S T R Ø M M E F O U N D A T I O N M I C R O F I N A N C E D E P A R T M E N T

ANNUAL REPORT 2007

F o l l o w i n g u p t h e m o m e n t u m

Follow up the momentum \\ STRØMME MICROFINANCE DEPARTMENT \\ ANNUAL REPORT 20072 Follow up the momentum \\ STRØMME MICROFINANCE DEPARTMENT \\ ANNUAL REPORT 2007 3

Foreword 3

Strømme Foundation Microfi nance Department in brief 4

Strategic guidelines 5Governance Structure 6

Main activities 75.1 Financial Services 5.2 Non-fi nancial services 5.3 Networking

Activities by geographical distribution, incl. fi nancial statements 96.1 East Africa - SMF EA Ltd6.2 Asia 6.2.1 SMAGL6.2.2 Bangladesh6.3 SMF Dept. including West Africa end South America6.4 Summarizing statistics and comments

Highlights and achievements from 2007 13

Challenges in the year to come 13

Appendix I Financial Report 14Appendix II Personnel in SMF 14Appendix III Abbreviations 15

2007 – Following up the momentum

2006 ended with the Celebration of the Nobel Peace Price Laureate Dr. Mohanned Yunus and Grameen Bank. Almost all of a sudden the world turned their eyes to Microfi nance as a tool for eradicating poverty. New initiatives were taken and new actors entered the fi eld. 2007 has been the year of following up the att ention, the interest and the momentum. In Norway we welcomed the private initiative by some investors inviting the government represented by Erik Solheim to join hands for investing in Microfi nance. Th is private/public alliance has had its working group and steering committ ee that has prepared the creation of and structure a fund in co-operation with the NGO-community represented by Strømme Foundation. We are welcoming this initiative and very much looking forward to the launching hopefully before the end of 2008.

Internally 2007 has been a year of preparing for the future. Two new members have been recruited for the Microfi nance team and by 1st January 2008 they are both operationally active in the organization. Further 2007 was the end of the 5 year agreement with Norad that was prolonged out 2008. Reviews of policies, strategies and means of intervention will continue in 2008.

We are envisaging a future where donors and other private actors are more interested in the activities and results of our involvement. Th is is challenging and motivating in our eff ort towards more eff ective and effi cient means of intervention and building inclusive fi nancial systems and providing services to the unbanked, driven by the conviction that access to sustainable fi nancial services will help poor improve their lives.

Øyvind Aadland Secretary General

Lars Erik HarvMicrofi nance Director

Kristiansand, 1 May 2008

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Follow up the momentum \\ STRØMME MICROFINANCE DEPARTMENT \\ ANNUAL REPORT 20074 Follow up the momentum \\ STRØMME MICROFINANCE DEPARTMENT \\ ANNUAL REPORT 2007 5

Strømme Foundation (SF) has organised all its involvement in Microfi nance (MF) through the Microfi nance Department (SMF Dept.). Th e global MF activity will further be named as SMF, meaning the MF sector in SF including both the SMF Dept. as well as all Apex institution. SMF Dept. in Norway serves as a coordinator of all MF activities within SF worldwide. SMF Dept. is working according to the development policy and vision of SF; Eradicating Poverty. Th e role is further to be a liaison offi ce between the SF microfi nance bodies, the funding partners (like Norad etc) and other stakeholders in the Global North.

Aiming for long term partnerships, the SF relationship to partners may vary from technical assistance, grants, loans, guarantees, equity holdings or networking with other partners. Th e contents of these partnerships vary from time to time and from partner to partner. Th is long term partnership and involvement both fi nancially and non-fi nancially is what we call our holistic approach.

Th e essential parts of SMF strategy are:1) Financial services – i.e. loans, equity holdings, guarantees etc.2) Non-Financial Services/ Technical Assistance (TA) – i.e. Facilitate and promote training, fund equipment, workshops and participate in developing appropriate tools such as Management Information Systems, reporting standards etc.3) Networking – i.e. partnering and working with appropriate stakeholders, nationally, internationally and both vertically and horizontally to promote best practices etc. and effi cient ways of involving in MF.

