NORSAD finance services for

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• NORSAD finance services for
• SADC SMEs

AFRICA SMME CONFERENCE 25th of October 2007 Sari
Nikka
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NORSAD in brief

• Development Finance Institution (DFI) established
  in 1991 by 4 Nordic and 11 SADC member countries
• Support for SADC SMEs
• Financing intermediaries
• Direct financing to SMEs
• Operates in 11 SADC countries
• Head office in Lusaka, Zambia
• 6 investment professionals
• 11 country advisors in SADC
• Loan portfolio and commitments USD 69.5 million
  (03/2007)

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NORSAD SME Financing in SADC region

• Financing through financial intermediaries
• Lines of Credit, Agency Lines and Guarantee Lines
• Direct financing for SME projects
• Senior Loans
• NORSAD financing principles
• Commercially viable private sector or
  privatization projects and business ventures
• Projects having positive development impact
• Financed projects shall comply with International
  Social and Environmental Standards
  (IFC/WB)
• Offers innovative and flexible financing
  solutions
• Expertise in SADC Nordic Joint Venture projects

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NORSAD projects

• Long term sustainable financing
• Access to technical assistance through NORSAD
  partners
• Professional commercial advice business
  linkages
• Assistance with social, HIV/AIDS and
  environmental guideline compliance
• Assisting in co-financing with NORSAD partners
  European and SADC DFIs
• SADC Nordic JVs expertise
• Match-making identify suitable Nordic business
  and technical partners in specific cases

• Private sector SMEs
• Financial intermediaries financing SMEs
• Viable business plan, with
  positive development impact
• Comply with social and environmental guidelines
• Project promoters have a relevant track record
  and capacity to add value within the industry
• Debt to equity ratio 50/50
• Project can provide sufficient collateral over
  1,5 times loan amount

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NORSAD Financing Instruments for Intermediaries I

• Line of Credit (LOC) terms
• Maximum amount USD 5 million
• Term maximum 7 years with grace period up to 2
  years
• Lending currency EUR, USD, ZAR, GBP, DKK, SEK,
  NOK
• Interest rate fixed or variable based on
  commercial and political risk market based
  pricing
• Front end fee of 1 (50 paid upfront)
• Commitment Fee of 1 p.a.
• Repayment Quarterly on interest and principle
• Collateral Assets of beneficiary SMEs and/or
  third party guarantees

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NORSAD Financing Instruments for Intermediaries II

• Agency Line (AL) terms
• Co-financing of SMEs
• Maximum line USD 5 million
• Term maximum 7 years with grace period up to 2
  years
• Lending currency EUR, USD, ZAR, GBP, DKK, SEK,
  NOK
• Interest rate fixed or variable based on
  commercial and political risk market based
  pricing
• Front end fee of 1 (50 paid upfront)
• Commitment Fee of 1 p.a.
• Repayment Quarterly on interest and principle
• Collateral Project assets and/or
• guarantees shared pari passu

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NORSAD Financing Instruments for Intermediaries
III

• Guarantee Line (GL) terms
• Guarantee up to 50 of realised losses on SME
  project
• Exposure up to 50 of debt and not exceeding
  USD 500,000 per individual project
• Maximum line USD 5 million
• Term maximum 7 years
• Lending currency EUR, USD, ZAR, GBP, DKK, SEK,
  NOK
• Guarantee fee Based on cost of funds and lending
  rates
• Front end fee of 1 (50 paid upfront)
• Collateral Assets and/or guarantees from
  beneficiary SMEs, shared proportional and pari
  passu

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NORSAD Financing Instrument for SMEs

• Direct Loan (DL) terms
• Loan amount from USD 500,000 to USD 3 million
• Term maximum 7 years with grace period up to 2
  years
• Lending currency EUR, USD, ZAR, GBP, DKK, SEK,
  NOK
• Interest rate fixed or variable based on
  commercial and political risk market based
  interest rate
• Front end fee of 1 (50 paid upfront)
• Commitment Fee of 1 p.a.
• Repayment Quarterly on interest and principle
• Collateral Assets and/or guarantees

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NORSAD Case Intermediary Financing I
ICC - Leasing finance institution serving SMEs

