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Dutch Good Growth Fund
Notice proposed transaction 20150522 LLC MFO Credo
Date of Publication: May 22, 2015
Taking into account the provisions for governing bodies that apply under the
‘Freedom of Information Act’ (‘Wet openbaarheid van bestuur’) and the ‘Data
Protection Act’ (‘Wet bescherming persoonsgegevens’), the Fund Manager of
the DGGF part ‘Financing local SMEs’ will publish its anticipated transactions.
Views
Parties can express their views on the proposed transaction to the Fund
Manager by contacting [email protected] within 30 days after publication
date of the notice. After the transaction has been closed, or after it has become
clear that the transaction will not take place, the Fund Manager will respond as
soon as possible to these parties concluding on the expressed views by these
Parties.
Description (English)
Part of DGGF
Financing Local SMEs
Name Intermediary Fund (IF):
LLC MFO Credo
Domicile IF:
Credo is domiciled in Georgia.
Name of manager of the IF:
Credo is a Georgian limited company with its head office in Tbilisi, and about 50
branch offices in other regions of Georgia.
Nature of the activities of the IF:
Credo is a non-bank Microfinance Organization founded by World Vision
International whose mission is to provide sustainable financial services to the
entrepreneurial poor and Georgian micro and small businesses. Credo is the
market leader in individual rural lending in Georgia and continues to expand its
branch network in areas where it typically is the first entrant. This gives the
company an excellent position to launch SME-financing in rural areas,
something that is until now very restricted as major banks have a very limited
presence outside the cities. The DGGF loan to Credo would finance an SME
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portfolio in the riskier economic sectors such as agriculture and tourism through
an innovative risk-sharing model.
Size of proposed investment:
Approximately USD 5 million / EUR 4.5 million1
Intended transaction date:
The Fund manager aims to close the agreement with Credo in June 2015.
Expected financial results:
A positive net financial return on the investment is expected.
Expected social impact:
Through its financing to Credo, DGGF is expected to reach to more than 300
underserved SMEs in Georgia. This is a significant number of SMEs given the
amount invested, thanks to Credo’s focus on the lower end of the SME
segment. It is estimated that approximately 25 to 30% of the SMEs financed
will be women owned. By specifically targeting sectors which are difficult to
reach and are currently underserved DGGF’s investment will be additional.
Lastly, given the innovative nature of this transaction, the demonstration effect
is potentially significant. If successful this risk sharing mechanism could
become a model for other investors to support financial institutions in reaching
out to a new client segment.
ESG compliance:
Credo targets small and family businesses, mainly in the agricultural sector or
small urban businesses such as shops. As such, Credo’s target markets suffer
specific risk with regards to ESG. Particularly in light of Credo’s plans to start
lending to more formal businesses (SMEs), the DGGF ESG team and Credo
worked together to identify further improvements to Credo’s existing ESG
policies and procedures. Credo will implement these improvements in order to
fully comply with DGGF’s ICSR policy.
Tax compliance:
The Fund manager has assessed the risks of tax avoidance by the IF and will
monitor this annually. The outcome from this initial assessment confirms that
the IF is not making use of artificial constructions to lower tax in the developing
countries and the Fund manager posed conditions to the IF to ascertain this.
Credo and the SMEs it will finance are domiciled in Georgia and there are no
artificial structures in place.
1
Based on the exchange rate on the date of publication.
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Business Development:
We are contemplating support to conduct market studies, develop tailored
products and deliver of business support to small entrepreneurs (agriculture,
tourism, start-ups). We will also support Credo in strengthening its capacity to
assess the impact of the services.
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