Our involvement in Microfi nance is contextualized and we are using conventional MF as well as Community Managed Microfi nance as methods. Community Managed Microfi nance is based on the principle of the participants´ ownership and the loan fund is funded by the savings of the participants.

Th e SF Board of Directors discussed and approved the adjusted Microfi nance strategy in January 2007 and decided to promote the following basic guidelines for its MF involvement:

PrinciplesTh e basic principles of Strømme Foundation Microfi nance are:

• Promote building of inclusive fi nancial systems, based on Best Practice Microfi nance, re CGAPs 11 principles of microfi nance.• To emphasize demand-led and pro-poor fi nancial systems. • To work as whole sale lending institutions through partner Micro Finance Institutions (MFI)• To support established and promising partner MFIs through loans and grants for TA. • To aim for the total fi eld structure of entities within Strømme Microfi nance to reach operational sustainability by end of year 2008.

• Create and support a structure of strong regional wholesale lenders / Apex companies in which Strømme Foundation plays the role of majority stakeholder. • Promote a ”holistic approach” implying close, long term responsible relationship with the partners. • Encourage and support strong partnerships and networks, both vertical and horizontal. • Keep a clear poverty orientation, focusing on underserved, rural and other vulnerable groups • Aim to stimulate innovations, fi nd special niches and promote new methods and tools – i.e. provide ”cutt ing edge” microfi nance.

2] Strømme Microfi nance Department (SMF-Dept) in Brief: 3] Strategic guidelines.

SF Countries of activity

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inciples of microfinance

BOLIVIA PERU

MAURITANIA

MADAGASCAR

SRI LANKA

BANGLADESH

INDIA SUDAN

KENYA

TANZANIA

UGANDA

BURMA

CAMBODIA

EAST TIMOR

RWANDA

MALI NIGER

BURKINA FASO

Follow up the momentum \\ STRØMME MICROFINANCE DEPARTMENT \\ ANNUAL REPORT 20076 Follow up the momentum \\ STRØMME MICROFINANCE DEPARTMENT \\ ANNUAL REPORT 2007 7

Th e organisation chart illustrates the MF organisation of Strømme Foundation at present. SF has organised its work in the microfi nance sector through a department at the head quarter in Norway. Th e manager of the SMF Dept. is called “Director of Microfi nance”. He/she represents the Secretary General in issues concerning MF.

As the total MF activities diff er in size and complexity in the four southern regions of SMF, the microfi nance work has been contextualized to meet needs of our partners. In the regions of South America and West Africa, as well as in a few other cases, the MF portfolio is managed in collaboration between the regional director and the SMF Dept. Th e latt er is serving as credit committ ee for new loans, while the regional offi ce staff s is responsible for identifying, supporting and monitoring MF partners. Th e activities in East Africa, Sri Lanka and in Bangladesh are organised as separate legal and administrative entities. Th e entity in Bangladesh is not yet fully implemented.

SF has decided to focus on three core activities for it´s involvment in Microfi nance, namely: Financial Services, Non-Financial Services (TA) and Networking.

5.1 Financial ServicesSMF’s main means of fi nancial intervention have so far been:

• Loans • Guarantees• Equity holdings As such, SMF conducts wholesale lending as one of its main interventions. (Promotion of clients’ savings, however, is of essential importance for the funding and security of the MFIs)

Th e lending activities have increased signifi cantly over the last years. SMF aims at off ering competitive facilities for our partner MFIs, yet without compromising the local fi nancial markets. SMF thus should not subsidize the interest rate, as we believe one of our missions is to promote inclusive, fi nancial markets. Having that said, SMF must also aim at promoting business between local banks and national MFIs.

In certain cases there is need for extra support to MFIs for capacity building. A loan on market based terms may, in such situations, be accompanied by a time- and amount limited grant from SMF. Th is arrangement avoids a situation of subsidized interest rate. See more on our involvement in Technical Assistance later.

