ 50,000. CONSOLIDAR’s financing needs, relating to the credit fund, the expansion of its staff and the purchase of computer equipment, have yet to be met. A joint mission with CORDAID is being planned for the first quarter of 2003, to discuss with CONSOLIDAR’s small management team how best to improve its current situation.

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Ecuador

Peru

Ecuador’s rate of inflation in 2002 was less than 10%, the lowest in the last 20 years, and remittances from Ecuadorians working abroad constituted the second biggest source of external income, after oil. BANCO SOLIDARIO ended the year on a high note, with a portfolio of 70,000 clients worth US$ 99 million. In February 2002, a new product called My family, my country, my return, launched in partnership with the Spanish Confederation of Savings Banks, was a success for the bank in targeting Ecuadorian emigrants, who were offered a loan to pay for the trip aboard, a safe and rapid fund transfer system and the management of income and savings.

After cooperation with CREDINPET was brought to an end, SIDI pursued its partnership with EDAPROSPO, an association active in microfinance, health care services, the promotion of credit and savings unions and microenterprise training (see chapter entitled Focus on New Partners). SIDI in particular is backing EDAPROSPO’s individual loan programme via a US$ 80,000 loan, which falls due in June 2003. Moreover, in keeping with its open approach to the rural areas, SIDI is planning on expanding its activities in Peru by targeting mainly the central macro-region and by contributing to better quality of financial services in this area, via a range of players having attained institutional and financial maturity.

In 2002, with the support of SIDI, the bank succeeded in renewing for another year a US$ 1 million financing package, granted by the unit trust Nord Sud Développement. Given its rapid growth, the bank will most likely need to increase its equity in the near future.

At the continental level Set up in 1995 for a 10-year period, Costa Rica-based PROFUND is today preparing for its closure, scheduled in two years’ time. Today’s economic and financial problems in South America, PROFUND’s area of activity, are hampering fund management, in so far as any attempt at investment is fraught with difficulties. PROFUND contributed to the financing of more than 400,000 microenterprises in 10 countries, which taught PROFUND a lot about the ups and downs of investing in this area. PROFUND has also set an example of strategic and operational management that led to the creation of other funds, on both sides of the Atlantic.

Uruguay During a mission carried out in February 2002, SIDI held a discussion with SAINDESUR, a risk-capital institution, on the idea of diversifying to new products, such as leasing. SIDI’s comments were well received by the new staff at SAINDESUR, which would now like to develop new activities. However, before SAINDESUR was able to secure the go-ahead from the financial authorities, Uruguay became insolvent, as a direct result of the Argentinean financial crisis. But the crisis also offered some small opportunities in the export prefinancing niche. With the plan of taking advantage of such opportunities, SAINDESUR is keeping its eyes open, but at the same time is taking a cautious stance. SIDI is planning to encourage closer ties between SAINDESUR and INDES, in Chile, because both organisations share a similar macroeconomic environment.

For its part, LA-CIF, a credit fund in which SIDI increased its initial stake, has continued to grow and attract new investors and backers, who at the end of 2002, contributed to the capital by more than US$ 3 million, and credit lines of more than US$ 10 million. In April 2002, SIDI, after receiving a remit from the Fondation Charles Léopold Mayer (Fondation pour le Progrès de l’Homme), took part in the formal launch of Foro-Lac, a continent-wide network bringing together representative organisations of rural MFIs in Latin America and Haiti.

Photo : CIRIC

The evolution of regional mechanisms such as PROFUND and LA-CIF has enabled SIDI to count on a real monitoring of the microfinance sector on this continent. Furthermore, the start of cooperation with a Latin American network active in rural financing will mean that SIDI will enrich its knowledge about related problems in this part of the world and will be able to open the doors to new partners.

A BANCOSOL client, Bolivia

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THE MEDITERRANEAN BASIN In 2002, SIDI broadened its multipartnership approach in Morocco and consolidated its existing partnerships in the other countries of the region, a priority of its 2000-2002 action plan. Economic integration is made difficult in the Mediterranean basin and the local economic and political situation is a source of instability. As a result, SIDI needs to understand local problems and set up supervised support.

The Maghreb

The Mashriq

Morocco and Algeria

Lebanon

There are two organisations through which SIDI is pursuing its activities in Morocco, AMOS, located in the Middle Atlas mountain range, and AL AMANA, a benchmark institution at national level that has 81 branches employing more than 200 loan officers for its 75,000 active clients. The microfinance sector in Morocco is young and the only officially authorized option in the field is through associations. That, plus the standardisation of loan products (solidarity groups) makes it difficult to broaden product diversity and introduce governance methods. Nevertheless, AL AMANA, which is seeking to enlarge its product-range to include housing loans and solar energy loans, is carrying out an ongoing monitoring of client impact and also wants to share its financial profits with the clientele, via a lowering of interest rates. AL AMANA is particularly appealing in relation to the innovations SIDI is encouraging under its new action plan. It was therefore granted a 220,000 euro loan that was released in May 2002, to cover its refinancing needs. In 2003 SIDI joined the AL AMANA association and participated in its governing bodies, which will set a promising backdrop for reinforced cooperation. AMOS has been a SIDI partner since 1999, but had a lacklustre year in 2002, during which its founding president departed, and its external technical support was sporadic. Nevertheless, AMOS achieved, for the first time, positive results, thanks to an increase in its portfolio and to cost control. In order to encourage AMOS’s professionalisation, SIDI’s support highlighted the need for structuring and reinforcing AMOS’ internal capacities, through increased financial resources and ongoing technical assistance. Although it was not possible to carry out missions in Algeria, SIDI’s work in 2002 focused on finding resource people in a context where individual initiative is very restricted.

Photo : AL AMANA

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An AL AMANA craftsman, Morocco

Despite the worsening local situation, NAJDEH’s loan programme in the Palestinian refugee camps continued to achieve good results. Handicap International, its longstanding partner, stopped sending subsidies and NAJDEH attained financial balance two years ago by financing its loans via an equity allocation of US$ 58,000 from Handicap International and a US$ 25,000 credit line from SIDI. At the end of 2002, the loan programme was serving more than 220 clients. Also in 2002, NAJDEH and its two partners in the North decided to conduct an external analysis of the programme to ascertain the impact of the loans on the clients and to draw up a strategy to extend the programme to other refugee camps, in particular in Beirut. SIDI wishes to acquire greater knowledge from the various players in this microfinance sector and in the field of support for microenterprises as well as in the area of youth access to the jobs market.

