MASSIF is the financial inclusion fund that FMO manages on behalf of the Dutch government.
MASSIF enhances financial inclusion for micro-entrepreneurs and small- and medium-sized enterprises (MSMEs) that are disproportionately affected by a lack of access to financial services. The Fund supports intermediaries that reach out to MSMEs in fragile and low-income countries, MSMEs in rural areas and those dependent on agriculture, women-and youth-owned MSMEs, and intermediaries providing access to productive goods and services for base-of-the-pyramid individuals.
In 2018, MASSIF delivered EUR 72.7 million in new investments and capacity development projects and reached 87,500 micro-entrepreneurs and 1,485 small and medium-sized companies.
At a glance
We measure the contribution of our activities in 2018 to local prosperity through the following goals.
Focus on micro-entrepreneurs in countries with lowest levels of financial inclusion, women-owned businesses and youth entrepreneurs
Focus on SMEs in countries with lowest levels of financial inclusion, small businesses in rural areas, women-owned businesses and youth entrepreneurs.
A fund is revolvable (100% revolvability) when the current value of assets is equivalent or above the sum of the capital put into the fund by shareholders.
Total committed portfolio
Expanding financial inclusion in Myanmar
Myanmar’s history dates back 13,000 years to when people first settled in the valley of the Irrawaddy River. Throughout its long history, Myanmar has experienced many dynasties and kingdoms.
History and political situation
Myanmar’s history dates back 13,000 years to when people first settled in the valley of the Irrawaddy River. Throughout its long history, Myanmar has experienced many dynasties and kingdoms. After British rule from 1886 to 1942 and a short period of occupation by the Japanese during the Second World War, Myanmar became independent in 1948. A military coup in 1962 drove the country into international isolation. During this period, Myanmar became the poorest country in Southeast Asia. In 2011, Myanmar regained a civilian government. However, even though the country now has a fully democratic government, the military still controls many of the country’s major assets as well as holding important political positions.
Following the 2015 elections, Myanmar finds itself within the first phase of a transition towards modern democracy. This is applauded by the Dutch government as well as the EU in general. However, the country did receive widespread criticism due to the ongoing conflict with the Muslim Rohingya minority ethnic group in the Rakhine state. Like the Dutch government and the EU, FMO condemns the actions of the Myanmar government in this context. To avoid any harm, FMO makes sure that no projects are initiated in the affected region.
The need for financial inclusion in Myanmar
Market demand for financial services in Myanmar is very high. A survey conducted by UNCDF in 2014 identified approximately 15 mln adults with no access to financial services. It is estimated that 60% of Myanmar’s economic activity is informal and all of this activity stems from micro and small enterprises. Of the approximately 7.5 mln enterprises, only 600k have access to financial services from regulated financial service providers. Overall, the unmet demand for credit is roughly USD 1bn, whereas the current aggregate supply of microfinance services in the formal sector is around USD 300 mln.
Current financial inclusion status in Myanmar
Various other parties (government banks, co-operatives, local and foreign NGOs) currently serve the microfinance sector in Myanmar, but most of them are small and young (<5 years). Moreover, the microfinance sector in Myanmar is highly concentrated with the 15 largest MFIs accounting for the majority of assets. At this stage, most MFIs operate close to urban centres to keep costs under control and become financially sustainable and attractive to investors. MASSIF’s investments in the microfinance sector in Myanmar are therefore making a crucial contribution to the country’s path towards financial inclusion.
Why we use local currency for investments
All of MASSIF’s loans to MFIs in Myanmar are made in local currency. This is beneficial to an MFI and to the end-beneficiary, because it eliminates the MFI’s potentially costly risk exposure to volatile exchange rate fluctuations. MFI’s could pass on additional costs by charging higher interest rates, for example. The ability to pay back debts in local currency means that MFIs do not need to worry about the debt suddenly increasing if the value of the local currency depreciates.
FinTech for financial inclusion
Founded in 2015, liwwa is a FinTech start-up that uses a hybrid marketplace and balance sheet lending platform to provide finance to un(der)served micro, small and medium-sized enterprises.
