IFC ADVISORY SERVICES ACCESS TO FINANCE H I G H L I G H T S R E P O R T IN PARTNERSHIP WITH OUR DONORS

Transcription

1 IFC ADVISORY SERVICES ACCESS TO FINANCE 2009 H I G H L I G H T S R E P O R T IN PARTNERSHIP WITH OUR DONORS

2 IFC s Advisory Services have become a substantial part of IFC's business and a critical tool for extending our reach and expanding our impact. Access to Finance (A2F) is one of five advisory services business lines that correspond to IFC s operational strategy. Support for IFC s advisory services is strong and includes partners and donor governments, multilateral institutions, and private donors such as foundations. Access to Finance appreciates our donors and partners that include: African Development Fund, Australia, Austria, Bank of Israel, Belgium, Canada, Denmark, European Union, Finland, France, Gates Foundation, Greece, Inter-American Development Bank, Ireland, Islamic Development Bank, Kuwait, Japan, Italy, Luxembourg, Netherlands, Norway, New Zealand, OMIDYAR Network Fund, INC., Spain, Sweden, Switzerland, United Kingdom, United States, and Visa International

3 TABLE OF CONTENTS FOREWORD 2 OVERVIEW 4 BUILDING FINANCIAL INSTITUTIONS 6 SME Banking 6 Microfi nance 7 Housing & Property Finance 7 Leasing 8 Sustainable Energy Finance 8 Insurance 9 Trade Finance 9 IMPROVING FINANCIAL INFRASTRUCTURE 10 Credit Bureaus 10 Securities Markets 12 Collateral Registries & Secured Lending 12 Payment & Remittances Systems 13 RESPONDING TO THE CRISIS 14 The Impact of the Crisis on Emerging Markets 14 Weathering the Crisis A2F Role 15 New A2F Crisis Response Programs 15 Early A2F Achievements in Record Delivery Time 17 Scaling-up A2F Financial Infrastructure Programs 17 PORTFOLIO TRENDS 18 A2F Portfolio in FY09 18 A2F Spending in FY09 18 IDA and Confl ict Affected and Fragile Countries, and MSME Focus 19 MEASURING RESULTS MONITORING AND EVALUATION 20 Monitoring Results 21 Evaluating Impact 21 CASE STUDIES HIGHLIGHTS 22 Building Institutions, Increasing SME Financing Bangladesh 22 Developing Leasing in Azerbaijan & Central Asia 23 Scaling Up Microfi nance Through Transformation in Colombia 23 Initiatives in Agrifi nance 24 IFC Leasing Program Helps Rwandan Coffee Farmers 25 Secured Transactions Measurable Impact in China 26 Crisis Response Advisory Work in Europe and Central Asia 26 Industrial Bank Firm on Sustainable Finance During Rough Times 27 Developing Credit Information Sharing in Egypt iscore 28 Banking on Women in Business Tanzania s Exim Bank 29 Helping Ukraine Create A Sustainable Agri-Insurance System 30 IFC Helps Revive the Mortgage Market in the Maldives 31 IFC Bolsters Bank of Saint Lucia with Funding and Advice 31 Recent Bond Issue in Tanzania Highlights Progress in Developing Local Capital Markets 32 M-Banking in Cambodia 33 SHARING KNOWLEDGE 34 Microscope Index 34 Financial Infrastructure Report 34 World Bank-IFC Remittance Prices Database 35 Benchmarking Best Practices in SME Banking 35 SME Banking Knowledge Guide 35 Leasing Guidelines for Emerging Economies 35 ACCESS TO FINANCE CONTACTS 36 Business Line Leaders 36 Secretariat 36 Donor Relations 36 Product Specialists 36 Regional Offi ces 37 Global Financial Markets Field Sector Managers 37

4 2 FOREWORD 2008 has been challenging and rewarding as IFC focused on helping clients cope with the economic crisis. We moved quickly with funding and programs aimed at eliminating further deterioration of financial institutions. We are working with banks across the globe to advise them on ways to expand lending to micro, small, and medium enterprises. Our programs are assisting financial institutions prioritize actions, steering them through the crisis, and protecting their customers and business. Clients are receiving assistance on risk and portfolio management and loan servicing, and in parallel, our ongoing Financial infrastructure programs have been quickly scaled up to strengthen both financial stability and access to finance through more efficient payment systems, remittance and domestic money transfer services, credit reporting systems, and secured transactions frameworks. our efforts are aimed at stabilizing and stimulating financial activity to help minimize the impact of the crisis on economic growth and job creation in emerging markets. In FY09, ifc access to finance (a2f) advisory had 298 projects and programs in 72 countries 141 projects in ida countries and 58 in fragile and conflict-affected countries. these projects represent $54.5 million in expenses, with about 36 percent of expenditures in ida countries and 14 percent in fragile and conflict-affected countries. We have supported a number of new initiatives this year such as creating efficient microfinance credit reporting systems globally, indexing the business environment for microfinance, and addressing the need for financial services beyond lending. our services are delivered on the ground through regional offices with more than 130 dedicated staff. We also coordinate our work with the World Bank to deliver policy advice and joint interventions. this report highlights our work over the last year in ifc s a2f advisory services. Development impact and results are fundamental to our mission and the success of a2f advisory services. More than half of the services are directly linked to ifc investments and over 70 percent serve micro, small, and medium enterprises (MsMes). Key figures of the reach of our a2f advisory services: ifc s sme Banking clients have generated $41.3 billion in financing and helped improve access to finance for 486,550 small and medium enterprises. ifc s Microfinance clients have provided $4.5 billion in financing to about 5 million micro enterprises. ifc s leasing clients provided 18,211 leases to micro, small and medium enterprises worth $1.7 billion. ifc s Housing finance clients financed 57,734 homeowners with more than $3.1 billion in mortgage loans.

5 access to Finance Highlights Report IFC has assisted its Trade Finance clients originate over $1.5 billion trade in 33 countries through advisory services. IFC has helped create or improve credit bureaus in 13 countries over the last 5 years. In 2008 these credit bureaus received 38.9 million inquiries and helped generate about $19 billion in new financing. Our donors have a critical role in supporting and partnering on our projects. Government, institutional, and multilateral donors contribute to our program as a whole, and to specific projects around the world. We thank them for their continued assistance and commitment to our mission to alleviate poverty and improve people s lives. Peer Stein Access to Finance Business Line Leader Georgina Baker Access to Finance Deputy Business Line Leader

6 4 OVERVIEW EXPANDING ACCESS TO FINANCE More than 3 billion people in developing countries have little or no access to financial services. IFC s Access to Finance business line helps increase the availability and affordability of financial services, focusing particularly on micro, small, and medium enterprises. In FY09, we had 298 projects and programs in 72 countries 141 projects were in IDA countries and 58 in fragile and conflictaffected countries. ifc delivers advice on access to finance mainly through our regional offices, with more than 130 dedicated staff members. We also coordinate these services with the World Bank to deliver policy advice and joint interventions. ifc s access to Finance advisory services focus on three key areas: Building bank and nonbank financial institutions, with emphasis on banks that serve small and medium enterprises or provide microfinance, housing finance, leasing, trade finance, insurance, and sustainable-energy finance. Improving financial infrastructure, such as credit bureaus, securities markets, collateral registries, payment systems, and remittances. Improving the legal and regulatory framework to help develop and improve the enabling environment for increasing access to finance. as part of our crisis response, we help our partner financial institutions through improved risk management in the areas of governance, asset-liability and liquidity management, capital adequacy, and credit risk. Our loan portfolio monitoring and workout activities help our clients avoid further capital depletion in the financial sector and reduce the risk of a long-lasting credit crunch. ifc is also developing new products such as mobile banking, index-based weather insurance for farmers, and agrifinance.

7 access to Finance HigHligHts RepoRt Expanding A2F In The Interest Of End Users Creating and Improving Financial Infrastructure Credit Bureaus, Payment Systems, Securities Markets, and Collateral Registries Legal and Regulatory Framework Close Collaboration with World Bank/IBRD Working with Financial Institutions Retail/SME Banks, Microfinance, Housing, Leasing, Insurance Comprehensive, Long-term Institution Building Programs Synergies between Investment and Advisory Services BANK B Market Infrastructure LEASING COMPANY BANK A Measuring Impact on the End Users

8 6 BUILDING FINANCIAL INSTITUTIONS IFC s Access to Finance advisory works with financial institutions and regulators to strengthen the financial sector, and deepen financial intermediation and outreach to increase access to financial services. It helps build bank and nonbank financial institutions with emphasis on banks that serve SMEs or provide microfinance, housing finance, leasing, trade finance, and sustainable energy finance. SME BANKING IFC has played a critical role globally over the past decade in increasing access to financing for smes through its investment and advisory services that build the capacity of banks to better serve the sme market. strengthening banks and helping them move from the corporate segment down market has the greatest impact in numbers and volume in providing access to financial services to the underserved. ifc s advisory services focus on strengthening banks small business or middle market servicing capacities. through an established approach these cover operating efficiency, asset quality, increasing revenues, as well as governance, strategy, products and services, and risk management. ifc s interventions highlight the importance of looking at a comprehensive bank offering for smes, providing them with the right mix of asset and liability products that include loans as well as deposits and other transactional products. in 2009, sme banking advisory services comprised 60 projects totaling $90 million. the program has developed a holistic assessment framework, the sme Banking check toolkit, which allows ifc to conduct a comprehensive assessment of financial institutions performance in more than 100 competencies and identifies potential areas of improvement for ifc portfolio banks. ifc s newly launched sme Banking Benchmarking Web survey allows banks to benchmark themselves against the sme banking practices of their peers. in response to the financial crisis and in collaboration with the Risk Management advisory program, a Risk assessment Framework was developed and introduced in europe and central asia and in latin america and the caribbean. Knowledge management continues to be an area of focus for ifc s sme Banking practice. several workshops have been held on the importance and best practices in sme deposit mobilization, portfolio monitoring, and nonperforming loans. in response to the crisis, it is critical that ifc s sme banking activities re-emphasize the importance of sme banking as there is a danger that clients will retreat to safer havens as they perceive greater risk in smes. ifc continues to reinforce the importance of sme banking versus lending. our work with individual financial institutions is complimented by our financial infrastructure work, which seeks to improve the enabling environment for sme lending through better credit bureaus covering smes, and collateral registries for moveable collateral, including receivables.

