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