Palestine Cooperation with the ACAD, an association that helps Palestinian populations on the West Bank and the Gaza Strip to buy agricultural supplies and create local jobs, continued in 2002. The missions conducted with ACAD were designed to assert SIDI’s solidarity in the midst of the political crisis, and to examine possible partnerships. Given the limited room for manoeuvre in this environment, ACAD will pursue its mission and ensure that resources will be forthcoming. ACAD therefore asked SIDI to see if a guarantee system could be designed that would enable it to cover portfolio risks by spreading them as widely as possible. This region is an ideal setting for SIDI, because it can redouble its efforts in financial innovation to support partners who are experiencing difficult situations and to look into microfinance associations combining financial and non-financial services. Moreover, SIDI will be able to back partners who are opening up to new fields, such as financing housing, health care, etc., thus fulfilling the wishes expressed by all the members of the Solidarity Chain for Financing. Under its next action plan, SIDI will strive to enrich its knowledge of development problems encountered by rural populations, Moroccans, Palestinian refugees in Lebanon as well as young people in Algeria and Lebanon, with a view to encouraging diverse approaches and broadening partnerships.

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THE CARIBBEAN SIDI’s actions in the Caribbean are focused on Haiti, a country where the economic and political situation is going from bad to worse and where there is no clear solution on the horizon. With foreign aid deadlocked and the constant devaluation of the gourde, which make day-to-day life very bleak indeed, SIDI’s partners are deploying huge efforts to pursue their activities with the disadvantaged populations. SIDI’s actions and its ability to adapt to local circumstances have been widely acknowledged and requests for partnerships are multiplying. In 2002, SIDI widened its partner network by setting up cooperation with a crafts association. Furthermore, SIDI, in conjunction with its allies, will intensify efforts to support a training scheme combining solidarity financing and development.

KNPF, which stands for the Conseil National pour le Financement Populaire, grew out of the initiative of three Haitian organisations (COD-EMH, GRAIFSI and KOFIP). In 2002, it gained 5 new members, all promoters of community banks and working in rural areas. Also in 2002, KNPF received support from CCFD, enabling it to hire a permanent coordinator to meet the expectations of the new members and to map out training schemes.

Photo : SIDI

The continued devaluation of the local currency made things difficult for our partners, some of whom were, however, able to anticipate the problems. Therefore, while GRAIFSI focused on creating solidarity credit unions, it also sought to make early repayment to SIDI. COD-EMH was unable to avoid these difficulties, and reinforced its network of community banks, numbering 416, bringing together more than 13,000 people.

A mango nursery, Haiti

Photo : SIDI

The leading event of 2002 was the setting up of IMOFOR, launched by KNPF, with the support of SIDI. IMOFOR is an itinerant training facility open to anyone concerned with financing and development. Thanks to considerable financing from the French Foreign Ministry, CORDAID and the European Union, IMOFOR now has the means to function with tailored technical assistance from SIDI.

Transporting rice by mule, Haiti

FONHSUD works with local organisations in the region of Aquin to promote income-generating activities. SIDI agreed to convert the entire loan granted to FONHSUD into gourdes, the local currency, and to set up a new repayment programme. SIDI’s vitally important loan to FONHSUD helped to refinance solidarity credit unions and savings banks as well as to finance farmers’ organisations, in particular collective means of production. SIDI granted a US$ 100,000 loan to INDEPCO (Institut National pour le Développement et la Promotion de la Couture en Haïti), a federation of small-scale tailors, via the CCG (Coopérative de Cautionnement et de Gestion). Because of the poor functioning of some cooperatives, which were paying 10% to 12% per month on deposits in US dollars, and because of its commitments to the state and the agrarian reform, the CCG went through serious liquidity difficulties. In 2003, SIDI is planning on backing a restructuring of CCG, but that will only be possible if the members of CCG agree to recapitalise and come up with a credible recovery plan. SIDI’s activities in Haiti show that SIDI has the capacity for adapting, as seen in its ongoing support. The aggravated economic and financial situation will require a big effort from SIDI to convert the current dollar loans into gourdes, the Haitian currency. Several new applications for partnerships were put forward in 2002 and should be processed in 2003. The new members will further enrich partnerships with local players working towards a solidarity economy and offering possibilities of exchange of experiences with these organisations. In 2003, KNPF is proposing to organise a seminar on rural financing, as an extension of the activities conducted by MAIN and in keeping with the priority that SIDI has accorded this subject.

17

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FOCUS ON NEW PARTNERS

TOGO

WAGES

The institutionalisation of an urban project in a thorny context The WAGES institution, a new SIDI partner in Togo, grew out of a project started by CARE International in 1994 and initially planned for six years. The original aim was to give the women of Lomé the financial means to develop incomegenerating activities and to promote a range of economic activities. The suspension of international aid in 1998 in the wake of the contested electoral victory of General Eyadema precipitated the departure of CARE from Togo. The project was then institutionalised in the form of an association in 1999, with an initial loan fund of 205,000 euro, and served more than 5,500 women. Thanks to its intense unity and a proactive management, the WAGES staff managed to prolong and diversify its financial services by introducing the collection of savings in 2001. Today, with its 17 loan officers and 15 savings collectors, WAGES is recognised as a quality urban institution in the area of loan distribution to disadvantaged populations. WAGES operates a head office in Lomé and has two branches, in Tsévié and Sokodé, located 30 km and 150 km from Lomé, respectively.

Solidarity loans based on prior savings From the outset, based on the principles of group solidarity, WAGES’ methodology for the granting of loans is founded on the following principles : - the organisation of women’s solidarity groups, of around 12 members each - the prior establishment of savings amounting to one-third of the amount applied for - a progression in the granting of released loan funds, from 300 euro to 3,000 euro - and an interest rate of 1.5% per month (constant interest) WAGES finances the full range of its female clients’ urban and suburban activities. The commercial sector comes in first place, at 62%, compared to 22% for farming activities. In the suburban areas, WAGES officers train and support solidarity groups for three months in the fields of savings education, the day-to-day management of an association and how to structure solidarity groups. This methodology, which does not require prior savings, helps to reach the most disadvantaged populations. The loan amounts vary from 30 to 120 euro and only 2% of the amount of the loan is charged at the time the loan is granted. WAGES’ portfolio is an indication of its success: its loans outstanding of 1.1 million euro at 31 December 2002 serve more than 9,000 active clients in 737 solidarity groups.