Guarantees have become more common over the years. It is of great importance for the MFIs to have access to local capital. Th is is all the more possible since commercial banks in most of the SMF countries of intervention are over liquid.

A guarantee is needed when there is too much asymmetry between the lender (Bank) and the borrower. Th is is frequently the case when MFIs want to access the com-mercial fi nancial markets. Th e conventional fi nancing institutions have very limited knowledge of the MF sector. Hence a guarantee from an accepted institution can help the MFI access commercial capital. In this process it is essential that the guaran-tee should decrease over time (or the loan amount increase) so that the guarantee amount may be leveraged. Th us a certain amount in guarantee will leverage a higher amount in loans. An Apex institution could play a key role in this context. Th at is what SMF wants to do.

As a way of supporting the MF sector and build external relationships, SMF has chosen to make direct investments. Th ese equity instruments, when invested in

4] Governance Structure 5] Main activities.

stakeholder companies in the North, open doors of collaboration with international players in the fi eld, give access to information and new networks and let SMF become an international, recognised MF player. When investing in partner MFIs in the South, the rationale could be a need for closer monitoring by having a seat on the Board, a symbolic support to an interesting, growing partner or a fi nancial investment in a strong MFI.

SMF also aims at exploring various quasi equity instruments, such as subordinated loans when involved in this sector. Acknowledging the inadequate capital structure of most NGOs / MF players, the latt er is a challenge calling for innovations.

5.2 Non-fi nancial services / Technical Assistance (TA)By non-fi nancial services and Technical Assistance, SMF is promoting a number of diff erent services related to Microfi nance, and which are necessary for our partners to provide or facilitate a supply of services that really corresponds to the needs of their clients. Services can be Impact Assessments, product development, developing manuals and plans for the institutions, institutional capacity building, market develop-ment support, applied research, provision of equipment for the MFI etc.

Where applicable, SMF off ers grants to cover defi cits and one-time investments in the MFIs. By building up a strong structure for the MF entities in the regions, concentrating on directoring MF services to MFIs with good governance, strong management, transparency and accountability. Th e grants are increasingly directed at the emerging MFIs in the early part of their life cycle. Since all parties should strive to reach at least operational sustainability, the grant element should be limited accor-dingly and reducing.

5.3 NetworkingTh e involvement in Networking can be further divided according to two categories:

5.3.1 Networks for capacity buildingSMF acknowledges the importance of strong, national networks within MF, be it on MFI level, Apex level, between diff erent donor agencies or collaboration with govern-mental bodies, both in the Global South as well as in Norway. Th ese networks vary in quality, functionality and in some countries they are non existent. Uganda and Association of Microfi nance Institutions in Uganda (AMFIU), is an example of how the structure of networks can be built and what an important role such networks play in securing a sound, vital development of the MF fi eld. SMF believes, through fi nancial and managerial support, one should support these structu-res in the chosen countries of intervention.

Th is is the organisational chart functioning per end 2007. We have a dormant company limited by shares, SMF AS, to replace the SMF Dept. as umbrella institution for all SMF activities. Th e Board of Directors in SF has already approved this transfer, but we are still waiting for clearance from Norad pertaining to fi nancial support a shareholder company.

SF BOARD OF DIRECTORS

SF COUNCIL

SECRETARY GENERAL

OTHER DEPARTMENTS

SMF EAST AFRICA LTD BY SHARES

(UGANDA)

PARTNERMFI

PARTNERMFI

SMF ASIALTD BY GUARANTEE

(SRI LANKA)

MICROENTERPRISEDEVELOPMENTFOUNDATION

(BANGLADESH)

