The activities of

SIDI

and its partners in

2004

nternational

olidarity

for

evelopment

and

nvestment

CTIVITIESOF

SIDI

ANDITSPARTNERSIN

2004

Glossary

ACAD:

ArabCenterforAgriculturalDevelopment(Palestine)

ADER:

AssociationforRegionalEconomicDevelopment(Mali)

ADI-Kivu:

AssociationpourleDéveloppementintégréauKivu

AFD:

DevelopmentFrenchAgency(France)

ADIE:

AssociationpourleDroitàl’InitiativeEconomique(France)

ALTERFIN:

FinancialCooperative(Belgium)

AMSSF:

AssociationMarocaineSolidaritéSansFrontière(Morocco)

AMRET:

newname:EMT“EnnatienMoulethanTchonnebat”(Cambodia)

AOPP:

AssociationdesOrganisationsProfessionnellesPaysannes(Mali)

ASPRODEB:

SenegalAssociationforPromotionandDevelopmentàlaBase(Senegal)

BANCOSOL:

BancoSolidario(Bolivia)

BANCO SOLIDARIO:

BanqueSolidaire(Ecuador)

BMS:

SolidarityMalianBank(Mali)

CAC La Florida:

CooperativaAgrariaCafetalera(Peru)

CCFD:

CatholicCommitteeagainstHungerandforDevelopment(France)

CCG:

Cooperativeforguaranteesecurityandmanagement(Haïti)

CCRD:

CaissedeCréditRuralpourleDéveloppement(DRofCongo)

CCSP:

CreditCo-operativetosupportSmallProducers(Laos)

CDC:

CaissedesDépôtsetConsignations(France)

CEP:

CapitalAidFundforEmploymentofthePoor(VietNam)

CERUDEB:

CentenaryRuralDevelopmentBank(Uganda)

CFS:

CommunityFinanceStructure

COD-EMH:

CoordinationofDevelopmentOperations-MethodistChurch(Haïti)

CONFIANZA:

EntidaddeDesarrolloparalapequeñaymicroempresa(Peru)

CONSOLIDAR:

CooperativaCorfasdeCreditoSolidario(Colombia)

COODEFI:

CoopérativeFinancièreetdeDéveloppementEconomique(DRofCongo)

CORDAID:

CatholicOrganisationforReliefandDevelopment(TheNetherlands)

CRG:

RuralCreditofGuinea(Guinea)

EDAPROSPO:

EquipodeAseroramientoaActividadesProductivasdeSectoresPopulares(Peru)

ESD:

SavingSolidarityDevelopmentAssociation(France)

ESF:

EpargneSansFrontière(France)

EU:

EuropeanUnion

FAEF:

Fondsd’appuiàl’EntrepreunariatFéminin(NorthKivu)

FAPECAFES:

FederacionRegionaldeAsociacionesdePequenosCafetalerosEcologicosdelSur(Ecuador)

FENACOOP:

FédérationNationaledesCoopérativesdeProducteurs(Nicaragua)

FC:

FondsCoopératif(Laos)

FENAGIEPêche:

FédérationNationaledesGroupementsd’intérêtEconomiquedePêche(Senegal)

FID:

Fondd’IncitationauDéveloppement(France)

FONHSUD:

HaïtianFundtopromoteLocalDevelopmentintheSouthernProvince(Haïti)

GRET:

GroupedeRecherchesetd’EchangesTechnologiques(France)

HIVOS:

HumanistInstituteforDevelopmentCooperation(TheNetherlands)

IMOFOR:

MobilInstituteforTraining(Haïti)

INDES:

InversionesparaelDesarrollo(Chile)

INDEPCO:

InstitutNationalpourleDéveloppementetlaPromotiondelaCouture(Haïti)

IRAM:

InstitutdeRecherchesetd’ApplicationdesMéthodesdedéveloppementrural(France)

JEMENI:

UniondesCaissesMutuellesd’EpargneetdeCrédit(Mali)

KNFP:

NationalCouncilforGrassrootFinancialsystem(Haïti)

KRK:

KreditimiRuralIKosovesLLC(Kosovo)

KOKARI:

Co-operativeofintermediationinruralcreditservices(Niger)

LA-CIF:

LatinAmericanChallengeInvestmentFund(SouthAmerica)

LIDE:

LiguepourleDéveloppement(NorthKivu)

MAF:

MicrofinanceAllianceFund(Asia)

MAE:

MinistryofForeignAffairs(France)

MAIN:

MicrofinanceAfricanInstitutionNetwork

MFI:

MicrofinanceInstitution

MICROFUND:

Institutionmutualistededroittogolais(Togo)

MISEREOR:

AktionGegenHungerUndKrankheitInDerWelt(Germany)

MUFED:

“Womenanddevelopment“CreditUnion(BurkinaFaso)

MUSO:

SolidarityCreditUnion

OIKOS:

DanishCooperativeBankInvestingmicrocreditschemes(Denmark)

OMIPA:

OruchingaMicrofinancePromotionAgency(Uganda)

PROFUND:

FondodeInversionesincorporadoenPanamá

PREFED:

ProgrammeRégionaldeFormationetd’EchangespourleDéveloppement(Rwanda)

ROPPA:

RéseaudesOrganisationsPaysannesdel’Afriquedel’Ouest

SAINDESUR:

Inversionesparaeldesarrollo(Uruguay)

SAPCA-EGAS(exUGIE):

Sociétéd’Approvisionnement,deProduction,deCommercialisationetdeConseilAgricoledesEntentesdesGroupementsAssociésduSenegal(Senegal)

SIDA:

SwedishInternationalDevelopmentAgency

SIPEM:

InvestmentCompanyforInvestmentPromotioninMadagascar(Madagascar)

TEMBEKA:

SocialInvestmentCompanyLimited(SouthAfrica)

TIMPAC:

TousImpliquésdanslamobilisationdesressourceslocalesetlapromotiondesactionscommunautaires(Togo)

TITEM:

Unionofcreditandsavingslocalassociations(Madagascar)

TRIODOS:

SocialBank(TheNetherlands,EnglandandBelgium)

UGPM:

UnionofPeasantAssociationsfromMeckhe(Senegal)

WAGES:

Women’sAssociationforbothGainEconomicandSocial(Togo)

Chairman’s message 3Solidarity financeand the realities of supportto partners8SIDI and its activities 10

Financing for our partners 10Supporting partners16Identifying partners,the search for financeand mechanisms to cover risks,analysis of social viability19

Mobilising the solidarity chainto exchange,innovate and capitalise22SIDI’s financial statements 26

Chairman’s

Message

NTERNATIONAL

OLIDARITYFOR

EVELOPMENTAND

NVESTMENT

12,rue Guy-de-la-Brosse75005 Paris - FranceTél.:+ 33(0) 1 40 46 70 00Fax :+ 33(0) 1 46 34 81 18Website :www.sidi.fr

Design and production:SIDIPoussières d’Étoiles - Courtabœuf (91)+ 33 (0) 1 60 92 42 72