MASSIF investment: USD 500,000
Contracted: February 2018
Instrument: Convertible Loan
Founded in 2015, liwwa Inc. (liwwa) is a FinTech start-up that uses a hybrid marketplace and balance sheet lending platform to provide finance to un(der)served micro, small and medium-sized enterprises (MSMEs). MSMEs benefit from an online loan application process and marketplace function, where retail investors can crowdfund ‘investment campaigns’ alongside five local banks and liwwa. Moreover, liwwa aims to scale up its business in Jordan and intends to replicate the business in Egypt.
FMO's USD 500,000 convertible loan, with an option to convert to equity, has been used to invest in technology, fuel growth in Jordan and to lay the groundwork for liwwa in Egypt.
Realized impact of liwwa
By targeting MSMEs in both growing and financially underserved areas, liwwa supports job creation where it matters most. Increasing the financial inclusion of MSMEs is important, because they are the backbone of the Jordanian economy. No less than 98% of all operational companies in Jordan are SMEs and they account for approx. 40% of GDP. Moreover, SMEs employ about 71% of workers in Jordan.
In Jordan, enterprises are considered small when they employ five to 19 employees and medium-sized when they employ 20 to 99 employees. According to a 2015 report by the European Bank for Reconstruction and Development, around 70% of SMEs in Jordan are credit constrained, compared to only around 20% of large enterprises. SMEs are thus clearly underserved in the Jordanian financial sector. Additionally, the overall unemployment rate (14.9% in 2017) is high compared to the average of other countries in the MENA region (11.9% in 2017; excluding high-income countries like Saudi Arabia). This applies even more to youth unemployment, which is approx. 40% in Jordan and averages 29% for other countries in the MENA region (excl. high-income countries).
As of December 2018, liwwa has 297 clients, approximately half of which are small or micro (employing up to four people) enterprises. The loans liwwa has provided to its clients have contributed to the creation of 939 jobs, USD 3.6 mln of income and USD 25.6 mln in additional goods and services sold in the Jordanian economy up to the end of December 2018, according to Liwwa’s internal impact model.
Especially for a rapidly growing company like liwwa, the timing of investments is important in order to keep pace with the growth of the company. MASSIF’s investment acts as an important bridge between liwwa’s first round of funding and a planned second round.
The main source of impact risk for liwwa is that of business failure. As a start-up, risk of business failure is considered high. This risk is partially offset by the strong operational and strategic involvement of a venture capital investor with roots in the region. As with most economic models, there is a risk that liwwa’s impact model does not truly reflect its impact but the company works continuously to collect updated figures to enhance the accuracy of its assessment.
Pioneering impact investing in small-scale fisheries
The Meloy Fund is the world’s first impact investment fund directly supporting small-scale, sustainable coastal fisheries in Indonesia and the Philippines.
MASSIF investment: USD 5 mln
The Meloy Fund I LP is the world’s first impact investment fund directly supporting small-scale, sustainable coastal fisheries in Indonesia and the Philippines. Set up by Rare, an international, non-profit conservation organisation with deep technical expertise and networks, the Meloy Fund links inclusive development with the conservation of critical marine habitats. It does this by investing debt and equity capital in fishing and seafood-related businesses. These investments will lead to better management and protection of community-based coastal fisheries, as well as opportunities to boost the livelihoods of local, small-scale fisheries through co-operation with Rare’s Fish Forever programme.
Potential impact of Meloy Fund
Through more sustainable fishing practices, the small-scale fisheries reached could experience an increase in their income and food security. This is an important impact as 60% of people in Indonesia and the Philippines, including ca. 4.3 mln small-scale fishers, live within 60 km of the coast and are therefore dependent on the sea for income and food. Moreover, the marine habitats protected by Fish Forever, which contain mangrove forests and sea grass meadows, for example, capture CO2 from the atmosphere and thus contribute to climate change mitigation. Lastly, the protected habitats play a critical role in the maritime ecosystem as they have extremely high biodiversity.