- individual savings, called HOLA, with a minimum deposit of 8 euro, a minimum duration of 6 months, yielding 3% per year - a type of savings called tontine, in which a common fund is set up and collected daily by itinerant collectors; the mini mum daily deposit is 0.3 euro, from which WAGES deducts one daily contribution each month. In 2002, the total savings outstanding reached 750,000 euro, a 132% increase over 2001, which demonstrates the clients’ genuine enthusiasm for this service. Based on these very encouraging results, WAGES would now like to consolidate its savings policy and its products by means of an evaluation of its clients’ needs. In addition, WAGES would like to promote a real savings culture, with the help of a teaching method developed and disseminated by the loan officers, who are usually the first to come into contact with the clients.

SIDI and its alliances support consolidation targets In 2002, WAGES applied for a loan to SIDI, when promised financing from donors in the form of credit lines and subsidies never materialised, and when a loan from a specialised programme (PUFS) of the Banque Ouest Africaine pour le Développement fell due. WAGES’ members met SIDI’s quality and motivation conditions. In addition, WAGES’ had a clear vision, made the right choices in a difficult period, sought to preserve human potential despite a lack of subsidies, and opted to maintain both the quality and quantity of its instruments and extend them over time. Furthermore, the involvement of the board of directors, made up of 9 members (3 borrowers’ representatives, 3 from the civil society, 2 employees and 1 representative from CARE) and the fact that the management was very involved and supported by the managerial staff, who were also very motivated and cohesive, were all positive aspects during this difficult stage of loan project institutionalisation. The granting of a 150,000-euro loan by SIDI in two instalments, topped up by a 100,000-euro loan from ALTERFINBelgium, released in November 2002, meant that the institution was able to consolidate its finances. With a view to strengthening WAGES’ institutional and human capacities, SIDI will continue to search for financing and will assist in the creation of an information and management system to formalise procedures and look into new savings products. SIDI will also work to ensure that WAGES’ actions are more socially viable by means of impact questionnaires produced by WAGES on a regular basis.

Developing collection capacity and securing savings Although the General Assembly wished to introduce savings collection in 2000, this did not actually start until 2002. Three types of savings are proposed : - compulsory loan savings, equal to one-third of the loan amount, but to which each member contributes in keeping with his ability

Photo : SIDI

18

Training of a WAGES solidarity group, Togo.

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PERU

Page 19

EDAPROSPO

A development NGO guided by social values The Equipo de Asesoramiento a Actividades Productivas de Sectores Populares (EDAPROSPO), involved in the social movement of the 1970s, was created during the big strike of 1977 after which many trade unionists lost their jobs. The three founders, including a French priest, then began to set up small-scale bakeries in the working class areas of Lima in order to provide jobs to people and enable them to survive. After a request from CCFD, which has been supporting this partnership for several years, SIDI got to know EDAPROSPO in 1998. EDAPROSPO’s strong base in the working class neighbourhoods of Lima arose out of a strong commitment to solidarity, transparency, responsibility, fairness and social justice, innovation and tolerance. Led by a deep-seated vision and a community mission, EDAPROSPO offers three types of services to its clients : - the promotion of health in poor neighbourhoods - training of microentrepreneurs - financial services that provide financing for microentrepreneurs and promote credit and savings unions EDAPROSPO’s activities are concentrated in the densely populated working class areas of the northern and eastern cones of metropolitan Lima.

« Prosperidad », a financial service closely tied to non-financial activities EDAPROSPO believes that loans alone cannot ensure the overall development of a microenterprise, but a loan combined with non-financial services can do so. Although today this viewpoint and this type of experience are controversial, EDAPROSPO has chosen its path and has succeeded in combining microfinance and non-financial services, brought together in the Prosperidad programme, which provides three different types of products: - individual loans, called Credin, to promote self-employment - the Alcancias Comunales, or Alcoms, which function as community piggy banks. This consists of self-promoting groups of 15 to 30 people who are encouraged to save in order to develop small economic activities for women in the shanty towns and poor areas of Lima. - lastly, the solidarity groups, whose members can access the Credin after their 4th loan.

The three loan portfolios at 31 December 2001 illustrate the diversification of products. The Alcom loan portfolio involved 140 groups, for a total of 2,400 people, the Credin individual loan portfolio included 1,000 microentrepreneurs and the loan portfolio of the solidarity groups covered 90 groups, totalling 200 people. The working staff, comprising 6 loan officers and 12 technicians, handles three complementary financial products, which enable it to reach out to a clientele from different social backgrounds. The complementarity of these activities with training and support services enables impoverished women and microentrepreneurs to change their lives for the better.

Institutionalise or remain an NGO? In Peru, the vast majority of NGOs offering financial services have opted to institutionalise, i.e. they have chosen to become a small-scale finance company (known by the Spanish acronym, EDPYMES), supervised by the banking authorities. This change in structure allows them to gain access to public resources, to collect savings and broaden their activities. EDAPROSPO is one of the few institutions that has decided not to take that step because it wishes to preserve a broad range of services for its clients, who request financial services in the form of individual loans and non-financial services, such as support and training. EDAPROSPO believes that the flexible status of an NGO allows it to provide quality services in both fields at the same time and to keep taxes down to a manageable level. The NGO status also means that EDAPROSPO can work with a broadened segment of the market, as shown in the following sidebar. However, EDAPROSPO is preparing for the future and is looking into the possibility of merging with a similar programme, CREDIVIDA, in order to expand its scope and impact. EDAPROSPO recently opened a branch in San Juan de Lurigancho, the largest district in the country, located east of Lima, where there is a large demand for loans. In 2002, SIDI granted a 3-year, US$ 80,000-loan, the capital of which falls due in June 2003, to finance individual loans. That time will be used to examine whether the loan should be renewed or enlarged, with a view to backing EDAPROSPO’s growth in new product areas, in particular the ALCOMS.