wo years of the 2003-2005 develop-ment plan have just come to a close.Have we fulfilled our mission tostrengthen support for communityfinancial services? Have we contri-buted to the evolution of SIDI’sportfolio,responded to our part-ners’ new needs and consolidatedtheir financial innovations? Havewe contributed to the institutionalstrengthening of SIDI ?The answer is yes,thanks to the support of many partners,shareholders and alliances who shared our vision of a solidarityeconomy.We have boosted and increased solidarity financingpractices set in motion by local organizations.We have supportedthe capacity of local economic players to become active andproductive in their own environment.We have also redoubled ourattention to rural areas.In 25 years,microfinance has providedaccess to financial services to millions of families who hadpreviously been excluded from banking services.In the 1990s,microfinance was heralded as the tool of choice for poverty reduc-tion.The disasters that struck in 2004 amplified and expandedpoverty throughout the world.More than half of humankind doesnot have access to formal financial systems and the divide betweenrich and poor is growing daily.Microfinance is not a universal solu-tion to poverty reduction,but rather an approach whose usefulnessand interest have been recognized at world level.In 2005,decla-red the Year of Microfinance by the United Nations,microfinanceshould serve more and more people throughout the world.By offering loans and securing savings,microfinance is a source ofhope to thousands of low-income people that they will be able toplan for their future.However,today it is still difficult to gauge andassess the impact of microfinance on the fight against poverty.That is why we must continue to come up with new solutions thatwill boost the social impact of solidarity financing,so that we maymeet the different needs of family farms,make it possible for themto invest in production equipment,promote marketing by farmers’organizations and provide access to housing and medicine.Theengineering of solidarity financing has a long way to go before itexhausts all its possibilities.In order to cover the diverse need for financial services,a range ofinnovative initiatives has been created.SIDI is already linked withthem and is working in partnerships with the CFSs* (CommunityFinancial Services) in the South and the East.These are true leadersin their local solidarity economy and include credit and savingsunions,microfinance institutions,solidarity credit unions,NGOs,people’s banks,producers’ organizations,associations,etc.They offerfinancial services to people who have been excluded from bankingservices.SIDI seeks to offer its partners financial support,institutionalmonitoring,technical support,networking services on manycontinents and an analysis of their social viability.SIDI,because itcovers these 5 dimensions with its own financial resources,is in a veryunique position in the solidarity finance landscape.Thanks to theSolidarity Chain for Financing,we are able to set in motion our mis-sion to consolidate the MFIs (see chapter 2) with a view to achievingequitable and sustainable development.Here in the North,innovative alternative mechanisms have beendeveloped in a number of areas,such as solidarity financing,ethical investing,microfinance support operators,etc.In thissetting,SIDI holds a unique position because :- it is not a bank in the process of discovering the size of the low-income market,- it is not a donor granting official financing,- nor is it a consultancy firm that draws up and designs projects.SIDI is a chain of solidarity activists.Our commitment to providesolidarity financing services is founded more on values than ontools.It is based on trust,social relationships,social cohesion andthe maximisation of solidarity over profit.We defer to localconditions and culture,focusing on the needs of the beneficiariesand on local practices (see chapter 1).We are convinced that by building alliances,on the basis of ourexperience in the field with our partners,we can build a viableinternational system.All the solidarity players who have put these innovations to workalready communicate well with each other,thanks to the develop-ment of networks and modern means of communication.It isnow possible to pool their efforts,learn from others and transferknow-how and skills from North to South,within the South andfrom South to North.Since 2002,SIDI has been getting more deeply involved in theSolidarity Chain for Financing and has been strengthening theconnection between the mobilization of solidarity savings in theNorth and its use by institutions in the South and East that aretrying to improve the well-being of the populations they serve.Inorder to achieve that goal,SIDI tracks the Social andDevelopment Viability of its partners in order to ascertainthe impact of financial services on local institutions and theircustomers.The focus is on social,environmental and ethicalissues,to ensure that investments make good economic sense.Notwithstanding the diversity,complementarity and the abun-dance of the links in the Solidarity Chain for Financing,andregardless of the number of participants,the level of skills anddegree of openness,SIDI and its partners will always be a “bell-wether”in the world of microfinance.At the close of the current 2003-2005 strategic plan,the totalestimated outstanding amount of investments is expected to beon the order of 5.8 million euros (realizable with the current equi-ty capital of 5.3 million euro and 0.5 million euros in borrowing).But the need for new financing resources is pressing and at theGeneral Assembly of 8 June 2005 the SIDI shareholderswill propose an increase in capital to fund the new partnershipconsolidation and development plan for the next 3 years (2006-2008).Thanks to you and your support we will be able to pursueour mission into the future.

Christian SCHMITZ

Chairman of the Boardof DirectorsParis,8 June 2005.

* Comonly used MFIs,the denomination used in this report

T a b l e o f C o n t e n t s

SIDI supports the emergence of new localplayers able to act independently and providesustainable financial products and services todisadvantaged populations.Forging partner-ships based on trust,transparency and the res-pect of values are key elements of SIDI’s vision.

SIDI,a solidarity investor

Today,there are 43

investment funds devoted tomicrofinance with a total capital of 700 million euros38 already existing and 5new ones in creation.Thesefunds make a vital contribution to the MFIs in the formof loans or capital participations,alongside bilateraland multilateral agencies and private foundations thatalso contribute to the capital of the MFIs.While someof these funds aim for relative financial profitability,others act to achieve strong social viability.

SIDI is a “responsible and patient investor”,whose goal is to make capital available to theMFIs in support of their development andgrowth.SIDI is also a solidarity investor in thesense that it contributes financing first andforemost to achieve social viability and notsimply to attain financial results.

While SIDI acts alongside other solidarity investors,it has a number of unique and noteworthycharacteristics.

Our founders pursue a vision based on social concerns and development

SIDI was created by CCFD,with which it sharescommon values in terms of vision and mission.

The choice of our partners is based on the qua-lity,motivation and the vision of the men andwomen who work for them,and not on the pro-fitability of the institution or the yield from ourinvestment.We share with CCFD the convictionthat our partners are the most appropriateones to promote our development mission.

Socially responsible investors

In all,SIDI has 500 shareholders,ranging from CCFD,institutional investors,religious congregations andprivate individuals

,who together have accumulated5.3million euros in capital for the benefit of the MFIsin developing countries.

A humane and committed Solidarity Chain for Financing

The solidarity partnership promoted by SIDI is centredon the Solidarity Chain for Financing from North toSouth.In the North,individual and institutional shareholdersand more than 6,000 solidarity savers who haveaccrued savings of nearly 50 million euros in a sharedsolidarity investment help to bring SIDI’s operations tofruition.They constitute SIDI’s financial and moralfoundation.In the South,the community finance structures use thissolidarity investment to grant financial services to thedisadvantaged.

