NMI Funds

NMI Frontier Fund

NMI Frontier Fund invests primarily in Emerging MFIs both directly and through Microfinance Investment Vehicles (MIVs). These MFIs are microfinance institutions that have good prospects for attaining financial sustainability within the next several years but that have not yet attracted significant investment from domestic or international capital markets or worked closely with international institutional investors. These institutions are smaller and frequently newer organizations that are growing rapidly, providing products and services in particularly challenging regions or difficult market segments, and/or piloting or introducing new or innovative products, services, and distribution channels.

The geographic concentration of the Frontier Fund is Sub-Saharan Africa and South Asia. The Focus Countries for the Fund are Cameroon, Ghana, Kenya, Mali, Nigeria, Senegal, Tanzania, Uganda, India, and Pakistan. The Fund may also consider investments outside of these Focus Countries.

The Frontier Fund may provide equity, senior, subordinated, or convertible debt to Emerging MFIs, with a general orientation toward equity investments. The Fund will take substantial minority positions and will be an active investor. Investments will have target average investment size of approximately USD 2 million, but can also be smaller or larger, up to a maximum of USD 6 million. The minimum investment will generally be USD 1 million.

The Frontier Fund also invests in MIVs managed by Emerging MIV Managers. Emerging MIV Managers are those who have not previously managed microfinance investment funds or who have a limited track record and experience. They also include MIV Managers starting new investment funds, reaching into new markets, or following potentially innovative or impactful development approaches.

The NMI Frontier fund is capitalized with NOK 250 million (about USD 40 million) from the Partners and has an initial term of 10 years.

MFI Eligibility Criteria for Frontier Fund Investments

  1. Primary business: Microfinance.

  2. Geographic location of operations: Sub-Saharan Africa or South Asia.

  3. Age: At least 1 year of operations.

  4. Minimum total assets: USD 1,000,000.

  5. Externally audited accounts.

  6. Operational self-sufficiency or a credible plan to reach it.

  7. Sound corporate governance and a dynamic management team.

  8. Legal status making international funding feasible.

  9. Commitment to measuring and reporting on Development Impact and Social Performance.

  10. In circumstances involving exceptionally experienced management teams or sponsors with a well defined and credible strategy, startup or greenfield situations may be considered.

NMI Frontier Fund Investment Process Overview

  1. Screening: MFIs will submit the documents listed below to info@nmimicro.no. NMI will review the MFI in light of the Eligibility Criteria. If necessary, NMI may request additional information.

  1. Description of MFI, including the following information:

    1. Legal form.

    2. Age (since date of first operations).

    3. Description of each product (loan types; savings; insurance; other products, including non-financial products).

    4. Lending methodology (e.g., group lending or individual lending).

    5. Number of loan clients and average loan balance per client for each of the past 3 years, or since start of operations.

    6. Number of total clients for each of the past 3 years, or since start of operations.

    7. Geographies of operation (including country and city/cities).

    8. The MFI's Operational Self-Sufficiency (defined as financial revenue divided by the sum of financial expense + impairment losses on loans + operating expense).

  2. Most recent audited accounts.

  3. Latest quarterly unaudited financial report.

  4. Brief biographical information of Board members and senior management, including Chief Executive Officer, Chief Operating Officer and Chief Financial Officer.

  5. Indicative funding request, including form (debt, equity, other) and amount.

  6. Most recent Social Performance report, if any.

  1. Desk Review: NMI will start the investment process and ask for the necessary documentation for a Desk Review. Documentation requirements will vary depending on the situation. In general, NMI's documentation request will include at least the following:

  1. Institutional presentation.

  2. Reports

    1. Audited annual accounts of the last 3 years, or since start of operations.

    2. Latest two semi-annual reports (or latest 4 quarterly reports).

    3. Monthly report for last month of last 3 years, plus the latest two months.

  3. Minutes from last 3 meetings of the Board of Directors.

  4. Detailed information on funding sources.

  5. Business plan for the next 3 years, including financial projections.

  6. External rating or evaluation, if available.

  7. Legal attestation demonstrating ability to operate and summary of regulatory status.

  8. Key operational policies, e.g., credit manual, loan collection procedures.

  9. Organization chart and full Board and management biographies.

  10. Social Performance data.

  1. Preliminary Approval: Based on the submitted information, NMI management will determine whether to ask the NMI Investment Committee for a Preliminary Approval and will prepare an Initial Draft Term Sheet.

  1. Due diligence: After consultation and review of the Initial Draft Term Sheet between NMI and the MFI, a team from NMI will conduct on-site due diligence of the MFI, including meetings with the senior management, operational staff, and branch visits. At the end of the due diligence or shortly thereafter, NMI management and the MFI will review the Initial Draft Term Sheet to discuss terms and potential changes. In addition, NMI management and the MFI will discuss any identified needs for Professional Assistance from NMI's Professional Assistance Facility.

  1. Approval: If appropriate, NMI management will prepare a recommendation to the NMI Investment Committee for final approval of the investment, including a valuation, a Revised Draft Term Sheet, and a plan for Professional Assistance from NMI's Professional Assistance Facility.

  1. Legal documentation: NMI and the MFI will negotiate and agree on legal documentation, as appropriate, and sign the documentation.

  1. Disbursement: Subject to disbursement conditions being met, disbursement will be made.

  1. Reporting: After disbursement, the MFI will submit regular reporting to NMI on a monthly, quarterly/semiannually and annual basis (details to be defined).