MF-ACTIVITIESWEST AFRICA

MF-ACTIVITIESSOUTH AMERICA

MF-ACTIVITIESASIA (OUTSIDE BANGLADESH & SRI LANKA

Regional MF-activities

Entity with separate Board

PARTNERMFI

PARTNERMFI

PARTNERMFI

PARTNERMFI

PARTNERMFI

PARTNERMFI

PARTNERMFI

PARTNERMFI

PARTNERMFI

PARTNERMFI

MICROFINANCE DEPARTMENTMF Director

Follow up the momentum \\ STRØMME MICROFINANCE DEPARTMENT \\ ANNUAL REPORT 20078 Follow up the momentum \\ STRØMME MICROFINANCE DEPARTMENT \\ ANNUAL REPORT 2007 9

5.3.2 Networks for funding and co-operationIn line with the increasing professionalism and commercialisation of the MF industry, SMF sees an ever growing need to partner up with other, strong entities involved in our playfi eld. Reasons for partnering is both co-funding, sharing of resources and responsibility in a project as well as strategic co-operation and knowledge sharing. Partners are both traditional donor communities, such as Norad etc .as well as other actors like Terrafi na Microfi nance from Th e Netherlands (=ICCO+ Oikocredit + Rabobank Foundation), SIDI in France etc.

Below is a list of some of the networks where we are affi liated:

Internationally:Microcredit Summit and CGAP, Opportunity International

European level:Th e European Microfi nance Platform in LuxembourgICCO, Oikocredit, Terrafi na Microfi nance, SIDI, OIKOS, EQUITY FOUNDATION

Nationally: Norway: Bistandstorget (Norwegian Development Network)Uganda: Association of Microfi nance Institutions in Uganda(AMFIU).Kenya: Association of Microfi nance Institutions (AMFI)Tanzania: Tanzania Association of Microfi nance Institutions (TAMFI).Mali: Association des Praticiens et Institutions de la Microfi nance (APIM) Sri Lanka: Donor MF Coordination Network, Microfi nance Practitioners’ Network in Sri LankaBangladesh: INAFI Bangladesh

6] Activities by geographical involvement

In this chapter we will give an overview of the Apex institutions in the structure as well as present some features about the rest of our involvement. As mentioned, the activities are contextualized and in accordance with local legislations to bett er serve the needs of our target group.

6.1 SMF Dept. including West Africa, South America and parts of AsiaTh e MF involvement in West Africa, South America and parts of Asia is governed by the SMF structure through the SMF Dept’s supervision and managed by the RDs. Th e regional offi ce is doing the due diligence and all assessments where the SMF Dept. serves as Apex and credit committ ee. Practically, the regions need authorization from SMF Dept. under the leadership of the MF director for loan approvals.

Due to local legislation, regulations and practicalities, some partnerships are handled from the Head Offi ce and through SMF Dept. Th ese include involvement in South Asia apart from Sri Lanka and Bangladesh and one partner in Kenya, Jamii Bora.

Th e loans and equity holdings in the Apexes will appear in the balance of SMF Dept.

Key performance indicators:Total number of external partners: 13Total number of outstanding loans: 19Total number of clients of partners: 254 502Gross portfolio yield: 3, 32Gross Assets yield: 3, 06Operational Self suffi ciency: 0, 77

Equity holdingsSMF Department has for various reasons decided to acquire ownership parts in various companies abroad. Below, an overview of the investments:

Company Country of origin Description Amount in NOKOikos Denmark Danish bank 106 995Oikocredit Holland 79 755

UnoPhone Uganda 39 000

SIDI France Wholesale lender 363 683Jamii Bora Kenya Ltd Kenya 2 185 860

Jamii Bora Scandinavia Ltd Sweden 338 704

Kolibri Kapital Norway 20 400

SMF EA Ltd Uganda SMF Apex 4 375 402

6.2 East Africa - Strømme Microfi nance East Africa Ltd (SMF EA Ltd)SMF EA Ltd is a company limited by shares, incorporated in 2004. Th e company is located in Kampala, Uganda and holding the activities of MF for the East African region (Uganda, Kenya, Tanzania, Rwanda and Sudan). SMF EA is a complete Apex organisation with a local Board of directors, a full set of manuals including a Business Plan, and policies for the Board, Accounting, Human Resources management and Operational & Financial issues. SF holds the majority of shares in the company and the regional director serves as chairperson of the Board.

