Cambodia’s Largest MFI Boosts Green Farming Loans

Phnom Penh Post, 01 June 2012

Cambodian microfinance institution PRASAC says it is bolstering its green credentials by increasing loans for eco-friendly farming methods in the kingdom.

Speaking at the Asia-Pacific Rural and Agricultural Credit Association (APRACA) General Assembly in Siem Reap, Sim Senacheert, President and CEO of PRASAC, said the institution is “committed to providing and developing more green financing to the rural people for their livelihood improvement and environmental protection in particular”.

PRASAC, which was formed in 1995, provides microfinance services to the rural population of Cambodia. Sim said that PRASAC had a vital role to play in maintaining the environment and added that “it is important to improve the resilience of the rural people with the rural financing”.

PRASAC said it is particularly proud of its recent initiative to provide a biodigester financing program. Biodigestion is the process of managing biodegradable waste and turning it into energy.

By the end of April, PRASAC said it had provided biodigester loans to roughly 5,800 borrowers in 13 provinces, with a loan portfolio of more than $3 million.

The National Bank of Cambodia and the Cambodia Microfinance Association organised the Siem Reap gathering, which was presided over by Chea Chanto, the Governor of the National Bank of Cambodia.

The objective of the event is to strengthen the resilience of smallholder farmers through rural finance innovations. There were around 250 participants including local and international bankers and microfinanciers.

PRASAC currently is the largest microfinance institution in Cambodia, and provides loans and savings to clients in 24 provinces and cities.

As of April, PRASAC said it has provided loans to 117,000 borrowers with more than $158 million of loans. It had 48,000 depositors with more than $12 million in savings.

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ANDE 2011 Impact Report

ANDE’s 2011 report on small and growing businesses (SGB) reveals progress and strides in building a new kind of investment community that is committed to both social and financial returns. The 2011 Impact Report is a one-of-a-kind publication offering data on the current state of the SGB sector, the impact of ANDE’s members, and a comprehensive review of its work this past year.

Read the full report: ANDE_2011_Impact_Report_Final.

In Cambodia, a Start-Up Combines Web Sales Skills and Hair Extensions

May 28, 2012, 1:45 pm NY Times

By RON GLUCKMAN

PHNOM PENH, Cambodia — For an Internet start-up, Arjuni faces more challenges than usual.

The Arunji founder Janice Wilson showing a hair extension that is ready to ship from Phnom Penh, Cambodia.
The Arunji founder Janice Wilson showing a hair extension that is ready to ship from Phnom Penh, Cambodia.

The e-commerce site that sells hair extensions operates out of a five-story building here that lacks elevators and, sometimes, power. Employees typically have to travel to remote villages by motorbike or foot to pick up the goods that Arjuni sells. And the office floor is cluttered with piles of hair strands instead of computers.

But like many new ventures, Arjuni is harnessing the latest Internet tools like Twitter and social media to build a loyal customer base.

In just two years, the company, founded by Janice Wilson, has grown from a handful of employees to 80, and it now generates more than $1 million in revenue. The start-up is also slowly gaining market share from the industry’s dominant players in India and China, as well as retailers in the United States and Europe.

“We not only buy and collect the hair ourselves, but sell it directly to our customers. This makes us stand out,” Ms. Wilson said. “We’re small, but considered one of the top brands.”

On the rooftop of Arjuni, a hair company in Cambodia, workers begin sorting the natural-grown hair according to length and quality.Ron Gluckman for The New York TimesOn the rooftop of Arjuni, a hair company in Cambodia, workers begin sorting the natural-grown hair according to length and quality.

While hair extensions have been around for decades, they became a fashion craze in recent years, when stars like Paris Hilton and Britney Spears started using them to change their looks. A large proportion of Arjuni customers, like Ms. Wilson, are African-Americans seeking fuller styles for their tresses.

India has long provided much of the world’s natural hair, sold to wholesalers mainly in China, which in turn marketed their products to retailers in Europe and the United States. But Ms. Wilson found that Cambodians have similar hair quality, long with cuticles in alignment.