Analysis of Peru’s financial market according to EDAPROSPO

{{ {{

Large microenterprise

Traditional microenterprises Origin : capitalisation Objective : profit

Medium-sized microenterprise

Photo : EDAPROSPO

Banks Finance institutions COOPEC EDPYMES

Microenterprises Origin : lack of jobs Objective : NGOs’ survival

Sidebar N°2 A meeting to discuss the community piggy banks, Peru

Small microenterprise Loans individual

Developing microenterprise

ONG’s

Solidarity groups

« Community piggy banks »

Emerging microenterprise Surviving microenterprise

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DR OF CONGO BAEF

Financing women’s economic activities : the start of a process… The Convention d’Objectif Grands Lacs, which SIDI signed in 2001 with the CCFD, provides a promising framework for identifying new partnerships in the region. COTEDER, the Conseil Technique pour le Développement Rural, has been active in this region for many years. The BAEF, Banque d’Appui à l’Entreprenariat Féminin, grew out of two COTEDER programmes that came to a close : a support programme for economic activities and, a women’s promotion programme. It had been observed that men have difficulties paying back loans, and that combining loans and subsidies creates confusion in people’s minds. Therefore, the women beneficiaries of these programmes wished to develop their own financial instrument. Furthermore, in a crisis, it turns out that women are better at business matters than men and tend to make better use of household income. COTEDER decided to support this initiative by contributing a special loan fund for women’s activities, in order to improve the living conditions of families. The fund is used by BAEF for start-up capital. Given the increased insecurity in the rural areas, BAEF decided to start its loan activities in the city of Butembo, in the North Kivu province, in support of women working in the informal economy.

Supporting an institution during a difficult transition The year 2002 was marked by BAEF’s independence from COTEDER, which gradually brought to a close its payment of BAEF’s operational costs. This transition stage was facilitated by a US$ 2,000 subsidy that BAEF’s small staff, comprising 5 people, received from the Great Lakes Convention. In the same year, BAEF asked COTEDER for technical and financial support. Before seriously considering the idea of institutionalising, BAEF will have to improve its poor loan situation, including long-standing, large arrears and a manual record-keeping system that provides only a limited overview of the clients and the portfolio. BAEF will have to find the way to achieve financial viability. SIDI wants to encourage BAEF’s staff in this difficult stage and in 2003 will help to computerise the portfolio in order to have a clearer and up-to-date view of its activities. Furthermore, BAEF is aware that it needs to diversify its financial products and to lower the rates of interest it charges. Once the computerisation is in place, new developments can be considered, such as the promotion of solidarity credit unions.

Taking the first steps towards institutionalisation The loan methodology is based on local support, with the following features: - women organise in small solidarity groups - training is provided prior to the granting of loans - prior local enquiries are made to ascertain the borrower’s activities and character - loans are granted progressively, with amounts varying from US$ 10 to US$ 650, the average being US$ 130 - the maximum duration is three months. Rather harsh loan conditions are imposed by BAEF, in particular high interest rates, because of the concern to preserve the small amount of capital it has available (US$ 16,000) in a context where arrears are high, owing to the war and reigning insecurity.

BAEF, whose sole shareholder is COTEDER, will have to draw up an institutionalisation plan in 2003. Besides SIDI, which may acquire a stake in BAEF’s capital in 2003 of around US$ 10,000, BAEF’s clients, now organised by sectors of activity, may also buy shares in the bank via a US$ 10,000 fund made available by a German cooperation programme, GTZ. The role of these clients in BAEF’s future organisation will therefore have to be spelled out. A tripartite partnership convention, bringing together COTEDER, GTZ and SIDI, will help to clarify their role.

At 31 December 2002, the outstanding loans amounted to US$ 21,600 for 164 active clients.

Photo : SIDI

20

BAEF staff prior to computerisation, DRC

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REINFORCING FINANCING IN THE RURAL WORLD 21 SIDI is seeking to shore up financing in rural areas over the forthcoming years. This decision was reached after hearing what our partners had to say, particularly in Africa. During its 2000-2002 plan, SIDI undertook to listen to them, because the problems were difficult and recent. SIDI then set in motion a number of financing and support activities that were designed to test the waters to see how this complex issue of rural financing could be handled in Asia, Africa and in Latin America. Our partners’ insistence and an in-depth inventory of West Africa convinced us of the need to strengthen our activities in that area. Moreover, the choice was made as well in the wake of questions raised by our shareholders, who wanted SIDI to make a contribution to rural financing. Today, more than one billion people in the world survive on less than 1 euro a day, and 75% of them live in rural areas. Moreover, the capital cities are continuously expanding and there will be more and more poor people in the cities, precisely because the grim living conditions and the lack of any national policy in the rural areas encourage people to leave the countryside for the cities. Things would be different if the farmers and craftsmen in the countryside could produce and sell more, at better prices. Today that is not possible, neither in Africa nor in the rest of the world. • The

first steps…

In Africa, in the year 2000, SIDI provided financial support to KOKARI, a credit and savings union that helps farmers in Niger, as well as to UGPM, a producers’ organisation in Senegal. KOKARI grew out of the institutionalisation of a former project, and carries out the difficult task of intervening in most of the regions in Niger, often at distances of 1,000 km from the capital city, where its headquarters is located. KOKARI provides a range of loans and a training programmes tailored to the needs of rural organisations. In Asia, SIDI has developed its financing commitments in rural areas with the CCSP credit and savings union network in Laos and with EMT and HATTHA KAKSEKAR in Cambodia. The process continues to forge ahead. •

Diversification: farmers’ organisations face the financing issue

During the 2002-2003 farming season in Senegal, SIDI, along with CORDAID, gave technical and then financial support to UGIE-EGAS, which was later renamed SAPCA-EGAS, for groundnut marketing. Unfortunately, the marketing season, which recently came to a close, was not very successful because of the scant groundnut production, a result of insufficient rainfall and a lack of seeds. In spite of that, the organisation was able to diversify and become active in marketing commodities. • Supporting financial products in far-flung rural areas SIDI is supporting organisations, both with financing and technical assistance, that wish to promote self-managed financial vehicles, such as solidarity credit unions in Senegal, Haiti, Madagascar and in the Great Lakes region, savings and loans in Uganda, etc. These organisations are funded by member’s contributions. • Backing

family holdings

Since 2000, SIDI has been providing technical and, subsequently, financial support to UGPM in Senegal. After assisting the organisation of 82 villages into solidarity credit unions, with financial support from SIDI, UGPM then decided to explore the financing of family farms, defined as socio-economic entities in which a family carries out a range of activities. UGPM’s approach is different from that of banks and even microfinance institutions, which usually finance an individual and a particular purpose of the loan, such as purchase of seeds, labour costs, equipment, etc. • Buttressing

institutional governance in rural areas

An examination of governance is today an essential component for ensuring the sustainability of institutions operating in rural areas. In Guinea-Conakry, SIDI sits on CGR’s board of directors. This institution helps family farms by financing a

range of activities and coordinating with organisation and development programmes focusing on the food sector (rice production) or that finance cash crop (such as coffee) producers. •

