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Africa Loan Fund Reallocation Plan (Project Case) Presented by: Jehiel Oliver Agricultural Finance Cornell University Prof. Josh Woodard April 10 th , 2013
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Africa Loan Fund Reallocation Plan (Project Case)
Presented by: Jehiel Oliver
Agricultural Finance Cornell University
Prof. Josh Woodard April 10th, 2013
2 CONFIDENTIAL © Aya Consulting 2010
Meeting Context and Objectives
§ With financing from the Africa Loan Fund (or ALF), My Client's microfinance program now serves more borrowers and reaches more low-income women than any other institution in Uganda, Tanzania or Southern Sudan.
§ Despite this success, lower-than-anticipated demand resulted in a smaller microfinance portfolio than originally projected. Since the size of the loan portfolio drives earnings, My Client has revisited its financial and operating assumptions.
§ In June 2010, My Client chose not to draw additional funds from ALF. In August 2010, My Client requested a transfer of $2.9 million from Southern Sudan to Tanzania where the funds could be effectively deployed.
§ This document presents My Client's Reallocation Plan to the Lenders in the Africa Loan Fund. The slides outline the plan but are incomplete without the accompanying oral and written commentary. My client and I are available to continue these discussions.
§ This document is prepared based on My Client’s financial and operating strategy with input from Aya Consulting. My Client retained Aya to review and structure the Reallocation Plan, but the ownership and responsibility for implementing the Plan remain exclusively with My Client.
3 CONFIDENTIAL © Aya Consulting 2010
Markets – East Africa Phase I
Tanzania Uganda
§ Large unmet need for financial services
§ Large population → large opportunity
§ Large percentage of population is rural – suited to My Client’s programs
§ Relatively politically stable
§ Developed banking system
§ Regulatory framework
§ Many MFIs but large gaps in markets served
§ Entrepreneurial culture
§ Relatively politically stable
§ Developed banking system
§ Regulatory framework
§ Large population → large opportunity
S. Sudan
§ Similarities to post-conflict Bangladesh
§ Desperate need for all of My Client’s programs
§ Few others willing to go there
§ Proximity to base in Uganda
4 CONFIDENTIAL © Aya Consulting 2010
My Client’s Development Strategy
Village Organization
Results 1. Building opportunities 2. Securing livelihoods 3. Empowering the poor
► Improved ability to create sustainable livelihoods
Education
Access to Capital
Supply Chain Development
Health Care
Social Development
Technical Support
Community
Microfinance is the delivery platform for a multi-pronged development strategy
5 CONFIDENTIAL © Aya Consulting 2010
Experience and Adaptations to African Market
Reduced Loan
Demand
Sparse Population • Uneven settlement patterns
• Clustered around favorable economic settings and roadways
Lower Uptake Rates • Fewer available economic
opportunities supportable by lending
• Borrowers per branch scaled back significantly
Small Loan Size • Loan size a function of local
economic opportunities
• Average loan size a function of repeat borrowing, -- client retention critical
Lower Participation in Cash Economy • Wage-employment income
is a small share of total income
• Agriculture dominated by subsistence farming
Smaller Loan Portfolio
6 CONFIDENTIAL © Aya Consulting 2010
Implications of Revised Financial Projections
Scenario A
My Client’s affiliates have insufficient cash to meet payment schedule
Undesirable
Scenario B My Client’s affiliates borrow in 2012 to repay on schedule
Dependent on future availability of capital
Scenario C
Reallocation Plan: Contributions from all parties to match market conditions and financial performance
Recommended as most realistic and favorable outcome
7 CONFIDENTIAL © Aya Consulting 2010
Projected Borrower Growth (Original Plan) Revised Financial Projections: Number of Borrowers
Based on updated assumptions, total number of borrowers in Uganda and Tanzania is projected to reach 88% of Original Plan in 2015.
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
500,000
2008 2010 2012 2014 2016 2018
Reallocation Plan* Tanzania Uganda
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
500,000
2008 2010 2012 2014 2016 2018
Original Plan Tanzania Uganda Southern Sudan
*Actuals presented with a solid line and projections presented with a broken line *Data is presented in a "stacked" fashion with country totals building on each other
8 CONFIDENTIAL © Aya Consulting 2010
Revised Financial Projections: Average Loan Size*
$0
$100
$200
$300
$400
$500
$600
$700
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Average Micro Loan Size (Uganda)
Original Plan Reallocation Plan
Projections are aligned with 2009 Actual results.