9 access to Finance HigHligHts RepoRt MICROFINANCE ifc has achieved industry leadership in microfinance since its first investment in it has effectively supported the financing and capacity building of several dozen microfinance institutions (MFis), including small business banks, nonbank financial institutions (nbfis) and non-governmental organizations (ngos). Further, ifc has played a catalytic role in developing specialized microfinance banks, fostered the creation of international microfinance network banks, and developed collective investment vehicles leading to the effective mobilization of private capital in the domestic and international capital markets. as one of the top two global investors, ifc s microfinance portfolio at June 2009 included: more than Us$1.3 billion committed investments in over 140 MFis, and more than $70 million in advisory services for 45 percent of the MFis. Microfinance advisory services flagship initiatives for FY10 include: significantly expanding deposit mobilization in the microfinance industry; enhancing risk management frameworks for portfolio clients; supporting technological innovations in microfinance; and developing microfinance credit reporting. HOUSING & PROPERTY FINANCE affordable housing is a key to improving people s lives. IFC continues to invest more and expand our advisory services in housing finance, while developing innovative financial products, despite the challenges imposed by the financial crisis. For example, in ghana, we made a new investment in a mono-line financial institution that focuses on the middle income segment of the population. In addition, we worked with both our portfolio clients and the housing market in general to deliver risk management products and advice through workshops and seminars, with the primary goal of finding ways to keep borrowers in their home. in Mexico and albania, we expanded our successful training to middle-tier mortgage finance institutions to reach lenders who serve clients in markets at the bottom of the pyramid. Using our global mortgage toolkit as the source for industry best practices, we continue to help lenders improve their operations so they can lower costs and thereby become more effective vehicles for meeting client needs. We continue to provide support and advice to regulators and financial institutions around building sustainable markets to provide affordable mortgage finance to consumers.

10 8 LEASING leasing continues to play a major role in ifc s a2f advisory services. in FY09, it has become even more important because of ifc s increased focus on ida countries, and frontier, fragile, and conflict-affected markets. leasing is critical in markets that usually have weak business environments and small entrepreneurs that do not have a significant asset base. By leveraging on little or no down payments, small businesses can obtain access to equipment through leasing and increase productivity and profits. ifc is bringing more value to clients by leveraging our regulatory improvement activities with institution-building and new product development. in Middle east and north africa, ifc continues to strengthen operations in the West Bank and gaza, afghanistan, and Yemen. in sub-saharan africa, ifc is expanding to other frontier, fragile, and conflict-affected countries. in Rwanda, the focus is on bank capacity to facilitate increased sme outreach. programs have also been introduced in the Democratic Republic of congo, Mali, senegal, liberia, and sierra leone. at a broader level, ifc is implementing projects aimed to support the climate change agenda and help address the food crisis. For example, in east asia, ifc is working with Japan to develop models that will facilitate energy efficiency, Renewable energy, and cleaner production finance. SUSTAINABLE ENERGY FINANCE sustainability and climate change mitigation finance help drive ifc s climate change mitigation strategy by supporting financial institutions with projects in clean production, energy efficiency, and renewable energy. advisory services complement ifc s investments in this area with capacity building and knowledge management initiatives. these include market analyses and training in pipeline development for ifc s regional partners, and an online learning program that helps clients identify new investment opportunities and comply with environmental requirements. in 2008, ifc increasingly focused on a2f advisory services offerings that complemented its investments in energy efficiency finance, in Russia and china, with new initiatives planned in other regions.

11 access to Finance HigHligHts RepoRt INSURANCE Insurance advisory services provide support for the development of new and existing insurance companies. activities include preparing feasibility studies, product development, and risk management. ifc s a2f advisory services in the insurance sector span a wide range of activities, from working with regulators and governmental agencies (cambodia and Russia) to improving market segments and niches (agro-insurance in Ukraine and indonesia), and hands-on training and development of required skills and resources (mortality tables in africa). this is in line with the sector s broad range of activities to promote insurance as a personal risk management tool and to contribute to as many fields as possible. ifc, jointly with the World Bank, is putting resources into developing index-based weather insurance with the support of the european Union (eu). this will have a significant development impact on food security initiatives and help local farmers and businesses who depend on agricultural output. TRADE FINANCE ifc s $3 billion global trade Finance program (gtfp) offers confirming banks partial or full guarantees covering payment risk on banks in the emerging markets for trade related transactions. ifc s trade advisory program is an integral component of gtfp, and is designed to help local banks build their capacity in the areas of trade finance operations. ifc provides local financial institutions with training and support in order to: upgrade skills in structuring basic and complex trade finance transactions; improve trade finance risk mitigation techniques; upgrade the operational and technical skills of the trade finance back office; and transfer current international best practices in trade finance to local markets. On a selective basis, IFC places experienced trade finance bankers with issuing banks to help them develop trade finance skills. in addition, ifc has developed the trade Finance certification program via e-learning in close collaboration with the International Chamber of commerce (icc). it also organizes sme exporters/ importers workshops around the world. this advisory services initiative is supported by IFC and various donor countries. since June 2006, more than 1,400 participants from more than 50 countries have benefited from the 68 training and advisory services programs.

12 10 IMPROVING FINANCIAL INFRASTRUCTURE Financial Infrastructure broadly defined comprises the underlying foundation for a country s financial system, including all institutions, information, technologies and rules and standards that enable financial intermediation. poor financial infrastructure in many developing countries poses a considerable constraint upon financial institutions to significantly expand their offering of financial services credit, savings, and payment services to underserved segments of the population and the economy. it further creates risks for the financial system as a whole, as poor payment and settlement systems may exacerbate financial crises, while the absence of credit bureaus in conjunction with strong credit growth may lead to one. Key elements of the financial infrastructure that every developed market can rely on credit bureaus, enforcement of collateral and functioning payment and remittance systems often do not exist or are less advanced in developing markets. properly functioning collateral laws and registries enable lending to smes, while credit bureaus are vital to enabling the expansion of credit markets to retail and sme segments in a safe and responsible manner. likewise, payment systems are critical for the effective functioning of financial systems and the economy for the availability and affordability of basic financial services, like remittances and domestic money transfer services. an efficient, and reliable payment system reduces the cost of exchanging goods and services, expands access to finance, and enhances the overall stability of the financial sector. ifc s a2f advisory services work focuses on expanding access to financial services by creating and improving financial infrastructure. CREDIT BUREAUS credit bureaus help consumers and small businesses obtain financing. they offer timely, credible, and objective information on borrowers, allowing financial institutions to reduce loan processing time and costs by 25 percent or more and cut default rates by 40 to 80 percent. these savings can mean lower interest rates, making credit more affordable and available to those in need. credit bureaus are also critical to avoid over-indebtedness and support responsible lending practices. since 2001, ifc has become an international leader in credit bureau development, providing support in over 50 countries. Recent successes include Morocco, egypt, and nigeria. ifc has just launched a credit bureau initiative in the english-speaking caribbean (soon to include Haiti).

13 access to Finance HigHligHts RepoRt Depending on specific country contexts and needs, interventions in credit reporting include: legal and regulatory support to develop an enabling environment for credit information sharing (in collaboration with the World Bank); outreach and awareness-raising on the benefits of credit information sharing; advisory support for the development of new credit information sharing systems with emphasis on sme credit reporting; and supporting the development of value-added services in markets with more mature credit information sharing systems. as the current crisis evolves and liquidity margins are squeezed, the program is moving towards supporting the development of more inclusive credit reporting systems (for smes and microfinance), building capacity for prudential supervisors to better utilize credit information data, and supporting the promotion of financial education and literacy on credit and credit reporting, targeting supervisors, regulators, lenders and indirectly end-users or borrowers. ifc s global credit Bureau program has been funded by australia, italy, luxembourg, norway, new Zealand, the netherlands, switzerland, Visa international, and more recently by omidyar network Fund, inc. BOX 1. GLOBAL EMERGING MARKETS LOCAL CURRENCY BOND PROGRAM (GEMLOC) The GEMLOC Program was launched in April 2008 by the World Bank Group to help develop local currency bond markets so they can attract more local and global institutional investors. The programs will help build and strengthen local currency debt markets in developing countries. GEMLOC has three separate but complementary parts: a private investment manager, Pimco, that develops and manages investment strategies to promote institutional investment in emerging market local currency bonds; a new privatesector led global index that tracks emerging market local currency bonds and serves as a new benchmark for the asset class, developed by IFC in cooperation with the leading index provider, Markit; and advisory services provided by the World Bank to strengthen local bond markets in emerging economies to help enhance their investability and attract new investments. ( BOX 2. EFFICIENT SECURITIES MARKET INSTITUTION DEVELOPMENT PROGRAM (ESMID) The ESMID Program is a three-year, $5-million program funded by the Swedish Development Agency (SIDA) to help build securities markets in Africa (Kenya, Nigeria, Rwanda, Tanzania, and Uganda) and to help fi nance housing and infrastructure development. ESMID combines advisory services to help build the enabling environment for local non-government bond markets strengthening the legal and regulatory framework, improving market infrastructure, and building the capacity of market participants with support for replicable demonstration transactions, thereby expanding access to longterm, local currency funding in key sectors of the economy. (