Encouraging dialogue between farmers and microfinance institutions

In December 2002, SIDI had the task of leading a seminar organised by the MAIN network in Addis Ababa, which brought together farm organisations and microfinance institutions. In Latin America, SIDI, along with the Fondation pour le Progrès de l’Homme and other partners, gave support to the Foro Latino y del Caribe de Finanzas Rurales (the Latino and Caribbean Rural Financing Forum). Although it grouped mainly national associations of microfinance institutions, this Foro Permanente was designed to develop a working agenda around this theme in the hope of attracting as many participants as possible. • Backing

a rural producers’ organisation

In Latin America, the problems relate more to the marketing of farm produce, such as coffee. Agricultural development banks are increasingly thin on the ground. Many were poorly managed and were liquidated, ceding their place to the commercial banks, usually private ones that support economic activities in the cities, but very few of them have branches in the villages. Given that context, cooperatives, which best meet the expectations of rural producers, are enjoying a revival. In 2002, SIDI became interested in the Peruvian La Florida Coffee Cooperative, which set up its own financing instrument with its savings and loan cooperative. This institution’s programme deserves further study because one does not often see small producers in Latin America who are able to create financial instruments in their own rural environment. With its rural financial services programme in the Sierra Norte region, BANCO SOLIDARIO, backed by the NGO Fundación Alternativa, intends to increase its rural activities and serve 4,000 rural clients by 2004. During its next action plan, for the 2003-2005 period, SIDI will be reinforcing its support to solidarity financing initiatives in rural areas on a number of continents. More particularly, SIDI will focus its thoughts on the following points: - the building of a financing strategy for rural areas in West Africa - the promotion of easy-access savings and loan instruments adapted to the needs of populations - capitalising on the impact of financial services, with their promoters.

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SIDI’S INSTITUTIONAL ACTIVITIES SIDI’S INSTITUTIONAL ACTIVITIES 22

1. THE SOLIDARITY CHAIN FOR FINANCING Promoting solidarity savings and investment The promotion of Faim et Développement investment fund was stepped up thanks to the activities of 20 regional SIDI/CCFD correspondents, in conjunction with Diocesan Committees. The shared proceeds from the investment fund will help to finance, via the CCFD, SIDI’s development mission, consisting of monitoring and supporting partners, as well as training and backing regional networks.

The SIDI/CCFD regional correspondents, a link in the Solidarity Chain for Financing Why did I agree to become a SIDI/CCFD correspondent? Not because of my financial skills (I work in telecommunications), but because during the "Jubilee 2000" I organised, with the support of CCFD, a roundtable session on Solidarity Financing that made me want to pursue this type of activity. For two years now I have been leading actions that, in my opinion, made this occupation of promoting solidarity financing so attractive. I make presentations explaining how to make the best of savings as part of a citizen’s commitment to solidarity. I present my experiences to the Diocesan Committees in CCFD, to trade unions, the Catholic Action movement, to teachers, etc. I also take part in various events such as association forums and local or regional gatherings in which the spirit of solidarity is always apparent. As you can see, the scope of action is broad and requires a lot of personal initiative, but I do not feel alone. I take part in two annual gatherings of SIDI/CCFD correspondents held in Paris, which help me to improve my knowledge on solidarity financing and exchange my personal experiences with the 20 other correspondents. My motivations for becoming a promoter of solidarity financing are founded in my deep conviction of the need to carry out indispensable action at the right time: - Indispensable action: Disadvantaged people in developing countries aspire for a dignified life. We can contribute to the support of local people capable of taking the initiative to change their living conditions. Solidarity financing is like an extraordinary lever that fully respects the individual’s dignity. - The right time: I believe that we are beginning to see some alternatives to the ultraliberal economic model. I look around me and see that many people want to devote a portion of their savings to helping the most disadvantaged people. Now is the moment to offer them the solutions put together by CCFD and SIDI, so that they can participate in the building of a world of greater solidarity.

Sidebar N°3

Bertrand Desmonts, Vannes

At the end of 2002, the amount outstanding in the investment fund, which is managed by the Crédit Coopératif, amounted to 47.5 million euro with 3,500 subscribers, a 4% increase over 2001, despite the downturn in the financial markets in 2002. Furthermore, the regional correspondents contributed to the increase in the number of subscribers during 2002 (see sidebar 3). A large part of SIDI’s capital is still held by CCFD, the founder and holder of 31% of the shares that, along with two women’s religious congregations that hold 28%, guarantee that SIDI’s social aims and its mission will be maintained. Since the capital increase of October 2001, the association Epargne Solidarité Développement has sold more than 1,000 shares to individuals, thereby promoting an increase in the number of people who support SIDI’s financing activities through its partners in the field. In 2002, the FINANSOL association, a French solidarity financing network bringing together finance institutions, backers and qualified individuals, renewed the issuing of its quality label to SIDI, a guarantee of the solidarity component and transparency, to the shares of SIDI shares, those of the Faim et Développement investment fund and to Eurco Solidarité.

Graph 6 : Breakdown of SIDI’s capital at 31 December 2002 European partners 4% Financial institutions 10% Cong. des Sœurs auxiliatrices 18% Cong. des Sœurs Ursulines de Jésus 10%

Development solidarity savings 24% Others 3%

CCFD 31%

2. INTRODUCING IMPACT ASSESSMENT AND SOCIAL VIABILITY ANALYSIS Guided by the choices of its shareholders and solidarity savers, SIDI sought to have a better understanding of the impact of its financial services on the clients. Thanks to the support of its majority shareholder, a new function was introduced in SIDI to create and propose to the partners a monitoring/follow-up system to study the impact, both economic and social, of the financing received, in

order to answer the questions asked at the SIDI Workshops by the participants in the Solidarity Chain for Financing (see sidebar n°3). This new function will help to boost SIDI’s bid to prolong the impact of its actions and increase the efficiency of its relationships with its partners and clients.