“Probably 99 percent of the world’s hair comes from India. Nobody had thought of Cambodia,” said Ms. Wilson, 39, straddling piles of hair on the floor.

It is a small but potentially profitable niche. The hair extensions business generates annual revenue of $250 million.

Ms. Wilson said it was important to her to have a business serve a social purpose. Many of Arjuni’s employees formerly worked in Cambodia’s notorious sex trade.

That effort helped attract seed capital from a Japanese investment fund, Arun, formed in 2009 by Satoko Kono to help social enterprises in emerging nations. “We like how Arjuni is employing women, and helping the needy,” said Ms. Kono, who spent a decade with development organizations in Cambodia.

Additional money came from the Cambodian Export Market Access Fund, which is a World Bank-financed project that helps companies trying to develop exports. The rest came from her savings, friends and family.

A lawyer by training, Ms. Wilson has built her business by making customers feel engaged in the product via the Internet.

Customers eagerly describe their orders on home videos that they upload on YouTube, with segments on topics like hair design, delivery and grooming. Clients are encouraged to send in pictures of starlets they want to emulate, like Catherine Zeta-Jones or Beyoncé. Arjuni also floods Facebook with testimonials and promotions.

“Our clients are fanatical about hair,” said Tiyana Peters, who oversees social media for Arjuni. “We get everything from wedding photos afterward to details on how the boyfriends react.”

By dealing direct with customers, Arjuni eliminates the added cost of working through another retailer or site. Extensions can cost thousands of dollars, but typically average around $500.

The Internet has helped with damage control, as well. After rumors spread online that Arjuni was stealing hair or forcing women to sell it, the company began regularly posting more information on its operations on networking sites.

“This was totally untrue. We buy the hair at fair prices, and tried to explain it, but there isn’t much you can do,” Ms. Wilson said. “Our company grew up in the age of social media,” she said. “Social media is huge, and has helped us, but these accusations really stung.”

Her idea for the start-up was an evolution of sorts. Ms. Wilson, originally from Green Bay, Wis., was on vacation in Cambodia four years ago, she began thinking about opportunities to start a business here.

Cambodia was in the midst of an economic boom and had the fastest-growing economy in Asia, after China, for several years running. One of the hottest sectors was real estate. Ms. Wilson, who was working for a real estate firm in Colorado, decided to move to Cambodia, and with local partners, planned a development near the temples of Angkor, the country’s top tourist attraction.

When Cambodia’s property market suffered along with the global economy, she faced a grim challenge. “I either had to give up and go back to America, or find something else to do,” she recalled.

The collapse of Cambodia’s textile industry largely as a result of cheap competition from China led to her idea. Cambodian workers with sewing skills were suddenly unemployed, and nobody had looked at Cambodian hair as a marketable material before.

“I was thinking, what is recession-proof?” Ms. Wilson recalled. The answer: “vanity.”

The best — and most expensive — hair extensions are made from natural human hair, which is cut, cleaned and sewn into individual pieces. “It was low-tech, they just needed to learn how to make them, and we just needed sewing machines. We could use the skills already here,” she said.

The business was also a way to help workers develop marketable skills. Ms. Wilson now provides employees with free English, computer and math classes. A third of workers come from troubled situations like sex trafficking or spousal abuse. “But we run everything as a business,” Ms. Wilson said.

Ms. Wilson acknowledged that she and her staff members were extremely ambitious at the outset, “trying to do everything at once — collection, fabrication and distribution.” But they have been able to keep up the frenzied pace as the company grew.

“It’s definitely been difficult to scale up,” Ms. Wilson said. “But it does make us better quality.”

This spring, Arjuni added yet another facet to its operation — a series of in-person events in the United States called Halo, where her staff could meet and help groom customers.

“Do I feel I have aged a lot? Definitely,” Ms. Wilson said. “But I love being an entrepreneur. I love the challenges.”

“When I worked in a law office, I was bored out of my mind,” she added. “When you have this entrepreneurial spirit, you just have to do it.”