14 12 SECURITIES MARKETS BOX 3. The G8 Global Remittances Working Group created by the G8 Heads of State at their summit in Hokkaido in 2008, and chaired by the World Bank vice president for fi nancial and private sector development, is a multi-year platform created to facilitate the fl ow of remittances by providing guidance and policy options to the global community. The efforts of the working group were successful in securing the commitment of the G8 Heads of State to achieve [ ] the objective of a reduction of the global average costs of transferring remittances from the present 10 percent to 5 percent in 5 years through enhanced information, transparency, competition and cooperation with partners, generating a signifi cant net increase in income for migrants and their families in the developing world (L Aquila G8 Communiqué 2009). For issues related to payments system infrastructure and access to fi nance, the G8 Global Remittances Working Group will leverage on the Private-Public Partnership on Remittances, a World Bank-coordinated forum for discussion between multilaterals, the regulators and the industry in the fi eld of remittances. The World Bank-IFC Remittance Prices Worldwide Database was launched in September 2008 and provides data on the cost of sending and receiving remittances for 134 country corridors worldwide. In 2009, the total number of corridors surveyed has increased to 165, including several south-south corridors representing more than 60 percent of total remittances to developing countries. The Remittance Prices Worldwide Database also expanded its coverage to include data on the cost of sending remittances to rural areas in the receiving countries. In the context of the G8 Global Remittances Working Group, the Remittance Prices Worldwide Database provides for a reference for monitoring the progress on the 5x5 objective The 5x5 objective aims at reducing the cost of sending remittances from 10 percent to 5 percent in fi ve years. properly functioning securities markets are an integral part of the financial framework and play a vital role in facilitating access to finance in developing countries. this is especially true today, since bank lending in many countries is severely constrained as a result of the global financial crisis. IFC provides advisory services to help develop securities markets, including bond, securitization, and equity markets. in addition to providing long-term capital for priority growth sectors such as housing, infrastructure, and sme finance, deeper and broader securities markets also help to expand the range of investment opportunities available to pension funds, life insurance companies, and other social safety-net investors in developing countries. the ifc/world Bank securities Markets group has two main programs the global emerging Markets local currency Bond (gemloc) program (see Box 1) and the efficient securities Market institutional Development (esmid) program (see Box 2) under which most of its advisory services and knowledge management products are designed and implemented. the gemloc and esmid programs are highly complementary as they focus on government and non-government local currency bond market development, respectively. gemloc is currently providing advisory services in egypt and nigeria and expanding into a wider range of countries in other regions. it recently held two high-level peer group meetings among emerging market countries to discuss key bond market issues. esmid is currently piloting two programs to develop domestic corporate bond markets in east africa and nigeria and will soon be expanding to other regions. COLLATERAL REGISTRIES & SECURED LENDING In emerging markets, many companies, especially smes, cannot access credit due to inadequate collateral frameworks. IFC provides advisory services to support the development of a well-functioning secured lending framework through a delivery model that focuses on harmonizing laws, building electronic registries, streamlining registration processes, and eliminating unnecessary paperwork. ifc s advice is provided jointly with the World Bank through investment climate advisory services to foster the use of movable assets such as equipment, vehicles, accounts receivable, inventory, and others as collateral in exchange for loans. as of today, advisory services have been provided in 10 countries and a

15 access to Finance HigHligHts RepoRt number of learning events have been organized. Meanwhile, demand in this area is increasing: six new projects are in the pipeline for FY10/11, particularly in africa and ida countries. in addition to the key accomplishments illustrated in china (see case study), other key accomplishments include: the passage of secured transactions laws and regulations in Vietnam, lao pdr, afghanistan, and Rwanda; and the creation of leasing/collateral registries in Yemen. the secured transactions portfolio includes ongoing projects in Vietnam, lao pdr, indonesia, nepal, countries belonging to ohada, ghana, Rwanda, Yemen, and afghanistan, with a strong pipeline of projects in Uganda, Bangladesh, Jordan, azerbaijan, Kazakhstan, and the Dominican Republic. the World Bank group has been active in over 100 countries supporting regional, multi-, or single-country initiatives, and providing technical advice on a broad range of topics. in 2009, the World Bank group was assigned the responsibility of chairing and coordinating the g8 global Remittances Working group. it also received endorsement by the g8 for implementing the (5x5) cost reduction objective. During 2009, the payment systems Development group further improved the World Bank-iFc Remittance prices Worldwide database by including new country corridors and coverage of rural areas (see Box 3). PAYMENT & REMITTANCES SYSTEMS efficient, secure, and reliable payments and securities settlement systems reduce the cost of exchanging goods and services and enhance the overall stability of the financial sector. they also help promote economic growth. a well-functioning payment system is crucial infrastructure for enabling safe and cost effective remittance services.

16 14 RESPONDING TO THE CRISIS THE IMPACT OF THE CRISIS ON EMERGING MARKETS the global financial crisis that started in late 2008 culminated in a recession of unprecedented magnitude since the end of World War ii. the global slowdown has significantly impacted financial institutions and real sector companies in a variety of ways lack of liquidity, declining demand for goods and services, and declining asset quality. the crisis and its aftermath pose major challenges for the world s economies, including emerging markets, and require coordinated action to address liquidity constraints, and capital and asset quality issues faced by financial and real sector entities to ensure sustained economic recovery. emerging economies are facing a severe reduction of global demand for their exports, asset prices have plummeted, remittances have decreased, investments have dried-up, employment is under threat, and internal consumption has decreased. enterprises in all industry sectors and all size segments are facing difficulties. as a result, defaults have increased across all banking loan segments consumer and housing, micro, small, and medium enterprises (MsMes), corporate, and project finance. Data show that ifc MsMe banking clients have experienced strong growth in the past two years, but that nonperforming loan percentage could increase to a minimum of 10 percent globally by the end of the combined effect of stagnating portfolios, increased defaults due to aggressive loan portfolio growth and economic slowdowns, is likely to feed back into the financial sector leading to further financial sector losses, even in regions where initial liquidity issues were appropriately managed in the early stages of the crisis. in this context, ifc s strategic objective is to play an active role to stabilize and stimulate financial activity, minimizing the impact of the crisis on economic growth and job creation in emerging markets. ifc s crisis response is comprehensive. it addresses liquidity, solvency, and risk mitigation challenges through a combination of investment and advisory services. investment initiatives targeted at the financial sector include a Microfinance enhancement Facility, Bank capitalization Fund, infrastructure crisis Facility, global trade liquidity program, an expanded global trade Finance program, and the Debt and asset Recovery program. advisory initiatives cover Financial infrastructure, Risk Management, and loan portfolio Monitoring and Workouts programs.

17 access to Finance HigHligHts RepoRt WEATHERING THE CRISIS A2F ROLE the a2f crisis response targets both financial institutions and the broader financial infrastructure. it addresses short-term immediate needs, as well as more medium- and longer-term systemic market support. the objectives of a2f advisory support are to: help financial institutions assess and quantify risks and internal weaknesses that threaten their sustainability in the context of the crisis; propose plans that can be acted on immediately, including medium-term capacity-building and organizational strengthening plans to mitigate the impact of the crisis; create impact on the broader financial sector beyond IFC direct client portfolio, through dissemination and awareness-raising of best practices; and ensure that the crisis does not end access to financing for the poor and underserved populations/areas. as an emergency response to the crisis, a2f immediately shifted the focus of its relevant existing advisory programs in sme banking, microfinance, housing, and leasing to assist financial institutions in prioritizing actions, steering them through the crisis, and protecting their clients and business in the respective market segments. In particular, existing a2f advisory projects address demand from financial sector clients for assistance with risk and portfolio management and loan servicing. In parallel, the ongoing Financial Infrastructure programs were quickly scaled up to strengthen both financial stability and access to finance through better payment systems, remittance regimes, credit reporting systems, and secured transactions frameworks. a2f programs also have an increased focus on financial inclusion and responsible lending practices. to ensure a timely response to the crisis and adequate resources, ifc a2f is building on its regional capacity as delivery channels, redeploying existing specialists resources and seeking additional funding and resources for the new programs. NEW A2F CRISIS RESPONSE PROGRAMS a2f s new advisory programs support the financial sector and help partner financial institutions objectively assess risk and identify immediate actions to mitigate the effects of the financial crisis and limit the credit-crunch period that will follow the crisis. new a2f programs include Risk Management advisory and loan portfolio Monitoring and Workouts/nonperforming loan Management. these programs help emerging market financial institutions by improving risk management and internal control practices, and improving portfolio monitoring and nonperforming loan management practices. activities target all types of financial institutions and portfolios, with specific techniques and tools adapted to each segment retail/consumer, MsMe, housing, and corporates. to achieve broader public benefits beyond IFC clients, initiatives are carried out at two levels, across regions:

18 16 at the institutional level, building capacity of financial institutions to monitor their portfolios and manage their nonperforming loans and overall risk management; at the sector-level, raising awareness of best practices in risk and nonperforming loan management and working with the World Bank on distressed asset resolution initiatives. Risk Management Advisory includes capital adequacy, liquidity, asset-liability management, and operational, market, and credit risk. It covers overall risk frameworks, policies, and governance in relation to business strategy and operating environment, as well as risk measurement, reporting, and control frameworks. in the short-term, ifc is focusing on assessing vulnerabilities and gaps, liquidity, and capital enhancement, in coordination with investment activity, including the Bank capitalization Fund. it is helping clients identify and prioritize issues in addition to disseminating best practices to the broader market. the program strengthens risk management capacity at financial institutions. in response to the financial crisis and in collaboration with the Risk Management advisory program, a Risk assessment Framework was developed and introduced in europe and central asia and in latin america and the caribbean. Loan Portfolio Monitoring and Workouts/Nonperforming Loan Management for consumer, sme, and corporate lending. the program develops and institutionalizes ifc global knowledge in loan portfolio monitoring and workout to optimize country and clientlevel implementation work carried out by the regional ifc advisory services facilities. the program is designed to establish IFC as a center of excellence and knowledge management in loan portfolio monitoring and workout, while providing best practice expert advice to complement advisory services implementation across IFC regions and facilities. the support encompasses a mix of sector level and institution-building activities, with a strong knowledge management and dissemination component embedded in the program design. along its core components, the program builds local private sector capacity with international and local partners, and develops advisory services packages that are easily scalable and maximize impact of interventions. the program expects to have a strong developmental impact by helping to develop a sustainable financial sector through a better credit culture, and complementing a2f advisory effort to mitigate the impact of the crisis on MsMes and individuals by ensuring that the crisis does not lead to a complete lack of access to financing.

19 access to Finance Highlights Report EARLY A2F ACHIEVEMENTS IN RECORD DELIVERY TIME As part of IFC s global knowledge management agenda, risk and nonperforming loan management programs have already delivered a set of diagnostic/capacity building tools in risk and nonperforming loan management (Risk Assessment Framework, Risk Management Training Curriculum for financial institutions, Deep Dive Banking NPL Diagnostic Tool, Global Best Practices in Portfolio Monitoring & NPL Management, Options & Best Practices in NPL Sales, Best Practices in MFI Collections) complemented by a set of sector or region-specific tools developed by regional IFC A2F teams. During the first months of crisis response activities, A2F launched a sustained dissemination effort across regions, resulting in 30 risk management/nonperforming loan banking sector workshops and conferences organized across 28 countries and covering all IFC regions. Regional A2F teams also initiated a wide institution-building effort through direct engagement with nine client banks in Gaza and West Bank, Guyana, Peru, Russia, and St. Lucia, conducting risk management and nonperforming loan diagnostics. The pipeline includes work with further 19 client banks across 11 countries throughout Europe and Central Asia, Middle East and North Africa, Sub-Saharan Africa, and Latin America and the Caribbean. At the policy level, A2F partnered with the World Bank on sector-level distressed asset resolution initiatives in 10 countries throughout Europe and Central Asia, and Middle East and North Africa. A2F also established a joint IFC- World Bank-IMF Distressed Asset Resolution and Insolvency Thematic Group with 72 investment and advisory members. The group works to catalyze the development of a distressed asset market through a combination of investments and advisory services, both on an institutionspecific micro level as well as on the market infrastructure macro level. As part of its distressed assets-related activities and standard- setting work, A2F also completed a White Paper and Guidelines on Global Practices in Responsible and Ethical Collections. This effort is closely coordinated with the ongoing responsible finance work led by the World Bank. A2F increasingly leverages regional expertise and streamlines institution building work with financial institutions to develop and institutionalize global knowledge. SCALING-UP A2F FINANCIAL INFRASTRUCTURE PROGRAMS The Financial Infrastructure Group, a joint World Bank/IFC team, has accelerated its activities to strengthen underlying enabling financial infrastructure in response to the crisis. The Group s activities center on the following financial infrastructure areas: payment and securities settlement systems, remittances, credit information sharing systems, collateral registries and secured transactions frameworks. The Financial Infrastructure Group aims to enable financial inclusion and responsible lending practices, by promoting credit reporting for microfinance and SMEs, building collateral registries and secured transactions frameworks and supporting reforms to global payment and remittance systems in the world s poorest countries. The total number of engagements in developing credit bureaus and collateral registries increased from 51 to 66 between FY08 and FY09. Payment systems reforms were underway in over 50 countries in FY09. The Group s efforts on developing microfinance and SME credit reporting systems currently covers 20 countries. In FY09 IFC supported credit bureaus were launched in Egypt, Morocco and Nigeria. The Group also supports development of enabling legal and regulatory frameworks, with recent successes including the passage of secured transactions laws and regulations in Vietnam, Lao PDR, Yemen, Afghanistan and Rwanda, and the official gazetting of credit bureau regulation in Kenya. In the July 2009 L Aquila summit of the G8, Heads of State pledged to reduce costs of remittance transfers by 5 percent in five years, an achievement largely enabled by the critical efforts of the G8 Global Remittances Working Group, led by the World Bank, as part of the Financial Infrastructure Group s efforts to develop international standards covering key financial infrastructure areas. The World Bank is currently leading the effort to develop international standards in the area of credit reporting. In FY10 our focus includes developing capacity for prudential supervision and regulation through the use of credit information data; applying joint assessment and reform approaches to developing financial infrastructure; developing targeted financial literacy programs; continued ramp up of current programs and activities in IDA countries; and a host of knowledge management activities.

20 18 PORTFOLIO TRENDS A2F advisory services is the largest of IFC s business lines. In FY09, IFC A2F advisory had 298 projects and programs in 72 countries 141 projects in IDA countries and 58 in fragile and conflict-affected countries. These projects represent $54.5 million in expenses, with about 36 percent of expenditures in IDA countries and 14 percent in fragile and conflict-affected countries. A2F PORTFOLIO IN FY09 Special Initiatives 7% Financial Infrastructure 14% Other 4% Housing Finance 11% Trade Finance 1% Securities Markets 2% (GEMLOC and ESMID) Insurance-GIIF 0% Sustainable Energy Finance 10% Leasing 7% SME Banking 22% A2F SPENDING IN FY09 Special Initiatives 5% Financial Infrastructure 8% Other 1% Housing Finance 13% Trade Finance 2% Securities Markets 2% (GEMLOC and ESMID) Insurance-GIIF 0% Sustainable Energy Finance 25% SME Banking 19% Leasing 7%

21 access to Finance HigHligHts RepoRt IDA AND CONFLICT-AFFECTED AND FRAGILE COUNTRIES, AND MSME FOCUS ifc s a2f advisory services has a strong emphasis in implementing projects and programs in ida countries. about half of ifc s a2f advisory services projects were in ida countries over the last fiscal year, while spending reached 36 percent of all a2f projects and programs. these programs are expected to grow further over the next three years as the ida focus continues to grow. projects and programs in conflict-affected and fragile countries will also remain a key focus for a2f, particularly in africa and Mena regions. ifc s committed portfolio in financial institutions that serve MsMes have grown dramatically over the last five years by 281 percent with a committed portfolio of almost $7 billion in FY09 alone. at the same time, over 70 percent of a2f advisory services focus on MsMe clients. as of December 2008, ifc s financial institution clients that received a2f advisory services held about 5.5 million MsMe loans worth over $45 billion in countries such as afghanistan, Bangladesh, nicaragua, pakistan, Rwanda, tajikistan, and tanzania. over the last year, financial institutions that received a2f advisory services reported an increase of 18 percent in number of MsMe loans outstanding, while volume increased by 15 percent.

22 20 MEASURING RESULTS MONITORING AND EVALUATIONS Measuring results is at the core of every A2F advisory services project cycle and is critical to ensuring overall A2F strategic goals are achieved. Through results based management, IFC s combined investment and advisory services offering has continued to deliver strong results. Key figures of the reach of our A2F advisory services are: ifc s sme Banking clients have generated $41.3 billion in financing and helped improve access to finance for 486,550 small and medium enterprises. ifc s Microfinance clients have provided $4.5 billion in financing to about 5 million micro enterprises. ifc s leasing clients provided 18,211 leases to micro, small and medium enterprises worth $1.7 billion. ifc s Housing finance clients financed 57,734 homeowners with more than $3.1 billion in mortgage loans. ifc s trade Finance clients have originated over $1.5 billion in trade for 64 issuing banks in 33 countries. ifc has helped create or improve credit bureaus in 13 countries over the last five years. in 2008, these credit bureaus received 38.9 million inquiries and helped generate about $19 billion in new financing. MONITORING RESULTS a2f projects are monitored regularly throughout implementation. each project must specify a2f indicators that reflect the objectives of the project, with baselines established, and targets expected to be achieved. During the life of any given project, actual results are monitored against stated objectives and their respective indicators. Once a project is completed, the development effectiveness of the project is assessed, with project ratings supported by actual results achieved, as well as the efficiency ( bang for the buck ) in achieving such results. lessons learned are ultimately harnessed at project completion, so that new projects in similar product areas or markets may benefit from improved design.