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Capitalising on the SIDI Workshops of October 2001 The SIDI Workshops were an opportunity for the participants, especially the savers’ and shareholders’ spokespersons, to ask questions and have their say. Their statements focused on values and principles, such as sharing, respect for cultures and the human dimension that goes with investment choices. These were also underpinned by the idea of social productiveness, a principle that informs financial investment. This kind of investment must produce human benefits, such as improved well-being of the beneficiary population receiving the financial services. These affirmations and deeply-felt convictions led to questions and proposals concerning the impact of financial services on the well-being of the beneficiaries, on their living conditions, on decreasing their vulnerability, etc. The questions from representatives of savers and shareholders in the North were understood by the partners in the South who, on the basis of their

practices and experience, also had questions concerning the real impact of financial services. Their questions related to challenges posed by the “world culture of production and consumerism”; to the development of individualism reinforced by a microcredit system that is excessively targeted on the individual microentrepreneur rather than taking account of the family unit and its immediate environment; and to the limits of microcredit when the aim is to find the means to finance investment and the processing of farm products, etc. These questions led to proposals for the future. In order to better understand the future, impact studies would shed light on fundamental issues in relation to the aims pursued. What is the impact of loans on relations between men and women? Does credit facilitate the participation of women in decision-making? What is the impact on savings? Excerpt from the document capitalising on the SIDI Workshops of October 2001, K. Verhagen, May 2002

Sidebar N°4

3. ALLIANCES AND THE LEVERAGE EFFECT ON OUR PARTNERS In 2002, taking advantage of the trust forged among its alliances with the North, SIDI mobilised additional financing to the tune of 280,000 euro (see graph 7). Those funds enabled SIDI to support its partners and carry out specific projects (see chapter II), including training for small microentrepreneurs supported by MENGGOS in South Africa, the implementation of the SIPEM development plan backed by CORDAID, several training sessions and thematic seminars organised by the MAIN network, the training of managerial staff in the CCSPs in Laos, etc. Moreover, in continuing the efforts deployed in 2001, SIDI has pursued its support to partners in the negotiation of new financing sources. A significant leverage effect, which multiplied the financial resources available to the partners, meant that 1.5 million euro was raised. In 2002, SIDI intervened with ALTERFIN (Belgium) to grant a direct loan to WAGES in Togo (76,000 euro) and to Hattha Kaksekar in Cambodia (100,000 euro), with the MPDF programme of the World Bank’s International Finance Corporation for the financing of a technical assistance programme of the Fonds Coopératif du Laos (50,000 euro) and with the French Nord/Sud Développement for the renewal of a 1 millioneuro loan to Banco Solidario in Ecuador (see graph 8).

SIDI has also mobilised several financing packages for the MAIN regional network: HIVOS Netherlands, SOS Faim Luxembourg and Belgium, the CTA (European Union) for a global amount of 100,000 euro, which was added to the resources obtained directly by SIDI. In order to boost this strategy for the partners, a person was hired to join SIDI’s staff in September 2002. The aim was to increase the financial resources for the partners and to reinforce their negotiating capacity with the donors.

Graph 7 : Additional financing sources mobilised in 2002 DGRV MISEREOR 8% CORDAID 4% 13%

Fundation GILLES 12%

1200 tK

HIVOS

MPDF

UE/EBAS

CRIF/DÉSIR D’HAÏTI

CORDAID 153 850

CTA

176 225

31 627 0 tK

SOS FAIM 4%

SOS Faim Luxembourg

200 tK

CORDAID et Entraide et fraternité

400 tK

Alterfin

600 tK

Sicav Nord Sud Développement

800 tK

CCFD 9%

MAE/UE 12%

Graph 8 : Funds mobilised for our financial partners in 2002

1 000 000 1000 tK

FPH 4%

MAE 34%

30 000

16 000

50 000

50 000

12 759

9 727

Financial partners

THE SIDI 2003-2005 ACTION PLAN The achievements of the 2000-2002 plan demonstrated institutional maturity. SIDI wants to pursue the momentum initiated in conjunction with its numerous partners, shareholders and alliances that share its vision of a solidarity economy. The 2003-2005 action plan was drawn up in 2002, thanks to contributions made during the SIDI Workshops of October 2001 from three different sources: the partners, which put forth proposals, the Board of Directors, which provided elements for guidelines and the staff, which conducted a collective reflection. This new 2003-2005 plan will endeavour to: - Reinforce and diversify partnerships in order to boost the capacity of the working-class economic operators to do business in their own environment, an often difficult task; - Undertake financial engineering by working with the partners on financial arrangements that are appropriate to the particular conditions; - Stimulate and enlarge the Solidarity Chain for Financing - Act via alliances in order to increase support and financing capacities for our partner.

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SIDI’S FINANCIAL SIDI’S FINANCIAL STATEMENTS AS OF 31 DECEMBER 2002 STATEMENTS SIDI BALANCE SHEET AS AT 31 DECEMBER - IN THOUSANDS OF EURO ASSETS

LIABILITIES 2002

Uncalled subscribed capital Net tangible assets Net financial assets of which shares of which loans and claims - Provisions on shares and loans

Total fixed assets

441 41 2801 2317 1055 -571

3282

Claims (net value)

1 Euro = 6,55957 FF

1101

2001

2000

2002

2001

2000

574 37 2174 1861 935 -621

2785

1091

32 1817 1750 855 -787

1849

416

Cash assets

5477

6047

5830

TOTAL

9860

9923

8094

Capital Balance carried forward Profit / loss for the year

5320 -397 78

5320 -410 13

3354 -461 40

Total equities

5001

4923

2933

Provisions risks and charges

127

164

129

Loans for activities

516

635

447

2592 313 507

2592 305 507

2592

805

797

1015 471

9860

9923

8094

FID - Internal garantee fund C.D.C. funds. Funds dedicated to Palestine Contributions for increase of capital Other debts

TOTAL

SIDI INCOME STATEMENT AS AT 31 DECEMBER - IN THOUSANDS OF EURO 2002

507

1 Euro = 6,55957 FF

2001

2000

INCOME

TOTAL Services (CCFD and additional financing) Other products

1340 1315 25

1354 1343 11

1266 1204 61

CHARGES

TOTAL Current operating charges Wages and salaries Depreciation expense Additional financing transferred to partners

1492 548 737 16 190

1400 654 621 15 109

1291 521 570 17 183

-152

-46

-25

OPERATING PROFIT / LOSS INCOME

TOTAL Income from portfolio (loans and shares) Income from current assets Investement securities - FID resources Exchange rate gains Provisions reversal

518 91 67 86 10 264

872 88 100 137 80 467

445 94 73 62 77 138

CHARGES

TOTAL Provisions for risks on shares and loans Interest on loans Loss on loans Conversion rate adjustement Exchange rate losses

362 135 29 13 51 134

566 290 23 160 91 2

295 206 21

156

306

150

102 28

89 273

14 62

73

-184

-49

63

37

13

40

FINANCIAL PROFIT / LOSS Exceptional income Exceptional charges EXCEPTIONAL PROFIT / LOSS Income taxes NET PROFIT / LOSS

78

61 7

«HLB SOFIDEEC Agency, external auditor, member of the Paris CRCC, represented by his Chairman, Mr Fouad EL M’GHAZLI, certified without reservations financial statements of SIDI for the fiscal year ended December 31, 2002.»

