short final financieros sin fronteras-1

8/3/2019 Short Final FInancieros Sin Fronteras-1

1/19

Mster en Microfinanzas y Desarrollo Social

Microfinance Conference 2011

Financieros sin FronterasMicrofinance in Eastern Europe andCentral Asia

Guadalupe de la MataEuropean Investment Bank


2/19


AGENDA

1

4

2 Impact of the crisis in the region

Microfinance in Eastern Europe and Central Asia

External support to strengthen the sector

Opportunities for the future

3

5

Main risks for microfinance and proposed mitigants


3/19


Microfinance in Eastern Europe and Central Asia


4/19


Market structure in the region

N ofcountries

Population(million)

GNI averageper capita

%populationbelow thenationalpoverty line

Balkans 7 23,6 7 097 15%

Caucasus 3 16,1 3 157 23.5%

EasternEurope

6 126 6 863 22.3%

Central Asia 5 57.3 2 299 25.4%

Rusia 1 141.8 9 620 13.1%

Total/weighted average

22 365.6 70 868 18,8%


5/19


Main features of the sector in the region

5

Young sector within the global industry

Average loan amount double than world average

Financing micro and SMEs more than micro-entrepreneurs andlow income families

More integrated in formal financial markets

General features

Lowest delinquency levels globally prior to the crisis

Portfolio at risk spiked in 2008 in environments of risingunemployment, high inflation, and over-indebtedness

Credit risk

High currency risk (most funding in hard currency and mostlending in local currencies)

Volatile currencies during the crisis

Currency risk


6/19


Microfinance sector size and impact

All MFIs EECA MENA Asia LatinAmerica

Africa

N ofclients

15 553 6 040 13 463 21 974 13 755 21 974

% women 62.9% 59.5% 68.1% 71.2% 61.3% 70%

Portfolio(millionUSD)

5 347 4 454 3 339 4 912 8 559 5 273

Avg loanamount

532 926 286 195 816 228

Avg loanamount

/GDP percapita

54% 79.7% 15.8% 35.9% 57.4% 69%


7/19Mster en Microfinanzas y Desarrollo Social

How has the crisis affected themicrofinance sector in Eastern Europe and

Central Asia?



Microfinance vulnerability to crisis: what has changed?

Previous crisis

MFIs seemed tobe immune toeconomic cycles

MFIs and theirclients notintegrated ininternationalmarkets

More flexible toadapt to changes

This time

Economies moreintegrated

MFIs have

financed SMEs

MFIs havereceived financefrom internationalfinancial markets

Consumer loans

Overindebtedness



How has the crisis affected microenterprises in the region?

Sales decreased Increased cost of basic products

Drastic reduction of remittances Increased unemployment

Economic deterioration

Over indebtedness

Currency risk

Lack of access to funding

Increased demand for working capital vs. investment Smaller loan amounts and shorter terms

Funding



How has the crisis affected MFIs in the region?

Slower portfolio growth Portfolio quality deterioration

Portfolio

Problems to access it Increased cost

Increased currency risk

Funding

Profitability decreased drastically

Increased cost of provisions and of funding

Not always possible to pass the increased costs to clients

Profitability



The effect of the crisis after 2008:

MSME portfolio levels of partner lending institutions

-

1.000

2.000

3.000

4.000

5.000

6.000

EURmln

Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009

Portfolio (Volume)



The effect of the crisis after 2008:

Average PAR 30 of SBF partners institutions

0,00%

1,00%

2,00%

3,00%

4,00%

5,00%

6,00%

7,00%

Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009

PAR>30 days



What are the main risks for microfinance failure thatshould be avoided? How can this be done?



Main challenges and proposed solutions

Consolidation

Product diversification

Lower growth rates

Improvement of credit methodologies and internal risk controls

Increased exchange of information: Participation in credit bureau and regularmeetings with other MFIs

Improved MIS system Closer monitoring

Portfolio quality deterioration

Transformation- (deposit mobilisation)

Refinancing risk

Deposit mobilization

Guarantees / back-to-back loans with local banks

Working with microfinance funds that offer local currency funding solutions

Currency risk



External support to strengthen the sector:

International Financial Institution's response to the

crisis


16/19


External support to strengthen the sector: IFIs response

Increased funds

Local currency when possible Increased monitoring

Debt

Improve capitalisation Improve corporate governance

Equity

Increased use of guarantees to reduce credit risk

Preferred when local currency funding is not available

Guaranties

Refresher courses in fundamentals of credit and cash flow

Corporate recovery techniques

Risk management

FX Risk courses

Mid management support

Technical Assistance


17/19


International Financial Institution's response to the crisis (II)

Increased communication and information exchange

Co-financing and joint initiatives

Principles for client protection

Increased coordination among IFIs

Policy dialogue with local authorities

Implementation of laws

Credit bureau

Efforts to improve regulatory framework

Transformations

Consolidations

Restructuring

Institutional support

1


18/19


Opportunities after the crisis

Back to the

microfinanceessence

Consolidation

andtransformation

Increasedcoordination

&informationexchange

Institutionalfocus

&Client

protection


19/19


Thanks.

Questions and answers

short final financieros sin fronteras-1

Documents