23 access to Finance HigHligHts RepoRt EVALUATING IMPACT evaluations play a complementary role to a2f project level monitoring, which are limited to demonstrating outcomes at the institutional level, rather than broader impacts at the market, sector and/or end-beneficiary levels. through rigorous evaluation methods and tools, such as the use of control groups and in-depth assessments through before and after analyses, impact evaluations provide a more robust assessment of the impact of a2f advisory services work. given the level of resources required to effectively manage impact evaluations, a selective approach is used to determine programs and projects that are evaluated. For instance, large, multi-year, or multicountry programs with multiple clients, as well as innovative products within a market with replication potential in other markets would be considered as strong candidates for in-depth evaluation. Over the last year, evaluations were underway across major a2f product areas. evaluations that were undertaken in 2009 include the following programs: global trade Finance program (gtfp); efficient securities Markets institutions Development (esmid) program; lac Micro, small & Medium enterprise (MsMe) program; china energy efficiency program (chuee); and Housing Finance programs in Russia and pakistan. EVALUATION OF GLOBAL TRADE FINANCE PROGRAM in 2009, ifc s global trade Finance program (gtfp) decided to conduct an external evaluation 2 to assess the interim results of its three years of trade advisory services operations. the evaluation firm sent out the survey questionnaire to all participants who have attended ifc s trade finance training programs in the past three years. overall, the evaluation concluded that the gtfp trade advisory services is well structured and delivers products that are valued by issuing banks. Quality of the training sessions was unanimously rated very high by all participants and appears to have improved technical skills and career opportunities. product range of ifc offerings in trade advisory services is very comprehensive and covers all potential needs issuing banks could have in the trade finance domain. geographical allocation of resources is both relatively well diversified (52 countries in 5 regions) and the vast majority of training efforts have been oriented to ida countries, which is indicative of a strategy to channel resources to where they are needed most. Within the countries reached, an impressive number of banks (367 banks) and participants (1,425) have been reached. However, all participants are from trade finance department of each issuing bank, and it is argued that trade finance products need to be understood outside of the trade finance department within a bank as well, notably to corporate account officers and credit analysts. a higher focus on train the trainers program for trade finance champions within each bank may be recommended going forward. Budget of advisory services operations is small whereas the demand of trade finance training from gtfp issuing banks is very high, indicating lack of institutional recognition of the importance of trade and the need for supporting training. ifc s trade advisory services has delivered 68 training programs since its launch in it has trained 1,425 people from 367 banks in 52 countries. among those training participants, 57 banks have joined ifc s global trade Finance program (gtfp), and $487 million in new trade lines has been facilitated by IFC $1.8 billion of trade has been generated by training participating banks through gtfp as of June 30, Results are preliminary, based on Evaluation of the Global Trade Finance Program, August 2009 (fi nal draft, pending publication).

24 22 CASE STUDIES HIGHLIGHTS This section highlights just a few of the ways in which IFC, its partners, and clients are working together to increase access to financial services by underserved groups in developing countries. BUILDING INSTITUTIONS, INCREASING SME FINANCING BANGLADESH smes contribute nearly 85 percent of Bangladesh s gdp. However, their growth continues to be hampered by the challenge they face in accessing financing from formal lending institutions. the banking industry has long been ignoring this sector. in 2005, eastern Bank ltd., a local commercial bank in Bangladesh, recognized the potential within the untapped market of small businesses and solicited assistance from IFC to develop a system to cater to the specific needs of smes. the then-managing director (Mr. Mahmud sattar) of the Bank said, I believe we are catalyzing a change in mindsets amongst banks, by highlighting the untapped potential of the SME markets. Not only is SME financing important for economic growth, but also it represents a huge opportunity for local banks. ifc assessed the existing capacity of the bank and developed a strategy for a sme-specific department. ifc worked with eastern Bank to set up an sme department, develop new products, and train staff in sme financing. ebl also took its own initiative in developing an information technology (it) system to run sme operations, and invested in specific hardware and software. By 2009, ebl has tripled its value of outstanding sme loans (from about Us$16.7 million in 2006 to nearly Us$54 million in March 2009) and added around 2,700 sme clients (from 300 in 2006 to 3,000 in March 2009) to its portfolio. ebl has introduced seven sme loan products, opened 18 sme branches, and employed 119 sme staff with dedicated services for women borrowers. its sme loan portfolio is now 10 percent of the total portfolio. eastern Bank continues to invest in research and development of new products and training of its staff to ensure the growth of its sme portfolio. the bank has set an aggressive target to increase its sme loan portfolio to Us$85 million by the end of 2010 (20 percent of its total loan portfolio). ifc is working with the bank to achieve this goal.

25 access to Finance HigHligHts RepoRt DEVELOPING LEASING IN AZERBAIJAN & CENTRAL ASIA ifc, in partnership with seco, has laid the ground for leasing development in central asia since predecessor projects helped create a transparent and viable legal and tax environment for leasing in the region. they also revealed the need for more targeted advisory services to build overall institutional capacity, and in particular to continue securing a favorable legislative environment for leasing. to respond to this market need, ifc created the azerbaijan-central asia leasing Facility advisory services project (acalf). the overall goal of acalf was to expand the leasing environment for smes through a significant advisory services program that would strengthen and build leasing capacity in four countries: azerbaijan, the Kyrgyz Republic, tajikistan, and Uzbekistan. acalf significantly contributed to the institutional capacity development and increased investment attractiveness of its clients. It also played a substantial role in further legislative improvements related to leasing, in building overall market institutional capacity through training and other client consultations, and in raising public awareness about leasing markets. Bang for Buck impact: each Us$1 spent by acalf has generated: Us$60 of new leasing deals by participating financial institutions (pfis); Us$8 of annual economic benefits to pfis from information technology upgrades (once completed); Us$62 of foreign investments into pfis; Us$14 of ifc investments into pfis; and Us$118 of growth in the overall leasing market. the project also helped governments draft and adopt eight laws to facilitate leasing, including contribution into the new tax codes in the Kyrgyz Republic and Uzbekistan. the project developed 65 training modules, training 740 people in areas such as risk management, human resource management, financial analysis, and monitoring of leases. the project training modules were on leasing basics, credit analysis in leasing, and microleasing. SCALING UP MICROFINANCE THROUGH TRANSFORMATION IN COLOMBIA the colombian microfinance industry has seen impressive growth for longer than a decade but still only reaches a small percentage of its potential market. One way to increase access to finance for the poor that has proven successful in many cases around the world is through the transformation of nongovernmental microfinance providers into regulated deposit-taking financial institutions. these transformations have successfully taken place in Bolivia, Kyrgyzstan, peru, tajikistan, Uganda, Kenya, among other countries. In Colombia, IFC is supporting the transformation of Fundacion Mundo Mujer popayan (FMM popayan) into a regulated, deposit-taking institution. FMM popayan has been operating for 24 years as a non-profit ngo devoted to provide microcredit to local micro entrepreneurs. With a loan portfolio of over $175 million and more than 200,000 clients, FMM popayan has been classified as one of the most successful and efficient microfinance institution in latin america. ifc has supported the expansion of the portfolio of FMM through a Us$6 million senior loan and is willing to take an equity stake in the supervised entity, once it is established. In spite of its success, it became apparent for FMM popayan s management that in order to be sustainable and competitive it needed to become a regulated financial institution.

26 24 given the complexity of transformation processes, FMM popayan requested ifc s advisory services to support such effort. ifc designed an advisory services product to support the institution in strategic and operational planning, credit risk management, and preparation of terms of reference for future consultancies related to the transformation. the project lasted from november 2008 to July after a successful completion, FMM popayan requested that ifc remain involved in the transformation process through an advisory services project. the components of the second project include improving risk management systems; revising credit policies and procedures and reinforcing training capacity mainly in credit issues; improving the finance and treasury area of the institution; and designing and implementing savings products. ifc believes that ngos that transform themselves into regulated microfinance institutions will play a key role in scaling up microfinance and increasing access to finance at the bottom of the pyramid. supporting the transformation of non-profit organizations into for-profit financial intermediaries is one of the ways ifc supports microfinance globally. INITIATIVES IN AGRIFINANCE lack of access to finance has been considered one of the key impediments for farmers to adopt better technologies and improve the efficiency of their production. ifc has initiated a number of projects to improve farmers access to finance, with some notable examples including the africa region. ifc s new africa agricultural Finance project (aafp) supports local financial institutions to improve their agricultural lending capabilities and also working with agricultural supply chain organizations to improve financing to these supply chains. More specifically, the aafp program will help financial institutions establish and/or further develop their agri lending activities. the amount and nature of this advisory would be tailored extensively to the needs and strategy of each participating client financial institution. the program will initially target banks, microfinance institutions, and leasing companies that have presence or are interested in expanding to rural areas. Financial institutions selected for this program will be offered a combination of ifc investment and advisory services with the objective of having a strong and immediate impact on the flow of agriculture financing. ethiopia s economy is heavily based on agriculture, which accounts for almost 50% of gdp, 60 percent of exports, and 80 percent of employment; however, farmers and smes have limited access to finance. Unfortunately, the current statistics demonstrate that local financial sector s exposure to agriculture is less than 5-7 percent of their outstanding portfolio, despite the size of the industry and the demand. IFC intends to support the agriculture sector in ethiopia by increasing access to finance through warehouse receipts (WHR)-based financing and assist the move toward a more efficient and transparent agricultural marketing system for both domestic and export markets. this program is built on ifc s experience with WHR in Indonesia.