Social Missions – FT

May 18, 2012 12:31 am

Social missions

By Sarah Murray

Solar energy in Tanzania

In launching its SocialAlpha-Prometheus fund, Zurich-based AlphaMundi is looking for more than financial returns. The fund, which is raising capital for its first close, will also measure how successfully its portfolio is delivering on its social aim of financing small enterprises that provide renewable energy to rural off-grid communities in Latin America and sub-Saharan Africa.

Such funds are attracting growing investor attention. Yet “impact investments”, as they are known, remain a tiny proportion of the global investment industry. What is needed before this emerging alternative-asset class can attract mainstream investors, argue its proponents, is a new ecosystem of legislation, tax laws, ratings providers, analysts and intermediaries.

Enthusiasm is there. An Ipsos Mori report in 2011 found 65 per cent of investors with more than £100,000 in investable assets wanted to achieve social impact from their investments as well as financial returns. And last December, when JPMorgan polled 52 impact investors, it found they planned to invest almost $4bn over the next 12 months.

When it comes to the foundation endowment managers, pension fund managers and private banks that drive the investment market, however, few are yet offering impact investment products to their clients.

“There’s real money flowing,” says Margot Brandenburg, an associate director at the Rockefeller Foundation working on initiatives that include impact investing. “But there’s much more uneven progress in unlocking institutional capital, with real and perceived barriers, depending on countries and regulatory and policy frameworks.”

One of these barriers is a dearth of professional expertise. And market expansion will depend on the emergence of a cohort of fund managers able to analyse investments based on more than purely financial factors. “Building human capital is a critical need and exists at multiple levels – entrepreneurs, fund managers, investors and service providers,” says Brandenburg.

Another impediment to the flow of institutional funds into impact investments is lack of supply. “There’s a finite number of social enterprises in the world, so the investment opportunities have so far been relatively small,” says Gavin Power, deputy director of the United Nations Global Compact, the UN’s business sustainability initiative.

Another challenge lies in the size of the investments. “There’s plenty of product out there today, but it’s mostly small,” says Andrew Kassoy, co-founder of B Lab, a US-based non-profit organisation which aims to harness the power of business to solve social and environmental problems. “If you’re a big pension fund or private bank looking to provide product for your client base, funds of $5m-$10m aren’t that useful.”

In the US, legislation is helping to expand the portion of the economy made up by socially driven businesses. In seven US states, new incorporation legislation has created an alternative commercial entity – the benefit corporation. Critically, the legislation gives leaders of benefit corporations legal protection to pursue social and environmental goals as well as profit.

Not only does benefit corporation legislation allow certified companies to put social and environmental goals on an equal footing with profit targets, but it also confers on them a mark of credibility.

“Everybody is concerned about greenwashing of one sort or another,” says David Wood, director of the Initiative for Responsible Investment at Harvard University. “So structures that signal credible social impact, such as benefit corporations, are important to develop.”

Allied to this is a need for robust measurement – not only of financial returns but also of the social and environmental impact of investments. To give investors a clearer indication of these returns, B Lab, supported by the Rockefeller Foundation, has developed the Global Impact Investing Rating System and is in the process of rating the first funds in the system.

This is something new. For while efforts have been made to take into account social and environmental factors in investments, ESG (environmental, social and governance) ratings tend to focus on the risk to financial return from non-financial factors rather than on positive social return. “That’s not to say risk management isn’t important,” argues Kassoy. “But investors who care about social impact aren’t getting answers from that analysis.”

Meanwhile, some regulatory hurdles need to be dismantled or adapted to allow large investors to participate in impact investing. In the US, the Employee Retirement Income Security Act (Erisa) is one example. While Erisa does not prohibit managers taking into account other factors, it requires pension plan fiduciaries to maximise the financial return of their investments.

“Erisa has some very strict laws about what pension funds can invest in. For the ESG and impact investing community, those are quite limiting,” says Kassoy. “So there are some big policy issues that need to be addressed if you want that kind of capital invested with a social impact lens.”