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SIDI’S FINANCIAL SUPPORT TO LOCAL FINANCING SYSTEMS

Gross portfolio as of 31 December 2002 – in thousands of euro Country

SOUTH AFRICA MADAGASCAR NIGER UGANDA UGANDA SENEGAL SENEGAL TOGO GUINEE TANZANIA TANZANIA

Partners

TEMBEKA SIPEM KOKARI CERUDEB OMIPA UGPM SAPCA/EGAS WAGES CRG SELFINA AKIBA

Africa BOLIVIA CHILE COLOMBIA COSTA RICA ECUADOR URUGUAY PANAMA PERU

BANCOSOL INDES CONSOLIDAR PROFUND BANCO SOLIDARIO SAINDESUR LA-CIF EDAPROSPO EMT HATTHA KAKSEKAR FONDS COOPERATIF CEP WUSOP

44 99 114 99 18 45 224

FONHSUD CCG/INDEPCO COD

103 176 29 354 44 99 114 99 18 45 224 1305

76

77 126 121 258 165 109 102 76

76

1034

29 19

26 17 174 29 19

26 17 174

217

at

385

77 126 121 258 165 109 102

NAJDEH AMOS AL AMANA

TISE

31/12/02

29

Caribbean POLAND

TOTAL

claims to associated entities

354

Mediterranean Basin HAITI HAITI HAITI

Loans and

103 176

958

Asia LEBANON MOROCCO MOROCCO

Equity Investments

920

Latin America CAMBODIA CAMBODIA LAOS VIETNAM VIETNAM

25

48

265

24 14 220

24 14 220

258

258

50 95 143

50 95 143

288

288

111

111

Eastern Europe

111

111

Total Portfolio in t K

2207

1055

3262

68

32

100

% of total

N.B.: the book value shown in this table includes currency differentials. N.B.: participations in European institutions are not reported in this table

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ADDRESS BOOK ADDRESS BOOK 26

AFRICA AFRICA MAIN Abidjan Office - Ivory Coast c/o FIDI - 04 BP 2237 - ABIDJAN 04 Addis Abeba Office - Ethiopia B.P. 278 - Addis Abeba Tèl : (225) 22 43 52 23 Fax : (225) 22 43 61 89 Email : [email protected] / [email protected] SOUTH AFRICA – MENNGOS 45, Castle Street - 3rd Floor - Cape Town 801 - PO Box 24121 Tél. : 00 27 21 424 1775 Fax : 00 27 21 424 1841 Email : [email protected]

BURKINA FASO – URCSONA BP 171 Tougan Tèl : (226) 53 41 13 E-mail : [email protected] IVORY COAST – FIDI Riviera Golf - Immeuble N'ZI - 2ème étage - App 489 - 04 BP 2237 Abidjan 04 Tél. : 00 225 22 43 52 23 Fax : 00 225 22 43 61 89 Email : [email protected] GUINEA – CREDIT RURAL DE GUINEE BP 3790 Conakry Tèl : (224) 41 35 71 ou 45 43 38 Fax : (224) 41 12 78 E-mail : [email protected]

TEMBEKA C/O SOUTH CROSS 135 Main Road - 1st Floor - B.P. 2337 Claremont 7740 – Le Cap Tél : 27 21 683 71 00 Fax : 27 21 683 71 03

MADAGASCAR – SIPEM Immeuble SANTA LOT III – 24, rue Naka Rabemanantsoa Antanimena B.P. 8616 – Antananarivo 101 Tél. : 00 261 20 22 300 98 Fax : 00 261 20 22 355 34 Email : [email protected]

BURKINA FASO – MUFEDE Immeuble Le Walkoye – Avenue de la résistance du 17 Mai Ouagadougou Tèl : (226) 318 827 E-mail : [email protected]

MADAGASCAR - TITEM Lot IVM 7 - Ambodivona B.P. 1291 - Antananarivo 101 Tél. : 261 20 22 658 67 Fax : 261 20 22 658 67 Email : [email protected]

NIGER – Coopérative KOKARI Avenue des Zarmakoye BP 11122 Niamey Tel/Fax : (227) 75 25 12 E-mail : [email protected]

SENEGAL – UGPM B.P. 43 - Mechhé Tél. : 00 221 955 51 13 Fax : 00 221 955 52 86 Email : [email protected]

UGANDA – CERUDEB Plot 7, Entebbe Road - P.O. Box 1892 Kampala Tél.: 00 256 41 232 393 Fax: 256 41 251 273 ou 278 Email : [email protected]

TANZANIA - AKIBA Commercial Bank TDFL Building (Phase II) P.O. Box 669 - Dar es Salaam Tél. : 00 255 222 11 83 40 Fax : 00 255 222 11 41 73 Email : [email protected]

UGANDA - OMIPA KABINGO MBARARA Tél. : 00 256 48 52 08 77

TOGO – WAGES Angle rue Aniko Palako et avenue Maman N’Danida BP 1339 Lomé Tèl : (228) 22 54 71 Fax : (228) 22 78 99 E-mail : [email protected]

SENEGAL - ASPRODEB 8, boulevard de l'Est X - rue 2 bis Dakar Tél. : 00 221 825 56 65 Fax : 00 221 824 48 73 Email : [email protected] SENEGAL – SAPCA-EGAS (Ex UGIE-EGAS) Quartier Diamagueune 1 BP 1120 M’Bour Tèl : (221) 957 49 57 ou 639 26 24 Fax : (221) 957 49 07 E-mail : [email protected]

MEDITERRANEEN BASIN MEDITERRANEAN BASIN ALGERIA – TOUIZA 18, rue Abdelaziz Mouzaoui - 16027 Alger Tél. : 00 213 2 64 99 92 Fax : 00 213 2 61 81 05 Email : [email protected] (Marseille) ou [email protected]

LEBANON - ASSOCIATION NAJDEH P.O. Box 113-6099 – Beyrouth Tél. : 00 961 1 30 20 79 Fax : 00 961 1 70 33 58 Email : [email protected]