27 access to Finance HigHligHts RepoRt IFC LEASING PROGRAM HELPS RWANDAN COFFEE FARMERS the humble bicycle is helping boost the income and better the lives of 1,200 coffee farmers in Rwanda, thanks in part to ifc s leasing program in the country. coffee is a major source of export income in Rwanda, a country that is still recovering from genocide and the resulting turmoil of the 1990s. Most of the country s 10 million people work in the agriculture industry or toil at their own small farms to survive. IFC, in partnership with a local subsidiary of an international nongovernmental organization, is expanding a program that allows local coffee farmers to lease durable, eight-gear bicycles with a specially fitted shelf to haul heavy loads. a program to lease custom-made bicycles to coffee farmers was initiated by the U.s. agency for international Development (UsaiD) and spread, a civil society organization. it has made a dramatic impact on an industry that still relies on strength, sweat, and stamina. IFC has teamed up with Vision Finance, the financial arm of World Vision international, to help expand and commercialize the program in Rwanda, allowing local coffee farmers to lease bicycles that can carry about four times as much as the strongest farmers can move on their backs. this enables farmers to bring their harvest to distant washing stations much faster, meaning the beans will be fresher and obtain a higher price at market. issac Murenzi, a married father of four children, is a coffee farmer from Rwanda s southern gitarama province. He knows the hard work involved in hauling heavy bags of freshly picked coffee beans some weighing up to 50 kilograms. The coffee bike has changed my life, Murenzi said. It allows us farmers to transport our coffee on the same day, improving the quality of coffee we deliver. This in turn has helped increase our earnings, since we have been able to meet the demands of the market both in quality and quantity. some 1,200 farmers are now using the bicycles, which they purchase for about $140 through a lease-to-own program that was designed largely by ifc. payments are made over the course of a year, ensuring that the cost does not bite deeply into the farmers monthly income. ifc has had much success in developing leasing programs in Russia, Ukraine, and central asia, and is excited about bringing these models to africa. IFC is a pioneer in introducing Leasing Programs to post-conflict countries like Rwanda, said Thierry Tanoh, IFC Director for Sub-Saharan Africa. He noted that leasing helps businesses grow by giving them the chance to introduce vehicles or equipment that would otherwise be too expensive to buy. This ultimately benefits the economy by boosting employment and increasing the tax base. ifc is also developing specific leasing models in cameroon, the Democratic Republic of congo, ghana, Madagascar, senegal, and tanzania all countries where legal frameworks for leasing are either rudimentary or nonexistent.

28 26 SECURED TRANSACTIONS MEASURABLE IMPACT IN CHINA in March 2007, china s national people s congress passed the historic property law which, among other things, adopted a number of important principles of modern secured transactions laws recommended by the people s Bank of china (pboc) and the ifc. as a result, according to the Doing Business report, china s collateral law index score, which measures the degree to which secured transactions laws facilitate lending, has increased from 0 to 6. in october 2007, with support from ifc, the pboc credit information center created a national online registry for pledges of receivables, the first of this kind for china. as of January 2009, the credit information center has reported an impressive impact: over 75,000 registrations representing loans with a value estimated at over Us$570 billion. More than 100,000 searches have been performed in the registry. of the Us$570 billion in financing, approximately Us$240 billion corresponds to sme financing. For each dollar spent by the project, Us$425,373 was generated as financing to firms, and out of that, Us$179,000 corresponded to new financing to smes per dollar spent. the number of smes that have benefited by being able to access credit is around 11,500. the percent of moveable based lending in china went from 12 percent pre-reform and prior to the creation of the receivables registry, to 20 percent after its creation. the factoring industry was introduced in china and the value of domestic factoring has reached a volume of Us$ 21 billion. around 3,000 people have participated in workshops, trainings, and awareness raising events. among the registry s 5,000 users are banks, guarantee companies, law firms, finance companies, and pawn shops. the user experience with the registration system has been overwhelmingly positive. 3. Doing Business. CRISIS RESPONSE ADVISORY WORK IN EUROPE AND CENTRAL ASIA ifc s a2f program in europe and central asia (eca) has developed a comprehensive crisis Response advisory program. through this program, the ifc catalyzes development of a distressed asset market through investments and advisory services on the micro (institutional) and macro (market infrastructure) levels. these efforts are providing companies with crisis management support. Banks need help to better manage the crisis, namely by focusing on the real quality of their portfolio, while real sector companies, especially smes, require access to much-needed funding. at ifc s 13 public awareness seminars throughout eca, participants discussed loan resolution, real estate portfolio concerns, and interest and liquidity risk management. the seminars, jointly organized with local partners, attracted more than 400 participants from 130 banks. The problem of nonperforming loans has become part of our daily life. We welcome IFC s initiative to help us deal with the most important issue for the Georgian banking sector, stated Irakli Giorgobiani of Georgia s TBC bank, who attended an IFC seminar.

29 access to Finance HigHligHts RepoRt ifc has also developed crisis-related management tools for financial institutions, including diagnostic tools, a mortgage borrower s information guide, and an assetliability Management manual with reporting software. these and other tools developed are now in widespread use across Russia and Ukraine, and are being distributed across eca. in addition, a joint team of advisory staff across business lines and the World Bank analyzed the current legal environment and mobilized a working group with key stakeholders for legal reform in Ukraine, advising neighboring countries on insolvency legislation. INDUSTRIAL BANK FIRM ON SUSTAINABLE FINANCE DURING ROUGH TIMES senior management at industrial Bank continues to provide loans to support sustainable energy projects even during the current global financial crisis. typical projects include energy efficiency, renewable energy, and cleaner production in the industrial, commercial, and residential sectors. From July 2008 to the end of June 2009, Industrial Bank disbursed 29 new loans under the china Utilitybased energy efficiency Finance program (chuee) to chinese borrowers. the projects supported by those loans (total disbursement about 1.3 billion RMB or Us$200 million) will lead to emissions reductions of more than 8.36 million tons of CO2 per annum. Mr. chen Dekang, the vice president of industrial Bank, told ifc: During bad times, it is even more important for companies to find ways to cut operating costs, which means there are even more reasons for the efficiency improvement in the use of energy and other valuable resources. also during this period, industrial Bank officially became an equator principle bank. in addition, in the last year the Bank created two designated divisions the sustainable Finance center and the sustainable Finance compliance Unit. the former is in charge of business development while the latter assures compliance of the bank s business conduct with principles such as equator principle. chuee supports marketing, development, and equipment financing services to energy users in the commercial, industrial, institutional, and multi-family residential sectors to implement energy efficiency projects in china. chuee brings together financial institutions, utility companies, and suppliers of energy efficient equipment to create a new financing model for the promotion of energy efficiency. through chuee, ifc has worked with two local banks since 2007 to finance projects involving energy efficiency and emission reduction. in just under 30 months, the two partner banks have disbursed more than $471 million in 107 loans to projects leading to an annual emission reduction of more than 14.5 million tons of CO2.

30 28 DEVELOPING CREDIT INFORMATION SHARING IN EGYPT iscore in 2005, the World Bank and ifc developed a country assistance strategy for egypt, and based on recommendations, the central Bank of egypt (cbe) requested World Bank assistance to strengthen egypt s credit reporting environment. the World Bank s assistance resulted in the passage of amendments to the Banking law of egypt in June the amendments, among other things, allowed the sharing of credit information with nonbank financial institutions and authorized the cbe to license and regulate private credit bureaus. in august 2005, iscore (previously estealam), egypt s first credit bureau, was formally incorporated with equal participation through private and public egyptian Banks, in addition to the social Fund for Development. iscore was granted a preliminary license by the cbe in september 2005 pending the completion of its operating systems and business plan. in late 2005, ifc was asked to provide technical assistance to help develop iscore. over the course of the next year, IFC concluded a technical assessment of the initial market of iscore s customers, and made recommendations to iscore s first set of customer banks addressing necessary technological and informational improvements. in addition, ifc advised iscore on developing its business plan. Most critically, ifc helped iscore through a long and sensitive procurement process to choose a technical partner: Dun & Bradstreet (D&B). iscore signed a contract with D&B in september 2006 to begin the process of developing the bureau. D&B was responsible for developing the technical infrastructure for iscore and implementing the credit bureau system/database, providing management consultancy on the business operations side of the bureau, and providing training to iscore staff and member banks. subsequently, ifc was retained by iscore in a second phase of the project, to provide support in the implementation phase of the bureau. this included several responsibilities, such as overseeing vendor implementation, reviewing in excess of 30 technical and process manuals, helping iscore develop operational rules and strategies, assisting in the drafting of the bureau s code of conduct and subscriber agreements, managing the user acceptance testing process, and final verification of properly functioning vendor installed systems. ifc also reviewed vendor training materials and oversaw training by the vendor of 33 service subscribers on using the iscore portal and troubleshooting. the training was delivered to knowledge champions at subscriber institutions who then disseminated the information to various other users. close to three years after ifc s initial engagement with iscore, the bureau was commercially launched in July With support from IFC and the systems vendor, iscore s data center was vastly expanded to include 9 million data records, a 13-fold increase from the baseline of 0.9 million facilities initially held by the cbe s public credit Registry. the data pertains to almost 4.8 million sme and consumer borrowers. iscore currently services the credit information needs of 55 institutional subscribers, which includes 41 banks, 8 mortgage finance companies, 4 leasing companies, the egyptian social Fund for Development (sfd), and one retailer. all banking institutions and sfd have completed the credit data migration process to iscore. Mortgage finance companies have submitted approximately 65 percent of their data records, and the 4 leasing companies 35 percent of their data. as of December 2008, iscore has issued over 1 million credit reports, signed up 55 subscribers, and improved its scores on Doing Business Indicators 4 related to credit information. In doing so, the bureau has already 4. Doing Business.

