IFC: HELPING MFIs UPSCALE
VSE/SME WORKSHOPPragueNovember 5, 2015
MFIs UPSCALING
Average Credit Gap, $
Nu
mb
er o
f V
SE
s
Potential VSE market
≈$65 Billion
IFC-McKinsey study (2011)
MARKET POTENTIAL
# of VSEs in region:
2m# of VSEs un- or under-served:
56%
CHALLENGES TO UPSCALING
MFIs
• Lack of market intelligence and experience serving VSEs
MFIs are reluctant to increase loan size or enter VSE space
3
• Unfamiliar with the different credit and risk assessment methods
• No formalized strategy for reaching the VSEs segment
• Employees don’t have the training or experience to serve VSEs
• Unfamiliar with collecting/registering different kind of collaterals
• Some resistance to deviating from social mission
• Senior Debt
• Equity
• Risk Sharing
• Credit Lines
• Credit Insurance
4
AdvisoryInvestment
OVERVIEW OF IFC OFFERING IN VSE
STRATEGY
VSE PROJECT LIFE CYCLE
4.Organization
Of VSE
IDENTIFY BUILD AND LAUNCH EVALUATE
5.VSE
Pilot
Launch
Pilot-test Plan & KPIs
Coaching and Support
Pilot Review
Refinement 1.VSE
Diagnostic
(Assess MFI
capability)
Select/Hire VSE Officers
3. Product Design
Branch Selection
Training of Staff
55
Prepare for Roll out
2.VSE
Market
Assessment
(Understanding
of Segments)
18-24 Months
1.5 month 2-3 month 2 month 12 month 2 month
ROLL OUT
2 month
IFC’s RECENT WORK ON VSE IN THE MENA REGION
Algeria Libya
Egypt
UAESaudi Arabia
Iran
Kuwait
IraqLebanon
Yemen
Bahrain
Qatar
Oman
Afghanistan
Pakistan
Morocco
Tunisia
Jordan
Syria
3. Attawfiq Full VSE product
development
ENDAVSE Assessment,
loan files, mrktg,training
TamweelcomVSE Assessment
only
1. Al Kuraimi, 2. Al Amal
Full VSE product development
Palestine
3 full-scale engagements (VSE product development) and 2 VSE assessments
EXAMPLE: AL KURAIMI MF BANK (Yemen)
Timeline: September 2013- December 2014Results to Date (March 31*):•225 approved loans / 207 disbursed •$3.3 million disbursed, $2 million outstanding•Average loan size = $14,600 USD •Loan size range: $4,650 – 180,000 USD
* SME activity stopped after onset of war in March 2015
Ratio of SME to Active Portfolio:
21%SME financings per officer:
17
Amt of SME financing per officer:
$168k
EARLY LESSONS LEARNED THUS FAR
VSE PILOT TEST
1. Selecting right staffing (internal vs. external) and ensuring proper incentives in place
2. Importance of introducing new SME financing ‘technology’; Training (and retraining) staff on it is key!
3. Pilot-test: Start slow with modest targets to test & improve methodology
4. At beginning, centralization / tight oversight from HQ
5. Selecting right forms of collateral and clear processes on what to collect, how to register, valuate, etc
6. Careful roll-out to new branches:leveraging stronger staff from first generation to lead
7. Give prestige and privacy to VSE clients via dedicated spaces in branches 8