CARIBBEAN CARIBBEAN HAITI – COD/EMH Delmas 95 - # 15 Frères - P.O.Box 6 Port-au-Prince Tél. : 00 509 257 75 44 Fax : 00 509 257 92 28 Email : [email protected]

HAITI – FONHSUD Rue Berne, # 19, Bois Vernat - BP 1041 - Port-au-Prince Tél. : 00 509 245 42 86 Fax : 00 509 222 39 38 Email : : [email protected]

SOUTH AMERICA SOUTH AMERICA BOLIVIA – BANCOSOL Casilla 13176 - Calle Nicolás Acosta N° 289 Esq. Cañada Strongest/Plaza San Pedro - La Paz Tél. : 00 591 2 39 28 10 Fax : 00 591 2 39 19 41 Email : [email protected]

COLOMBIA - CONSOLIDAR Calle 54 # 10-81 - Piso 2nd Santa Fé de Bogotá Tél. : 00 571 212 10 88 Fax : 00 571 348 14 06 Email : [email protected]

CHILE – INDES Bernardo O’Higgins N° 1468 – Comuna de Santiago de Chile Tél./Fax : 00 562 696 09 16 Email : [email protected]

COSTA RICA – PROFUND P.O.Box 769-1005 - San José de Costa Rica Tél. : 00 506 220 4122 / 290 2404 /296 8004 Fax : 00 506 290 2345 Email : [email protected]

ASIA ASIA CAMBODIA – EMT 72/74, rue 598 – Boeng Kok II - Toul Kok BP 57 - Phnom Penh Phone: 00 855 23 881 342 Email: [email protected] ou [email protected],

HAITI – GRAIFSI 17, ruelle O, Turgeau - Port-au-Prince Tél./Fax : 00 509 245 4819 Email : [email protected] HAITI – CCG/INDEPCO 13 rue Capois Port au Prince

ECUADOR – BANCO SOLIDARIO Av. Amazonas 3887 y Corea - Edificio Grupo Enlace - PBX : 260260 Tél. : 00 593 2 26 85 34 Fax : 00 593 2 26 88 43 Email : [email protected] PERU – LA-CIF Calle Bolivar # 472 – bureau 702/703 – Miraflores – Lima 18 Tél. : 00 511 446 8877 Fax : 00 511 446 8585 Email : [email protected] ou [email protected]

CAMBODIA – HATTHA KAKSEKAR Road No 4 Peal Ngek I Village Phteash Prey Commune – Sampovmeas District Pursat Province 50 m from highway 5 Tél. : 855 52 951 404 Email : [email protected]

THAILAND – RCP 2044/21 New Petchburi Road - Khet Huai Khwang - Bangkok 10310 Tél. : 00 662 321 57 18 Fax : 00 662 718 07 53 Email : [email protected] and [email protected]

LAOS – CCSP 271, rue Nongbone – Ban Phonxay BP 7437 - Vientiane Tél. : 00 856 21 41 54 57 Fax : 00 856 21 215 628 via BOX 03 Email : [email protected]

VIETNAM – CEP Fund 14, Cach Mang Thang Tam – 8 st Dist. 1 - Ho Chi Minh Ville Tél. : 00 848 822 33 21 Fax : 00 848 824 56 20 Email : [email protected]

EASTERN EUROPE EASTERN EUROPE

MOROCCO – AL AMANA 28 rue Oum Errabiaa, Agdal, Rabat Tèl : (212)37 77 01 41 Fax : (212) 37 68 67 12 E-mail : [email protected] / Site : www.alamana.org

POLAND – TISE UL. Nalewki 8/27 – 00-158 Varsovia Tél. : 00 48 22 636 07 40 Fax : 00 48 22 636 29 02 Email : [email protected]

MOROCCO – AMOS 2, rue 26, Quartier Amalou - Khénifra Tél./Fax : (212) 55 39 43 07 Email : [email protected] PALESTINIAN TERRITORIES – ACAD P.O.Box Al-Beireh – 3816 – Jérusalem 51001 Tél.: 00 972 2 298 93 50 or 51 Fax : 00 972 2 298 93 52 Email : [email protected]

HAITI – KNFP c/o COD - Delmas 95 - N° 15, Frères P.O. Box 6 – Port-au-Prince Tél. : 00 509 57 74 44 Fax : 00 509 57 92 28 Email : [email protected]

PERU – EDAPROSPO Octavio Bernal 598 - Jesús María – Apartado Postal : 110325 - Lima 11 Tél. : 00 511 463 4173 / 00 511 461 6014 Fax : 00 511 463 0776 Email : [email protected] URUGUAY – SAINDESUR Bulevar Artigas 1119 - SUBSUELO Montevideo Tél./Fax : 00 598 2 402 27 80 Email : [email protected]

VIETNAM - Union des Femmes de la province de Soctrang WUSOP 09 Tran Hung Dao Ward 3 Ville de Soctrang Province de Soctrang Tél : Phone : 84 79 82 42 41 - 84 79 82 10 - 28 - 84 79 82 22 02 Fax : : 84 79 82 10 28

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SUPERVISORY BOARD SUPERVISORY BOARD 27 Xavier LAMBLIN Chairman of the Supervisory Board Chairman of the CCFD (Catholic Commitee against Hunger and for Development) Philippe MESNY Vice-Chairman Antoon BIERINGS Jean PERE Jean-Pierre PLUQUET Arthur POTOCKI Association Epargne Solidarité Développement Represented by Henry KLIPFEL Caisse Centrale du Crédit Coopératif Represented by Karol SACHS Caisse des Dépôts et Consignations Represented by Hocine TANDJAOUI Congrégation des Sœurs Auxiliatrices des Ames du Purgatoire Represented by Sœur Geneviève GUENARD Congrégation des Ursulines de Jésus Represented by Sœur Christiane GROSSIN

DIRECTORATE DIRECTORATE Christian SCHMITZ Chairman of the Directorate Christophe COURTIN Bernard MAZZASCHI

AUDITOR AUDITOR Fouad EL M’GHAZLI HLB SOFIDEEC

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INTERNATIONAL SOLIDARITY FOR DEVELOPMENT AND INVESTMENT 12 rue Guy De La Brosse 75005 PARIS Tél. 33 (0) 1 40 46 70 00 Fax. 33 (0) 1 46 34 81 18 site web : www.sidi.fr

Photo : CIRIC

3545-SIDI/2003_GB

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