31 access to Finance HigHligHts RepoRt enabled an estimated $1 billion in financing. on the indicator s overall ranking of 183 countries, egypt advanced 85 places to rank 71 in 2010 from 156 in the private Bureau Coverage, an index of adult population coverage, increased from 0 percent in 2007, to 8.2 percent in the 2010 Doing Business report. likewise, on the Depth of credit information index, egypt s score increased from 2 of 6 in 2007, to 6 of 6 in BANKING ON WOMEN IN BUSINESS TANZANIA S EXIM BANK exim is tanzania s seventh-largest bank by asset size. the bank traditionally focused on serving corporate clients but faced with an increasingly competitive banking sector, exim wanted to expand to underserved locations and markets. Women in business represent a growing but still underserved market, with only about 8 percent of women-owned businesses having access to bank finance. exim started looking in this direction for potential new business opportunities, but had no previous experience in serving small and medium entrepreneurs, and specifically, women entrepreneurs. exim bank partnered with ifc in ifc provided a Us$5 million credit line for lending to women entrepreneurs and specialized advisory services to support the design and roll-out of its Women entrepreneurs Finance (WeF) program. IFC provided access to international knowledge and expertise in the women s market through the global Banking alliance for women and worked with exim bank to review and improve its delivery of financial services to businesswomen. WeF includes both training for women entrepreneurs to make them more bankable, as well as training for bank staff on gender-sensitive customer service. From , exim s WeF program made great achievements. portfolio increased UsD $6.2 million was disbursed to over 110 women entrepreneurs. savings accounts opened more than tripled. new savings and loan products were devised to encourage women to save. a new partnership with micro-insurer sero lease created a platform to reach out to microfinance clients with good credit histories. Risk reduction a 0 percent default rate in the Women s sme portfolio relative to overall non-performing loans of 2.43 percent. training Financial management and How to Become Bankable training delivered to 528 women entrepreneurs. Reputation enhancement First financial institution to offer a WeF program for women running mid-sized businesses in tanzania. networking and mentoring increased In the process of establishing a Women s club to facilitate mentoring and networking opportunities among women entrepreneurs.

32 30 exim s brand equity and image improved with the WeF program. WeF is playing an important role in the mobilization of savings and positioning the brand in the retail segment. ifc experience shows that banking on women entrepreneurs is a profitable business as women entrepreneurs have excellent repayment rates, are good savers, and contribute positively to their community s well-being. HELPING UKRAINE CREATE A SUSTAINABLE AGRI-INSURANCE SYSTEM in early 2008, ifc officially launched the agri-insurance Development project to help Ukraine create a sustainable agricultural insurance system. Quality agriinsurance will help Ukrainian producers better manage their risks, stabilize their incomes, and increase their access to credit. good insurance protection helps producers, by reducing their risks related to natural disasters, to be more confident in financial decisions, and adopt modern technologies. this is especially relevant in the light of the world food crisis. Ukraine, already one of the major grain exporters, is in a position to increase production and contribute significantly to mitigating the crisis. creating a sustainable agriculture insurance system requires an effective agri-insurance system. However, Ukraine s agri-insurance sector is still in its infancy. the appropriate legislation and regulatory environment does not exist. insurance companies lack technical expertise and experience. insurance is data-driven, but data for actuarial calculations, proper assessment of risks, and the establishment of actuarially sound premium rates was not systematically collected at the start of the project. the cost of insurance due to these shortcomings is too high. to help Ukraine address these issues, the ifc Ukraine agri-insurance Development project works in a comprehensive way with key stakeholders with funding from cida. the project helps Ukraine create a public-private partnership including government, the insurance industry, and producers, to achieve sustainability in agri-insurance. a comprehensive government agri-insurance strategy was developed with participation of all these parties and work is underway to consolidate these gains in new legislation. the project is also active over a wide range of issues such as: a separate license for agri-insurance, collecting and managing data, introducing standard products, and standardizing loss adjusting and underwriting procedures. to improve agri-insurance, better insurance products are needed. the project works with insurance companies to introduce best practice and international standards in product development. this includes the active participation of producers, first to help them better understand various aspects of agri-insurance and then to take active part in forging an agri-insurance system that serves their interests, and developing new products that meet their needs. in spring 2009, the project implemented the producer education campaign for 603 agricultural enterprises operating on nearly 1 million hectares of farmland. the project has developed a new product for insuring winter wheat crops for the full growing season with the input from all major stakeholders involved. as a result, the new product takes into account and balances the interests of all parties. this is anticipated to increase insurance sales and consumer satisfaction. the new product is transparent, and the procedures understandable to farmers a requirement for building a new insurance culture based on trust. also, for the first time in Ukraine, the project established a data depository for the actuarial calculation of rates for the new product for each of the 490 rayons in Ukraine and developed standard underwriting and loss adjustment procedures that will be used by insurance companies. this product development cycle will be repeated and systematically integrated into a sustainable system.

33 access to Finance HigHligHts RepoRt IFC HELPS REVIVE THE MORTGAGE MARKET IN THE MALDIVES Housing is in chronic shortage in the Maldives as the country is caught between the competing difficulties of providing essential services to a widely dispersed population and coping with the task of an unmanageable congestion and untenable population density in the capital island, Male. the island hosts over 100,000 residents in an area covering 1.90 square kilometers. With limited or no access to long-term finance, the premier housing finance company, Housing Development Finance corporation, Maldives (HDFcM) had to stop lending operations. ifc s investment and advisory inputs in HDFcM is part of its ongoing initiative to support the development of the nascent financial sector in the country and help local financial institutions improve their operational capacity and increase access to domestic and international funding. ifc has assisted in the privatization of the 100 percent government-owned HDFcM and is helping to transform it into a commercially viable private sector-led company that would play a key role in providing housing finance to the low- and middle- income households, thereby reducing the severe housing shortage in the country. IFC has an agreed equity investment of 18 percent of the company in addition to a loan commitment of Us$7.50 million. additionally, ifc has designed a performancebased program for advisory services for setting up and implementing systems and processes related to loan origination, risk management, and corporate governance. through its representative on the Board, ifc is able to contribute to good corporate governance of the HDFcM and help ensure that the operations are conducted in the best interest of all stakeholders. HDFcM has restarted its lending operations following the infusion of equity and debt. Business volumes are expected to pick up substantially once certain legal issues pertaining to property rights are cleared by the government with respect to the newly developed Hulumale island, which is three times the size of Male. Foreign institutional investors have also started showing interest in extending long term lines of credit to the company. IFC BOLSTERS BANK OF SAINT LUCIA WITH FUNDING AND ADVICE the Bank of saint lucia is the largest banking institution on the caribbean island of st. lucia, enjoying a 40 percent market share. It offers a broad range of banking services, and recently expanded its focus on smes. a year ago, ifc approved a $20 million investment to support the Bank of saint lucia s services for corporations as well as smes. along with the investment, ifc advisory services helped the bank implement its sme strategy. the bank now has a business unit fully dedicated to serving the needs of smaller businesses. Just as the sme banking project got underway, the Bank of saint lucia had to deal with the local effects of the global financial crisis, which highlighted areas in the bank s risk management that could be improved. ifc responded immediately by offering to conduct a risk assessment, the implementation of which helped the bank better understand its risk management capabilities and take steps to improve them. this major local bank is now better prepared to weather future financial storms. the project also received support from the canadian international Development agency, a donor partner for advisory services programs in the english-speaking Caribbean. access to financial services for smes has been identified as a significant obstacle to private sector growth in the Caribbean, and has become particularly acute as a result of the global financial crisis. ifc s strategy focuses on improving access to finance for MsMes through partnerships with local financial institutions.