BALANCE SHEET (all numbers in NOK): 31-12-07 31-12-06Total current assets: 89 046 389 95 011 512 Total non-current assets: 7 489 400 4 982 180 TOTAL ASSETS 96 535 789 99 993 692

Total current liabilities: 593 690 103 376 Total non-current liabilities: 3 209 166 8 214 008 Total equity: 92 732 933 91 676 308 TOTAL LIABILITIES AND EQUITY 96 535 789 99 993 692

INCOME AND EXPENSES STATEMENT 2007 2006 Total operating income 3 009 082 2 737 367Total fi nancing expenses - 252 175 - 225 192 Provision for loan losses+write-offs - 920 256 - 1 365 231 Total operating expenses - 2 741 905 - 1 927 414 Net income from operations - 905 254 - 780 470 Income tax - Currency loss /gain - 10 050 150 - 6 518 779 Total grants received 12 012 029 18 779 848 Net income after grants for the period 1 056 625 11 480 599

Wholesale lending Institution – one of the largest worldwideGrameenphone-like company combining the services of MF and Mobile telephones

MF part of the Jamii Bora GroupInvestment fund with purpose of channelling funds for Jamii BoraNorwegian wholesale lending Institution

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Follow up the momentum \\ STRØMME MICROFINANCE DEPARTMENT \\ ANNUAL REPORT 200710 Follow up the momentum \\ STRØMME MICROFINANCE DEPARTMENT \\ ANNUAL REPORT 2007 11

SMF EA Ltd is part of the (Apex) wholesale lenders organisations’ network. SMF EA Ltd are also actively supporting the Association of Microfi nance Institutions in the respective countries of involvement through participation in meetings, seminars and workshops.

Key performance indicators:Total number of active partners: 25Total number of outstanding loans: 33Total number of clients of partners: 501 225Gross portfolio yield: 11,67 %Gross Assets yield: 11,22 %Operational Self suffi ciency: 1,04

6.3 South AsiaIn the Asian region, SMF has chosen to set up two diff erent legal entities. Further, local legislation hinders either one of these from granting loans to other countries in the region. Loans to partners in Myanmar, Cambodia, India, East Timor etc. are therefore included in SMF Depart. Norway.

6.3.1 Sri Lanka - Strømme Microfi nance Asia Guarantee Limited (SMAGL) SMAGL is incorporated under the Companies’ Act no 17 at the Registrar of Compa-nies on January 6th 2006 with SF as the Founding Member. Th e company has taken over all MF activities in Sri Lanka and has its seat in Colombo. A professional board with local resource persons in addition to two members from SMF is governing the processes. Th e SF Regional Director is chairing the board. Th e fi gures given below are joint accounts for SMAGL including Tsunami Disaster Relief Fund, a fund establis-hed to answer needs aft er the Tsunami in 2006.

Key performance indicators:Total number of active partners: 27Total number of outstanding loans: 161Total number of clients of partners: 231 967Gross portfolio yield: 7,80 %Gross Assets yield: 7,53 %Operational Self suffi ciency: 0, 83

BALANCE SHEET (all numbers in NOK): 31-12-07 31-12-06 Total current assets: 37 468 710 30 105 192 Total non-current assets: 127 698 2 142 533 TOTAL ASSETS 37 596 408 32 247 725 Total current liabilities: 673 131 77 313 Total non-current liabilities: 22 122 281 23 427 729 Total equity: 14 800 996 8 742 683 TOTAL LIABILITIES AND EQUITY 37 596 408 32 247 725

INCOME AND EXPENSES STATEMENT 2 007 2 006 Total operating income 3 736 295 2 892 649 Total fi nancing expenses - 997 365 - 858 611 Provision for loan losses+write-offs - 862 510 - 1 965 958 Total operating expenses - 1 739 922 - 1 530 789 Net income from operations 136 498 - 1 462 709 Income tax - Currency loss /gain - 62 726 553 395 Total grants received 3 840 047 4 853 638Net income after grants for the period 3 913 819 3 944 324