The small-scale fishers targeted currently earn an average of USD 3.1 per day (PPP adjusted), which is below the lowest daily minimum wage in both countries. Moreover, fish contributes 40% or more to the protein intake of people in coastal communities. These people are therefore highly vulnerable to the negative effects of climate change and overfishing of coastal ecosystems. In fact, only about 3% and 1.6% of the marine area of Indonesia and the Philippines is protected, while 60% and 70% of coral reefs are at medium or high risk of overfishing respectively. Clearly, there is not enough protection.
The Meloy Fund aims to reach 100,000 members of fishery households and for 1.2 mln ha. of coastal waters to be protected by 2028, which translates to significant tons of GHG emissions avoided through reduced deforestation of mangrove forest and seagrass meadows. Moreover, the Meloy Fund strives to reduce the carbon footprint of small-scale fisheries by 37% by shifting an even higher portion of their protein intake to fish. By increasing the demand for sustainable seafood products, the Meloy Fund aims to add USD 20 mln of economic value annually to the fishers it reaches. This translates into an increased average daily income of USD 5 (PPP adjusted). While this is a great improvement of 60%, it does not yet lift these people out of poverty.
Investing alongside several family foundations and international non-profit organisations, MASSIF is contributing ca. 23% of all committed capital and is thus closing an important funding gap for the Meloy Fund, without which it could not have reached its current scale. Moreover, MASSIF adds value to the Meloy Fund by funding several technical assistance projects, such as an ESG best practice training for Meloy’s investees.
The main source of impact risk to all intended impacts is that the sustainable fishing zones and conservation areas are not maintained due to a lack of local support. This risk is mitigated by Rare’s strong track record in engaging local communities in leading its conservation efforts. Rare has, for example, already run 34 similar conservation campaigns in the region.
First licensed private insurance company
Insurance Corporation of Afghanistan (ICA) was Afghanistan’s first licensed private insurance company and is the market leader. ICA offers a wide range of insurance products to Afghan corporations and international organisations, including pioneering the country’s first healthcare insurance product, and is the only Afghan insurance company to offer life insurance.
ICA is a portfolio company of InFrontier, which manages the first private equity fund in Afghanistan. InFrontier invests in financial services, technology, agricultural processing and healthcare companies with the potential to become market leaders and shape whole sectors of the economy.
We are proud to support InFrontier’s ambitious fund management team in its mission to expand commercial investment in the challenging environment in Afghanistan and are inspired by the opportunity they see.
Al Majmoua, Lebanon
Advancing financial inclusion
Fatima is a Lebanese graphic designer who started her own business after having been an employee in the same field. She took out loans from Al Majmoua, Lebanon’s leading microfinance provider, to invest in her business and pay her university tuition fees. Fatima is working hard to develop her business and believes that future loans will give her the opportunity to expand by opening a shop selling glass handicraft items. She attributes her personal and business success to Al Majmoua’s loans.
Fatima is a typical client of Al Majmoua, which places emphasis on catering to women entrepreneurs (58% of its clients are women). What is unique to Al Majmoua is its genuine dedication to including all groups of society, from young people, women and refugees to disabled people.
Improving people’s prospects
Solomon Birhane Belachew is 50 years old and runs a small clothing business in Ethiopia. He took out a loan of 10,000 Ethiopian birr (approx. 310 euros) with Visionfund Ethiopia, a branch of the international microfinance institution Visionfund, to buy garments.
He sews and sells women’s and men’s clothes in his shop. He also used the loan to purchase goods such as soap, fuel, biscuits, coffee, caramel, waxes and other items for his wife’s shop.
MASSIF supports Visionfund MFI through an unfunded guarantee, which enables a local bank to extend credit to Visionfund. Ethiopia is the second most populated country in Africa but has a widely underdeveloped financial sector, providing ample opportunity for the FMO to support financial inclusion.
Apollo Agriculture, Kenya
Delivering modern farming
Apollo is a start-up based in Kenya, operating at the intersection of AgriTech and FinTech.
Apollo is supplying small farmers with high-quality farming inputs on credit, crop insurance and voice-based training.
Apollo uses a unique ‘high tech, low touch’ model by leveraging advances in mobile money, machine learning and remote sensing technology including satellite data.