34 32 RECENT BOND ISSUE IN TANZANIA HIGHLIGHTS PROGRESS IN DEVELOPING LOCAL CAPITAL MARKETS local currency non-government bond markets in east africa are still small relative to those in east asia or latin america. in Kenya and tanzania, for example, only a handful of bonds are listed on the local exchanges. secondary market trading in these issues is very limited, and historically, the time required to obtain regulatory approvals and complete a bond issue was considered excessive. the ifc/ World Bank esmid program is working to address shortcomings in the local bond market in east africa (Kenya, Rwanda, tanzania, and Uganda), including, among other things, strengthening the primary market framework and streamlining the approval process for new issues. there are now positive signs that some of the changes recommended by esmid are beginning to take place. earlier this year, alluminium africa limited (alaf limited), a well-established, tanzanian-based producer of flat and long steel products and a company that has been operating in the east african region for many years, completed a highly successful tzs 30 billion (approximately Us$25 million) offering of fixed and floating rate notes that represents the first-ever stand-alone issue by a nonfinancial company in the domestic bond market. the issue, which was led by standard chartered, carried a final maturity of seven years and was placed entirely with local institutional investors. since alaf generates a significant portion of its earnings in tanzanian shillings, the issue allowed alaf to mitigate the currency risks which might otherwise have been associated with a foreign currency offering. alaf will use the proceeds of the issue to expand its local manufacturing capacity. Given the high quality of the issuer, the positioning of its credit profile and the deal structure, we were very confident that this issue could obtain the relevant capital market approvals without the need for third party credit enhancement and with just one local currency rating, said Ade Adebajo, Regional Head of Africa Capital Markets, Origination and Coverage, at Standard Chartered in London. in the end, despite going through a rigorous process to ensure adequate and complete disclosures, we were very pleased with the [regulator s] efficient and prompt turnaround time on the approvals for this offering, which suggests that some of the bond market reforms proposed by esmid are beginning to take root in tanzania. the esmid program supports domestic non-government bond market development and aims to increase access to long-term local currency financing in key sectors, such as infrastructure, housing, and microfinance/ sme lending. it also aims to increase the supply of investment products for institutional investors, such as local pension funds. the program combines enabling environment advice covering the regulatory framework, market infrastructure, market participants, and regional market integration, where appropriate with support for replicable, demonstration transactions that help pave the way for other bond issues to come to market. By integrating enabling environment assistance with transactions support, both the advisory team and clients are able to gain a better understanding of the specific challenges impeding market development and can then incorporate this knowledge into more informed and targeted policy assistance, said Clemente Del Valle, ESMID global program manager. esmid east africa, which has been operating for two years, represents one of two pilot programs esmid operates. the other was more recently launched in nigeria. esmid is planning to expand into other regions, such as latin america and south asia.

35 access to Finance HigHligHts RepoRt M-BANKING IN CAMBODIA today s financial market economy abounds with innovations in both products and delivery channels that defy the traditional boundaries within which financial markets operated. innovations in branchless banking, mobile banking, and correspondent banking models, are all thriving today and promise to lead the way in defining the landscape of financial markets going forward. these innovations usher in new benefits through increased access points that make products and services more affordable and available to all. IFC is working both globally and in a number of countries on mobile banking activities including Brazil, cambodia, india, indonesia, Mozambique, papua new guinea, and senegal. In Cambodia, a country with a population of 14.5 million, the number of banked customers is extremely small. Based on research jointly conducted by ifc and australia and new Zealand Banking group (anz), mobile phone subscribers have increased substantially to over 1.6 million as of March 2007 with around 1 million cell phone users currently unbanked. In addition, 80 percent of the population has access to a mobile phone and penetration is growing at 50 percent per year. anz has a growing footprint in asia and in 2007 investigated the opportunity to broaden its reach to customers. It partnered with IFC to conduct research on the market for mobile payments and banking for the unbanked in cambodia. anz Bank set up a subsidiary, Wing in March 2008, to acquire and provide a technological platform for mobile payment solutions in the country. With advisory services from ifc, Wing has developed a customer care center, a merchant network, and a strategy for technology uptake. ifc and Wing are also jointly conducting a financial literacy campaign on mobile banking and facilitated a dialogue with the national Bank of cambodia (nbc) to ensure the central bank s confidence amid insufficient governing laws and regulations. M-Banking services were launched in late January Wing provides cash in/cash out, person-to-person payments with now over 598 cash express points. By using a 10-digit passcode, users can send money to non- Wing customers. after 8 months of operations Wing serves 33,175 clients, 68 percent of whom were previously unbanked. Wing has now partnered with MFis as outlets for Wing express points for cash in /cash out and they are working on similar arrangements with MFis in 20 out of cambodia s 24 provinces.

36 34 SHARING KNOWLEDGE Key to A2F advisory services outreach and development impact is our ability to generate and use knowledge in ways to benefit our clients. Highlighted here are some new tools in Access to Finance. MICROSCOPE INDEX Global Microscope on the Microfinance Business Environment Microscope Index 2009 outlines the findings of in-depth analysis of the microfinance business environment in 55 countries. the index that underlies this report allows countries and regions to be compared across three broad categories: regulatory framework, investment climate and institutional development. the study uses a methodology that has been employed for the last two years in a microfinance report on latin america and the caribbean, and is being piloted for the first time on a global basis. conducted by the economist intelligence Unit (eiu), with support from from the Multilateral investment Fund, part of the inter-american Development Bank group, the corporación andina de Fomento, and ifc. FINANCIAL INFRASTRUCTURE REPORT Financial Infrastructure: Building Access through Transparent and Stable Financial Systems, a new report from the Financial infrastructure group, maps financial intermediation systems and the size of the financial systems market. it provides an expanded data index for measuring financial infrastructure and identifies reforms. Financial institutions process payments, check potential borrowers past experiences with credit, and evaluate the suitability of proposed loan collateral. consumers pay bills, buy houses, remit earnings, and save for retirement. all of these formal financial transactions rely on a foundation of institutions, information, technologies, and rules and standards the infrastructure of financial intermediation. these underlying systems of financial infrastructure are analyzed in the report, drawing on efforts of the World Bank group in payment and securities settlement systems, remittances, credit reporting, and secured transactions and collateral registries. the report makes recommendations for reform to make the system more efficient and reliable, thereby reducing costs and increasing access to financial services. org/financialinfrastructure

37 access to Finance HigHligHts RepoRt WORLD BANK-IFC REMITTANCE PRICES DATABASE the World Bank-iFc Remittance prices Worldwide Database was launched in september 2008 and provides data on the cost of sending and receiving remittances for 134 country corridors worldwide. in 2009, the total number of corridors surveyed has increased to 165, including several south-south corridors representing more than 60 percent of total remittances to developing countries. the Remittance prices Worldwide Database also expanded its coverage to include data on the cost of sending remittances to rural areas in the receiving countries. In the context of the g8 global Remittances Working group, the Remittance prices Worldwide Database provides for a reference for monitoring the progress on the 5x5 objective. BENCHMARKING BEST PRACTICES IN SME BANKING the global sme Banking program launched the sme Banking Benchmarking Web survey in the survey provides participating banks with the ability to benchmark themselves against the sme banking practices of their peers. to date, 12 banks in emerging markets have participated in the survey and have received a benchmarking report based on their answers that provides valuable insights into how their sme banking practices compare to those of their peers in a number of relevant areas, including: products and services that most effectively target smes; most commonly used delivery channels; business model and organizational set-up; and cross-selling, efficiency, and performance ratios. Our banking partners can use the benchmarking report and its recommendations to expand and improve their services to smes. Due to the strong demand from banks in Central and eastern europe, a Russian translation of the survey is also available. SME BANKING KNOWLEDGE GUIDE ifc global sme Banking program developed a knowledge guide to disseminate information on best practices to financial institutions considering or currently engaged in banking to smes. the sme Banking Knowledge guide synthesizes ifc lessons learned and shares key success factors for profitable sme banking operations. it is primarily a technical publication intended for bank directors, managers, and staff in developing economies, who see the untapped opportunity in their local markets but still wonder about the optimal way to approach the sme segment. It is also a useful tool for policymakers and other financial sector actors who seek to better understand the essentials of sme Finance. the sme Banking Knowledge guide draws widely from existing research and literature as well as from numerous primary interviews with sme banking experts and practitioners worldwide. the guide supports financial institutions in making informed choices by sharing challenges, opportunities, and effective practices in sme banking operational models from across the globe and through practical examples of sme banking provided by a number of featured financial institutions. LEASING GUIDELINES FOR EMERGING ECONOMIES ifc s global leasing program developed leasing guidelines to share its lessons and experiences from 32 years of leasing market development activities. the guidelines were originally produced in 2005 and have been updated to reflect changes in the environment, and information and lessons learned since then. the guidelines identify the key policy issues on leasing development, examining the approach of current and past projects. it is primarily written for the benefit of policymakers and is intended as a reference manual for other stakeholders, including lessors, lessees/smes, investors, banks, international financial institutions, development partners, and legal and accounting firms. they highlight which elements to look for locally, why experiences may be different among countries, and what based on IFCs experiences may be appropriate causes of action. the guidelines will help leasing development practitioners identify local characteristics, assess their potential impact, and thereby make informed development and implementation decisions.

38 36 IFC ADVISORY SERVICES ACCESS TO FINANCE CONTACTS BUSINESS LINE LEADERS peer stein, access to Finance Business line leader georgina Baker, Deputy Business line leader SECRETARIAT lory camba opem anushe Khan ifc.org consuelo tan ifc.org DONOR RELATIONS Max aitken ifc.org Urkaly isaev ifc.org Wei-Jen leow ifc.org PRODUCT SPECIALISTS Agriculture Finance panos Varangis Collateral Registries/ Secured Lending alejandro alvarez de la Campa worldbank.org Credit Bureaus tony lythgoe shalini sankaranarayan Gender Access to Finance Zouera Youssoufou Housing Finance Douglas grayson Insurance Heinrich de Kock Martin Reto Buehler Leasing & Non-Bank Finance Minerva Kotei Davorka Rzehak Micro Finance Makanda Kioko Nonperforming Loan Program panos Varangis Davorka Rzehak Payment Systems & Remittances Massimo cirasino Risk Management Advisory lakshmi shyam-sunder ghada teima ifc.org SME Banking ghada teima ifc.org Securities Markets alison Harwood Sustainable Energy Finance Miles stump ifc.org ajay narayanan ifc.org