Quarterly Newsletter September, 2015 Issue No. 31 info@cgf-palestine.com www.cgf-palestine.com INSIDE THIS ISSUE Letter from the Manager P.2 SME Profiles P.4 Updates on Partner Banks P.2 Market Penetration P.4 Sector Distribution P.3 News and Activities P.5 Geographic Distribution P.3 News and Activities P.6 1
Letter from the Manager I am pleased to announce the incorporation of EPCGF as a Foundation in the Netherlands in August, 2015. It has been our intention from the start to establish a permanent legal institution that serves the development objectives of our stakeholders. The foundation creates a permanent and viable structure to better serve our partners on long term basis and to provide for flexibility to design new SME products in the future. The operation of EPCGF will continue as normal with no major changes. We will increase our efforts to create new products to support SMEs in Palestine, which go beyond our program design and to develop entrepreneurship. Our Micro Finance window supporting Micro enterprises through Micro Finance Institutions is also growing and progressing with 5 micro finance partner Institutions and over USD 4 million in Micro Finance guarantees. It is with the continuous support of our stakeholders, partners and staff that we were able to reach this level. We have ambitious plans for growth and diversification in the near future. Hanna Sahhar Managing Director Updates on Partner Banks 252 loan guarantees were approved in the third quarter of 2015, for the amount of USD 12,305,225. The average loan size stands at USD 39,159.68 since inception of the program and until September, 30 2015. The majority of loans are not secured against tangible collateral but the overall quality of the portfolio is good. No claims were submitted by partner banks during the third quarter of 2015. The NPL average stood at 1.51% as at the end of August 2015. 2
SECTOR DISTRIBUTION The table below illustrates distribution of the total portfolio by sector as at September 30, 2015. Economic Sector Amount Agriculture 8,073,415 Health & Medical 5,553,889 Trading 111,149,821 Export & Import 725,000 Education 990,708 Crafts 2,844,981 Industry/Light Industry 19,354,873 Services 18,098,808 Construction& Contracting 4,391,298 GEOGRAPHIC DISTRIBUTION Region Amount USD No. of Loans Southern Districts 42,287,537 1134 Central Districts 43,592,066 1052 Tourism Agriculture Fishing 2,070,170 576,850 Northern Districts 80,704,722 1979 Gaza Strip 7,245,488 274 TOTAL 173,829,813 Total 173,829,813 4,439 South: Hebron, Bethlehem Central: Ramallah, East Jerusalem, Al Ram, Bethany, Jericho North: Nablus, Jenin, Tulkarem, Qulqelia 3
SME PROFILES MARKET PENETRATION The table below illustrates the number of borrower s enterprises by number of employed workers. The table below shows the number of loans granted to existing borrowers compared to loans granted to new borrowers Banks Clients as at September 30, 2015 No. of Employees Total No. of Employees 1-5 3,192 6-10 732 11-15 245 Code Client Type Number 001 New clients 1,340 16-20 270 Total 4,439 002 Existing clients with no credit relation 1,186 003 Existing borrowers with no credit 390 004 Existing borrowers 1,483 005 Borrowers with arrears 5 Total 4,439 4
PRESS RELEASE Stichting European Palestinian Credit Guarantee Foundation The German Financial Cooperation, through KfW Entwicklungsbank, on behalf of the Federal Ministry of Economic Cooperation and Development (BMZ) signed on Tuesday 6 th of October agreements with the Palestinian Ministry of Finance for the transfer of Funds to the Stichting European Palestinian Credit Guarantee Foundation. Present at the signing ceremony were, Mrs. Laila Sbaih, Director General of International relations and Projects department at the Palestinian Ministry of Finance, Mrs. Martina Maurer and Mr. Jonas Blume representing KfW, Mrs. Sabine Brickenkamp from German Representative Office, Mr. Riccardo Rossi and Mr. Thomas Boyer representing the European Union, Mr. Hanna Sahhar and Mr. Daoud Maliha representing the new Foundation. The newly established Foundation, which is to be capitalized at Euro 31.5 million aims at supporting access to finance of Small and Medium as well as micro finance enterprises by reducing the risks associated with their lending. EPCGF Capital is funded by the European Union and German Government; both continue to support the mission of the Foundation. The Foundation will carry on tasks and responsibilities of a successful guarantee program operating since 2005. The EPCGF program facilitated the financing of over USD 161 million in loan capital with more than 4,000 SME beneficiaries and partnered with 5 Micro Finance Institutions and programs to facilitate their commercial lending in order to expand their portfolios to Micro Enterprises. The program strengthened financial institutions SME lending capacities through specialized training. In addition to the Fund capital, the Foundation will be providing technical assistance to the Micro Finance sector through a technical assistance component granted by KfW. The Euro 250 thousand T.A component will help build the capacity of micro finance institutions and further strengthen the sector thus supports further lending to micro enterprises. Small and Medium enterprises are the driving force behind economic growth, job creation and poverty alleviation. Official estimates show that 95% of enterprises in Palestine are classified as Small and medium with 90% of these employ 20 persons and less. The European Palestinian Credit Guarantee Foundation will target these enterprises through the existing financial sector. The signing of the agreements caps extensive research, design and donor coordination. The Foundation s main office is located in Albireh. 5
RECENT NEWS AND ACTIVITIES Workshop for Bank of Palestine SME credit Department EPCGF conducted a two day workshop on SME credit for Bank of Palestine SME credit department staff. The workshop was conducted on the 2nd and 3 rd of October at the Intercontinental Hotel in Jericho. The workshop covered a range of topics relating to SME lending from filling out loan applications to conducting cash flow forecasts. The workshop aims to further build on the strong partnership between EPCGF and Bank of Palestine and the common goal of further supporting SMEs in Palestine. Bank of Palestine has become the number one partner bank in terms of number of loan guarantees submitted to EPCGF, lending in difficult and high risk geographic areas such as Gaza and Jericho and to the relatively high risk agriculture sector. First Foundation s Supervisory Board meeting convened The First Supervisory Board of EPCGF Foundation convened on 7 September 2015 in Al Bireh Palestine. The Board of the Foundation comprised Mrs. Laila Subieh from the Palestinian Ministry of Finance, Mr. Jonas Blume from KfW, and Mr. John Khoury as an independent Board Member. The board in its first session appointed Mr. John Khoury as chairman of the board of the Foundation, approved operations and financial manuals of the Foundation, and outlined important steps going forward. In addition the board approved the Board charter document which outlines maximum transparency and professionalism with respect to governance of EPCGF. It is worth noting that EPCGF continues to operate in accordance with best industry standards. EPCGF to host a two day training on Analyzing Micro Finance Institutions EPCGF will be hosting a two day training workshop on how to analyze a micro finance institution from a credit perspective. The workshop will be held on the 21 st and 22 nd of November 2015 at Leads International in Ramallah. The workshop aims at improving the skills of lenders on conducting due diligence on MFIs with a view to extend financing to this growing Sector. EPCGF commissioned Mr. Rauf Khalaf an international expert on the subject. The training is one component of the Technical Assistance project granted by the German Government through KfW and is being executed by EPCGF. New appointment at EPCGF Ms. Dina Shaltaf joined EPCGF team in July 2015 as a Portfolio Credit officer and will be handling the relationship with three partner banks. Ms. Shaltaf has prior experience in banking and lending. 6