$0
$100
$200
$300
$400
$500
$600
$700
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Average Micro Loan Size (Tanzania)
Original Plan Reallocation Plan
Actual Average Loan Size
*Average loan size at origination
9 CONFIDENTIAL © Aya Consulting 2010
Revised Financial Projections: Projected Portfolio Outstanding
Updated assumptions indicate that the gross portfolio outstanding will reach $98 million by 2015 or 72% of the original plan in Uganda and Tanzania.
*Actuals presented with a solid line and projections presented with a broken line *Data is presented in a "stacked" fashion with country totals building on each other
$0
$50,000,000
$100,000,000
$150,000,000
$200,000,000
$250,000,000
2008 2010 2012 2014 2016 2018
Original Plan Tanzania Uganda Southern Sudan
$0
$50,000,000
$100,000,000
$150,000,000
$200,000,000
$250,000,000
2008 2010 2012 2014 2016 2018
Reallocation Plan* Tanzania Uganda
10 CONFIDENTIAL © Aya Consulting 2010
ALF Balances Outstanding: Original Plan vs. Reallocation Plan
Consistent with My Client’s more conservative projections, the Reallocation Plan extends repayment to 2017.
$0
$10,000,000
$20,000,000
$30,000,000
$40,000,000
$50,000,000
$60,000,000
$70,000,000
$80,000,000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Original Plan Reallocation Plan
Reallocation Plan: final debt payment
Original Plan: final debt payment
11 CONFIDENTIAL © Aya Consulting 2010
Summary Rationale for Reallocation Plan
• Avoid default and financial losses. • Right-sizes ALF to fund local loan demand. • Maintains presence of proven investment funding vehicle that
can be used to fund My Client’s long-term vision for Africa. • All parties contribute to reallocation. • Reduces investor risk by repaying Southern Sudan, lowering ALF
balances and receiving MasterCard operational subsidy.
Internal Benefits
• Preserve development programs. • Shows well to market and industry observers: Sets precedent for
other MFIs seeking commercial capital in Africa; adaptation of Asian NGO model to Africa at scale (“South-to-South”).
• Reinforces belief that management prudence is rewarded by market capital.
• Maintains working relationships.
External Benefits
12 CONFIDENTIAL © Aya Consulting 2010
Biography Jehiel Oliver is a global finance consultant focused on the micro, SME (small and medium enterprise) and agriculture industries. Mr. Oliver brings a unique blend of skills acquired from working in both the domestic and international financial sectors as an investment banker and consultant to public and private institutions.
Mr. Oliver currently works with Aya Consulting, a company he founded in 2008, on a variety of projects including program reviews, financial due diligence and transaction execution for socially responsible investors. He has work experience in over ten countries, including areas in conflict. Mr. Oliver’s consulting experience in sub-Saharan Africa includes over $100 million dollars in cross boarder financing engagements spanning five countries. He has also worked extensively in Asia with multiple projects in Afghanistan and Bangladesh. In Afghanistan he worked on the USAID-ARIES project, performing technical program reviews and investor diligence for both WOCCU (World Council of Credit Unions) and MISFA (Microfinance Investment Support Facility Afghanistan). Within these technical reviews, Mr. Oliver also provided recommendations on capital disposition for his client, USAID, on its $25 million debt facility used to help capitalize the countries micro, small and medium enterprise sectors. In addition to his consulting duties, Mr. Oliver also serves as on the board of directors of Shared Interest. Shared Interest is an impact investment fund that has benefited over 2 million people to date through its investments in microfinance institutions and agriculture cooperatives in South Africa. His board duties include serving as treasurer and executive committee member, responsible for the fiduciary management and reporting of the funds $14 million investment portfolio.
Prior to working in international development, Mr. Oliver served as an Associate with Key Banc Capital Markets. Within this organization he worked within the Private Equity and Debt Capital Markets business divisions, engaging in over $8 billion in corporate financing transactions.
Jehiel Oliver Owner Aya Consulting +1(404) 861-6617 [email protected] Skype: jehiel.oliver ayaconsult.com