In 2004,SIDI worked in 30 countries with58partner institutions,4 of which are regionalin scope :the MAIN network in Africa,PROFUNDand LACIF in Latin America and MAF in Asia.

Institutional maturity

Since its creation in 1983,SIDI has been a pioneer inthis field;most of the investment funds having beenset up at the end of the 1990s,or later.

Patient and tailored fundscombining loans, capital participationand guarantees

Patient funds are set up for the long-term and for thebenefit of the MFIsin order to generate significant socialimpact.SIDI combines the conventional finance tools–loans,capital participations and guarantees – whichmakes it possible to work with a wide range of partners(see chapter 2) in accordance with a variety of tools.

SIDI’s financial commitments at 31 December2004 to its partners in the South and Eastamounted to 4.6 million euros,an 18% increa-se over 2003.This breaks down as 4.5 millioneuros for the loan portfolio

and capital parti-cipations,i.e.2.6 million in capital participa-tions plus 1.9 million in loans,in addition to0.1million euros in guarantees.

A look back at thehistory of microfinance

At the end of the 1970s,microfinance began to develop inorder to enable populations that had been excluded frombanking services to gain access to financial services,suchas loans,savings and others.Over the past 25 years,projects,NGOs,associations,credit unions and savings andloan co-ops have flourished around the world and todayserve more than 60 million people across the globe.Microfinance has had a remarkable career and more than7,000 microfinance organizations are active today

.Microfinance is now widely used as a poverty reductiontool and has successfully proved that loans can be grantedto disadvantaged populations in an efficient andsustainable manner.

Set up in 1983 by the Catholic Committeeagainst Hunger and for Development (CCFD),SIDI was part of the very first initiatives to pro-vide access to financial services for peopleexcluded from the banking sector,first in theform of equity participation in micro-enterprisesin the South and then,starting in 1994,via sup-port in the form of loans and participation in thecapital of microfinance institutions,with a viewto expanding the scope of their interventions.

Today,the achievements of microfinance have beensingled out and recognized as having made realprogress in terms of increased income,access to heal-th care,education and housing.However,studies haveshown that it is not necessarily the most disadvanta-ged populations that can make the best use of a loan.The ones that most benefit are those who have aneconomically viable project.When the United Nations declared 2005 to be the Yearof Microfinance,it also set a number of ambitioustargets.Today,60 million people have access to micro-finance services;the UN target is to increase thatfigure to 200 million in the next 5 years

.The goalis therefore to achieve a much broader coverage offinancial services,in particular in rural areas.SIDI designs its interventions with these two goals inmind:to help a greater number of people gain accessto financial services and at the same time target thedisadvantaged.

Solidarity finance at theheart of SIDI’s activities

SIDI’s position in relationto microfinance players

Historically,these local institutions often began withstate subsidies or funding from public or private deve-lopment aid agencies

,and technical assistance fromlocal and international specialized NGOs that contri-buted greatly to the start-up of initiatives,such as thecreation of the CRG in Guinea,AMRET in Cambodia,TIMPAC in Togo and AL AMANA in Morocco.In othercases,such as SIPEM in Madagascar and INDES inChile,a few visionary local private businessmen com-mitted to create a financing structure to meetdemand.Still others began as strong community orga-nizations,such as local associations and farmers’organizations that started by offering financial ser-vices to their members.At that time,it became clear that the microfinance pro-grammes,until then funded by public and private sub-sidies,had to become financially independent in orderto ensure their future.The aim was to transform theminto local structures able to provide financial servicesover the long term.There was a need for stableresources in order to consolidate operations,attractadditional financing and support growth.These localmicrofinance structures went by the name of microfi-nance institutions (MFIs).

SIDI was one of the first to recognize the needfor long-term resources,and to accept the riskby contributing to the equity of local microfi-nance institutions

,or to grant them medium-or long-term loans to help them expand theiractivities.

SIDI,a player in solidarityfinance

Solidarity financing is for people who have been eco-nomically and socially sidelined.Its goal is to reduceinequalities that hinder access to financial services.The MFIs in the South are the focal point of solidari-ty finance.Their strength lies in their knowledge ofand proximity to the customers and the relationshipof trust they enjoy with them.

CTIVITIESOF

SIDI

ANDITSPARTNERSIN

2004

Solidarity finance

and the realities of support to

partners

Focus on SIDI’s positioning and activities in 2004