BALANCE SHEET (all numbers in NOK): 31-12-07 31-12-06 Total current assets: 20 017 555 17 377 700 Total non-current assets: 6 053 413 29 586 TOTAL ASSETS 26 070 968 17 407 286

Total current liabilities: 632 038 260 385 Total non-current liabilities: 25 250 300 18 065 239 Total equity: 188 630 -918 338 TOTAL LIABILITIES AND EQUITY 26 070 968 17 407 286

INCOME AND EXPENSES STATEMENT 2007 2006 Total operating income 1 542 880 792 333 Total fi nancing expenses - 178 763 - 249 144 Provision for loan losses+write-offs - 566 889 - 1 174 177 Total operating expenses - 1 115 894 - 404 958Net income from operations - 318 667 -1 035 946Income tax - 30 727 Currency loss /gain - 8 455Total grants received 174 359Net income after grants for the period -175 035 -1 027 491

6.3.2 Bangladesh - Microenterprise Development Foundation (MDF)MDF was a joint venture that was planned launched during late 2006 or early 2007. Unfortunately the eff orts of co-operation failed and we did not manage to fi nalize the process in 2007. Bangladesh used to be SF’s Asian head quarter, thus the portfolio in the region is signifi cant in both amount and outreach.

Th e virtual Apex is at the time functioning as an Apex governed as a division within the Regional Offi ce in Sri Lanka.

Key performance indicators:Total number of active partners: 10Total number of outstanding loans: 114Total number of clients of partners: 1 090 295Gross portfolio yield: 7,89%Gross Assets yield: 6,47%Operational Self suffi ciency: 0,87

6.4 Global statistics

If one includes all the Apexes and the involvement through the department, we may present the following information as per December 31st 2007. Th e fi nancial report is found in Appendix 1:

BALANCE SHEET (all numbers in NOK): 31-12-06 31-12-06 Total current assets: 32 208 236 31 940 878 Total non-current assets: TOTAL ASSETS 32 208 236 31 940 878

Total current liabilities: 144 062 260 758 Total non-current liabilities: 32 342 400 31 702 610 Total equity: - 278 226 - 22 490 TOTAL LIABILITIES AND EQUITY 32 208 236 31 940 878

INCOME AND EXPENSES STATEMENT 2007 2007 2006 Total operating income 1 933 347 1 736 757 Total fi nancing expenses - 932 015 - 721 900 Provision for loan losses+write-offs - 895 508 - 971 225 Total operating expenses - 385 184 - 415 233Net income from operations - 279 360 - 371 601Income tax - Currency loss /gain -Total grants received - 62 355Net income after grants for the period - 279 360 - 309 246

31-12-07 31-12-06Total Assets 107 928 812 109 618 220Total Equity 103 068 932 97 679 162Gross Loan Portfolio 89 829 050 80 608 881Total operationg income 8 331 899 6 447 881Total operation expenses 5 982 905 4 278 394

2007 2006Total number of MF partners 88 97Total number of outstanding loans 327 343Total disbursement to partnerssince inception (year 2000) 218 562 614 175 500 000Outstanding balance 89 829 050 80 608 881Total number of clients in our MF partners 2 077 899 1 817 580Total number of cleints reached by SMF funds 204 130 174 542

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%0,87

Follow up the momentum \\ STRØMME MICROFINANCE DEPARTMENT \\ ANNUAL REPORT 200712 Follow up the momentum \\ STRØMME MICROFINANCE DEPARTMENT \\ ANNUAL REPORT 2007 13

Th e constant strive for identifying and implementing bett er solutions, working effi ciently and developing the industry further should never stop. Some of the challenges we identify are issues linked to these matt ers, such as Social Performance Management, adequate funding instruments and institutional structure for invol-vement. Th ese three were named as challenges last year. We are carefully paying att ention to these matt ers and will continue strive for improvement.