• Local leasing company in better position to reach
  out to a larger number of SMEs than NORSAD direct
  loans
• With NORSAD loan the Leasing company has been
  able to help small and medium size companies to
  become reliable suppliers to the mining industry
• Terms of financing
• USD 5 million Line of Credit, 5 year maturity, 1
  year grace
• Collateral assignment of all leases, securities
  taken by the leasing company in respect of leases
  financed under the LOC, cession over insurance
  policies
• Financial covenants D/E ratio, Liquidity ratio,
  Capital Adequacy ratio
• Other terms NORSAD endorsement on leases (incl.
  pricing and terms) under the LOC

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NORSAD Case Intermediary Financing II
ICC - Leasing finance institution serving SMEs

• Development impact
• More competition by increasing capacity of mining
  sector SMEs linkage of SMEs to main stream
  mining sector
• Development of local resources
• Employment effect created more than 700 jobs
• NORSAD loan influenced leasing company to improve
  the environmental compliance of their clients
• Impact on diversification and strengthening of
  the finance sector
• Impact on diversification of the leasing company
  credit allocation towards mining SMEs

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NORSAD Case Direct Financing I
Agricultural and Meat Processing Company

• Privatization project with rehabilitation and
  expansion of existing operations
• Company buys cattle from local farmers, fattens
  them at its feedlot station and later slaughters
  and processes the meet at the abattoir
• NORSAD assisted to get TA and capacity building
  from APDF at the time of Business Plan
  preparation
• Terms of financing
• USD 1.5 million direct loan, 6 year maturity, 1
  year grace
• Collateral First mortgage bond and specific
  charge on fixed assets, floating charge on
  movable assets, personal guarantee from sponsors
• Other terms Ownership change clause and dividend
  restrictions

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NORSAD Case Direct Financing II
Agricultural and Meat Processing Company

• Development impact
• Regional diversification - earnings to local
  small-scale farmers
• Employment creation 120 direct jobs, 500
  indirect jobs
• Foreign currency generation and savings exports
  and imports substitution
• Improve local populations access to quality food
  products
• NORSAD loan facilitated the growth of business
  and creation of linkage from cattle breeders to
  meat producers
• NORSAD assisted to get TA and capacity building
  from APDF at the time of Business Plan preparation

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NORSAD Experience Elements for Success

• Adequate accounting systems and financial
  reporting
• Proper working capital management and control
  systems
• Resource planning for input and output
• Good HR policies, training and incentives for
  employees

• Good Corporate Governance
• Hands on experience and technical know how
• Correct business attitude
• Have strong management team consisting of
• Administration
• Financial
• Production, Sales

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NORSAD Project Process
1- 3 weeks
1 -3 months
1 7 years
Timing
Negotiation and contract
Implemen- tation and operation
Exit - loan repaid
Project identification
Investment appraisal
Screening

• Sponsor presents
• Business Plan
• Sponsor information
• Audited accounts
• Initial evaluation done within short period of
  time
• Approval in principle by Norsad management

Detailed investment and market study (due
diligence) Meet local partner in target
country Agree on terms and define roles Board
approval Sign contract
Disbursement after conditions are met NORSAD
assisstance on TA and social environmental
issues No board level participation Value
enhancement perspective
The speed of the process is depended mostly on
the sponsor making information available
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NORSAD Contact Details
Sari Nikka, Chief Executive Officer Mobile 260
966 866 030, e-mail sari.nikka_at_norsad.org Patien
ce Matshe, Chief Investment Officer e-mail
patience.matshe_at_norsad.org Alice Zulu, Senior
Investment Officer (Angola, Lesotho,
Tanzania) e-mail alice.zulu_at_norsad.org Edward
Mulilo, Senior Investment Officer (Botswana,
Mozambique, Swaziland) e-mail edward.mulilo_at_norsa
d.org Justin Nthala, Investment Officer
(Mauritius, Malawi, Namibia) e-mail
justin.nthala_at_norsad.org Rosemary Liywalii,
Senior Portfolio Officer e-mail
rosemary.liywalii_at_norsad.org Mulenga Bwalya,
Assistant Portfolio Officer (Zimbabwe) e-mail
mulenga.bwalya_at_norsad.org Tel 260 1
255663/4 or 255773/4 Fax [phone]
www.norsad.org norsad_at_norsad.org
Anglo American Building, 74 Independence
Avenue P.O. Box 35577, 10101 Lusaka, Zambia