Power agrees. He sees governments as critical in creating incentives and policy signals, whether through tax codes or lowering regulatory hurdles. “There’s a huge opportunity for governments to take an interest in this and stimulate its development,” he says.

From Potential to Action: Bringing Social Impact Bonds to the US

A social impact bond (SIB) is a new approach for scaling social programs. Currently being piloted in the United Kingdom and generating interest globally, a SIB is a multistakeholder partnership in which philanthropic funders and impact investors—not governments—take on the financial risk of expanding preventive programs that help poor and vulnerable people. Nonprofits deliver the program to more people who need it; the government pays only if the program succeeds.

Because the concept of a SIB is so new (the first and only SIB is the UK pilot mentioned above), information about how—and how well—this approach could work is very limited. In this report, the most thoroughly researched study of SIBs to date, we explain how SIBs are structured, assess their potential in two specific program areas (homelessness and criminal justice), describe the various stakeholder groups involved, and present the results of a pro forma analysis of a hypothetical SIB.

Read the full report: McKinsey_Social_Impact_Bonds_Report.

Rabobank Ready to Offload Robeco

09 May 2012

Rabobank is to sell its asset manager Robeco in order to boost its own balance sheet, Dutch financial daily Het Financieele Dagblad reported on April 27, citing unnamed sources.

Robeco, which has assets under management of €150 billion (US$194.63 billion), will sell at between €1.5 billion and €2 billion as part of a reorganisation of its businesses, the sources told the paper. Deutsche Bank and JP Morgan have been brought in to manage the sale, the report claimed.

Merchant bankers told Het Financieele Dagblad that companies such as Robeco are wanted by private equity groups as well as independent British, US and Asian asset managers.

Asia Asset Management

Senior Economist Backs Mining Investment Freeze

May 11, 2012

Vientiane Times

The economy will not see a downturn over the next few years if the
government decides to stop granting permission for new mining
investments, according to a senior economist.

“There will be no impact on our economy in the short term if the
government stops giving permission for new mining projects this year,”
Lao National Economic Research Institute Director General, Dr Liber
Libouapao, said on Wednesday.

He made the comment after the Ministry of Planning and Investment
suggested to Prime Minister Thongsing Thammavong on Tuesday that no
more proposals for investment in the mining sector be accepted.
Companies that have already been given the green light to conduct
economic feasibility studies for mining projects can continue as
planned.

Economic growth has stayed above 7.5 percent over the past five years,
with mining as the main driving force. The proposal to rein in the
industry has caused concerns that it could result in a slowdown.

Prime Minister Thongsing spoke to investment officials at the second
private investment promotion and management workshop in Vientiane on
Tuesday, but did not comment on the ministry’s proposal to curb
investment in the mining sector. The prime minister focused on ways to
encourage more businesses to invest in the non resource sector.

Dr Liber said the government had already given permission for several
mining projects to go ahead in recent years and should now concentrate
on ensuring that investors carry out these projects instead of
continuing to allow new ones to be set up.

If these companies proceed with their projects, the economy will
continue to grow over the next five years. But he admitted the economy
could slow in the long term if the country is unable to source more
investment in the non resource sector.

Dr Liber said that cutting off investment in the mining industry would
force Laos to boost private investment in the non resource sector to
secure stable growth. He noted that it is Party and government policy
to reduce investment in the development of natural resources and boost
investment in the non resource sector to ensure sustainable growth.

The Ministry of Planning and Investment is recommending that the
government promote private investment in agribusiness, the processing
industry, education, health and tourism, which have high investment
potential.

Dr Liber warned it would not be easy for the government to divert
investment from the resource to the non resource sector, pointing out
that low education standards and a largely unskilled workforce were
major challenges in this regard.

Laos needs experienced businesspeople, a skilled workforce,
infrastructure and sufficient investment funding to boost private
participation in the development of the non resource sector, he said.

The government is increasing the budget available for education,
hoping to provide skilled workers to meet the demands of the growing
number of local and foreign investors. But the government is
struggling to improve education and train personnel, despite the
increasing number of state and private schools.