7.1 Changes in staff Internally 2007 has been a year of preparing for the future. Two new members have been recruited for the Microfi nance team and by 1st January 2008 they are both operationally active in the organization. Further 2007 was the end of the 5 year agreement with Norad that was prolonged out 2008. Reviews of policies, strategies and means of intervention will continue in 2008.

7.2 Financial sub-committ ee established Th e Microfi nance team are happy to welcome the establishment of a fi nancial sub-committ ee appointed by from the Board of Directors. We believe that the highly qualifi ed people represented in the committ ee will contribute signifi cantly on fi nancial issues and further challenge the SMF staff .

External investor entering in SMF EA LtdTh e fi rst external investor has bought shares in SMF EA Ltd. SIDI, a French Development Organisation converted their loan to equity and holds 10 % of the shares in SMF EA. Th is is a step toward the development of a open, att ractive invest-ment opportunity for external actors. SMF Dept. has been instrumental in this.

Cooperation Agreements with peers in West AfricaTwo agreements for co-operation in MF were signed during 2007. We have joined hands with Terrafi na Microfi nance (NL) and Oikocredit (NL) for co-operation regarding assessment and monitoring partner MFIs for funding and for providing technical assistance. Th e second agreement is formed for the involvement in Community Managed Microfi nance with Oxfam America, Plan Mali and Freedom From Hunger.

Norwegian Microfi nance InitiativeDevelopment minister Erik Solheim followed-up on his promises given aft er the No-bel Peace Prize to Dr. Mohammed Yunus. Th rough 2007 several actors representing the private sector of Norway, the governmental bodies and the NGOs, represented by Strømme Foundation, have been working to create a fund for investing in MF.

As mentioned in chapter 7, Achievements and highlights, some issues are ever relevant and we should never stop striving for bett er solutions, more effi cient tools and means to eradicate poverty as well as being part of the development of the MF industry.

Th ere is general acceptance of a double bott om line. Such reporting includes both the fi nancial results as well as the reporting on non-fi nancial results. Th is is driving the inspiration that access to sustainable fi nancial services will help people improve their lives. We will further strengthen the focus on Social Performance Management and the measuring of outcome in Microfi nance for bett er achieving long term social and economical impact in the lives of the people with whom we are working.

Th e fi ve year agreement with Norad will come to an end in 2008 and the year will be used for planning and preparing the master plan for the coming fi ve years. We will continue to look into our fi nancial activities, tools and methods for MF in order to enhance goal achievements.

In 2006 we were on our way to establishing a new Apex, together with CARE in Bangladesh. Unfortunately this failed. In 2007 we have been going over alternatives of co-operation and regulations. We hope to fi nally formalize the Apex in 2008. Th ere are still hurdles to be overcome since the new legislation and the political situation in the country are not in favour of new company establishments.

Since end of year 2007, some major events have taken place. 1st of January the new Microfi nance Director Lars Erik Harv started his work in Strømme Foundation. Th e SMF Dept. now consists of a team. During January Norad visited Strømme Foundation both in Kristiansand and Uganda for a thorough review of the organisa-tion. Th is is a review with the purpose of giving inputs to the forthcoming 5 year agreement we are signing with Norad during 2008. We are hoping for Norad’s support to include a range of fi nancial and non-fi nancial tools, such as equity holdings, subordinated loans, technical assistance, networking and community managed microfi nance.

7] Highlights and achievements in 2007 8] Challenges in the year to come

39%

56%

0%

5%

Outstanding balance per 31.12.2007

East Africa 34 822 697 West Africa 4 674 941 Asia 50 168 850 South America 162 563 Total 89 795 707

2007 Outreach by our partners Outreach by our funding East Africa 621 225 50 528 West Africa 106 614 4 066 Asia 1 344 223 149 388 South America 5 837 148 Total 2 077 899 204 130

0

37500

75000

112500

150000

0

37500

75000

112500

150000

EAST AFRICA WEST AFRICA ASIA SOUTH AMERICA

0

375000

750000

1125000

1500000

0

375000

750000

1125000

1500000

EAST AFRICA WEST AFRICA ASIA SOUTH AMERICA

Outreach by our partners

Outreach by our funding

East Africa

South America

West Africa

Asia

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Follow up the momentum \\ STRØMME MICROFINANCE DEPARTMENT \\ ANNUAL REPORT 200714 Follow up the momentum \\ STRØMME MICROFINANCE DEPARTMENT \\ ANNUAL REPORT 2007 15

BOD: Board of Directors

CEO: Chief Executive Offi cer

CGAP: Consultative Group to Assist the Poorest

CMMF: Community Managed Microfi nance

FWA: Framework Agreement MF: Microfi nance

MIS : Management Information Systems

MFI : Microfi nance Institutions

NGO: Non Governmental Organisation

RD: Regional Director (in SF)

SF: Strømme Foundation

SMF: Strømme Foundation Microfi nance

SMF Dept.: Strømme Microfi nance Department

TA: Technical Assistance

Appendix 1 Consolidated fi nancial report

Th e executive staff involved in Microfi nance in 2007 are composed of the four Regional Directors (RD) as well as a number of Microfi nance specialists:

SMAGLNimal Martinus (RD Asia), Chairperson Upul Batagoda, CEO Nadeera Sumudu, MF Offi cerPriyantha Saman Bankara, Operations CoordinatorSavarimuththu Gnanapragasam, Administration and Finance Offi cer

SMF EA LtdPriscilla Mirembe Serukka (RD East Africa), Chairperson Paul Mayanja, CEO Elizabeth Naiga, MF Offi cerDaniel Sentumbwe, MF Offi cer Denis Okaba, AccountantBadru Lubega, Driver

BangladeshZahirul Islam, Microfi nance specialist Daniel Mondal, Accountant

West AfricaZakariya Abdou, RD West AfricaSamuel Dao, MF Offi cer South AmericaSusana Tapia, RD South America

SMF Dept.Johannes Sannesmoen, Acting MF DirectorAnja Elise Ø. Husebø, MF Consultant Heidi Prestbakmo Holtskog, Accountant, (1/5 position)

BALANCE SHEET (all numbers in NOK): 31-12-07 31-12-06 Total current assets: 104 634 903 104 262 921 Total non-current assets: 3 293 909 5 355 299 TOTAL ASSETS 107 928 812 109 618 220 Total current liabilities: 1 650 713 701 831 Total non-current liabilities: 3 209 166 11 237 227 Total equity: 103 068 932 97 679 162 TOTAL LIABILITIES AND EQUITY 107 928 812 109 618 220 INCOME AND EXPENSES STATEMENT 2 007 2 006Total operating income 8 331 899 6 447 881 Total fi nancing expenses - 470 613 343 620 Provision for loan losses+write-offs - 3 245 163 5 476 591 Total operating expenses - 5 982 905 4 278 394 Net income from operations - 1 366 782 - 3 650 724 Income tax 30 727 0 Net income from oper. after tax - 1 397 509 - 3 650 724 Currency loss /gain - 10 112 876 5 956 928 Total grants received 16 026 436 23 695 841 Net income after grants for the period 4 516 051 14 088 188

APPENDIX II PERSONNEL APPENDIX III ABBREVIATIONS:

Microfi nance Department Strømme Foundation, June 2008 Lay-out and graphic design: Strømme Foundation All photos: Strømme Foundation

Th e Strømme Foundation is member of Th e Norwegian Control Comitt ee for Fundraising

Microfi nance DepartmentStrømme Foundation, June 2008 Lay-out and graphic design: Strømme Founddation ndation

ZD

WZS

SS

SJAH

urrency loss /gain - 10 112 876 5 956 928 grants received 16 026 436 23 695 841

me after grants for the period 4 516 051 14 088 188

E MI

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Skippergaten 3 • Box 414 • N-4664 Kristiansand Norway Tel +47 38 12 75 00 • Fax +47 38 02 57 10 • Org. no 952 002 139

E-mail: post@stromme.org • www.stromme.org