MicroBank The Social Bank of la Caixa Facilitating the access to microfinance Conference on Microfinance in Europe Brussels - November 10, 2010
2 la Caixa Savings Bank
MicroBank was created in 2007 as part of the la Caixa Group The la Caixa Group: A leading financial group in retail banking in Spain, committed to people s economic and social integration A benchmark financial institution The world s largest savings bank Universal banking model with multi-channel management Retail banking leader in Spain. 10% market share Leader in quality of service Robust risk profile. Default rate below industry average Great financial strength: liquidity and solvency The largest investment portfolio in Spain Managed by Criteria Caixa Corp (79.5% stake) Diversified portfolio: services (68%) and financial business (32%) International expansion vehicle Social commitment 500 million invested in Community Projects in 2010, 25% of the Group s recurring profit Budget maintained in recent years 3
Community Projects: the most contemporary value The soul of la Caixa 500 500 Budget (MM ) 500 400 Budget 2010 Social Programmes Environmental & Science Prog. Cultural Programmes Education and Research Prog. 356 62 55 27 71% 12% 11% 6% 2007 2008 2009 2010 We have maintained the budget for the third year in a row 2nd European foundation 5th Global foundation 4
5 MicroBank, 3 years promoting microcredit
MicroBank: a strategic venture MicroBank MicroBank was set up to channel la Caixa s social banking business. The aim was to promote this work through a single financial institution in the group that acts based on the parameters of specialisation, strictness and sustainability appropriate to a banking institution. MicroBank is registered in the Bank of Spain Register of Banks, and consequently we are under the Spanish banking legislation and we have to fulfill all the requirements and formalities established by the Bank of Spain. 6
MicroBank: a strategic venture Strategy Setting up MicroBank has given specific legal personality to a strategic challenge that la Caixa is undertaking. Advantages of this decision: It makes it easier to serve a population segment with limited resources and to develop specially-adapted products and services. It allows our business to be identified better. It makes it easier to assess the business being managed and its sustainability 7
MicroBank: a strategic venture Start of business Sole shareholder, investing 79.8 million of capital & reserves Provides and will provide the financing needed to cover the needs arising from the bank s growth June 2007 It is being set up at a time of special need and social sensitivity 8
MicroBank: 3 years promoting microcredit MicroBank, a bank whose activity is: FINANCIAL Microcredit loans for businesses and families SOCIALLY-MINDED Promotes: Productive activity Job creation Personal and family development SUSTAINABLE 87,061 loans granted, 545,6 million euros With a default rate of 1,63% With the support of European Institutions *Data at 31/10/2010 9
How does it carry out its business? Support network: 5,233 la Caixa branches 417 Partner Institutions 86 Non-profit organisations 3 Regional Governments 231 Town/City Councils 75 Public organisations 12 Universities 10 Other Lending products: microcredit Liability products Microloans with security For businesses For families Savings Book Current Account Financial Social Family Microcredit Microcredit Microcredit Debit Card No collateral provided Honour Credit la Caixa pawnshop 12,518 customers 28 million outstanding balance Support from the la Caixa branch network facilitates expansion Strict risk models appropriate to a financial institution Full cost allocation (staff, operating costs, etc.) 10
And with the support of more than 400 partners Distributed throughout the national territory of different types: universities, town/city councils, NGOs, entrepreneur associations, etc. aimed at different collectives young people, unemployed, entrepreneurs, self-employed, women, etc. representing a significant contribution to MicroBank Knowledge about potential beneficiaries Advisory services for project implementation and validation Examples of partner institutions Ministry for Equality, which promotes the participation of women in economic and social life Local development agency of Barcelona City Council, which promotes employment and quality, forward-looking companies. 11
Providing opportunities for micro-entrepreneurs MICROCREDIT FOR BUSINESSES Business microcredit Purpose of microcredit for businesses For micro-entrepreneurs and the self employed to build or expand their business Business expansion Amount up to 25,000 % financed up to 100% Guarantee No collateral* Period 5 years Requirements: Business plan so a feasibility study can be conducted Start-up 12 * Guarantees may be provided
and opportunity coverage for families MICROCREDIT FOR FAMILIES Family microcredit Purpose of microcredits for families For people with a yearly income of less than 18,000 and with family needs, allowing them to get through difficult times Disability Other Education and health Housing Amount up to 25,000 Guarantee Period Without collateral 6 years Family needs Transport 13
MicroBank: Current customer profiles % Microloans by beneficiary s employment situation 14
MicroBank: Current customer profile % Microloans by entrepreneurs country of origin SPAIN SOUTH AMERICA REST OF EUROPE ASIA & OCEANIA NORTH AMERICA 15
MicroBank: Current customer profile % Microloans by age group 16
MicroBank: Current customer profile % Microloans by gender WOMEN MEN 17
MicroBank: Statistical information about the portfolio Data on 31 October 2010 87,061 microloans granted, worth a total of 545.6 million. 61,177 of these loans, worth 305.7 million, are still in the portfolio. New products and services are increasingly being added. 18
Ensuring the project s sustainability LOW DEFAULT RATES Microbank default and coverage September 2010, in percentages and millions of Euros MicroBank Default rate (proportion of outstanding portfolio) Bad debts (proportion of the loan portfolio) Coverage rate Insolvency funds: Of which generic 1.63% 3.36% 203% 10.4 7.4 19
20 Collaboration with European institutions
Microbank enjoys the support of European institutions European Investment Fund Council of Europe Development Bank European Investment Fund (EIF): a European Union institution that focuses on financing SMEs The agreement is part of the EU s Competitiveness & Innovation Programme (CIP) Council of Europe Development Bank (CEB): the institution that develops the Council of Europe s policy of solidarity Purpose: Transactions covered: Bad debt cover Social and financial microcredit Term: 4 years (2008-2011) Maximum guaranteed: 18,000,000 Purpose: Transactions covered: Credit facility Social, financial and family microcredit Term: 8 years (2008-2016) Amount: 8 years (2009-2017) 80 million 21
European institutions SUPPORT FROM EUROPEAN INSTITUTIONS IS A DECISIVE FACTOR IN MICROBANK S GROWTH It enables us to increase the size of our business volume and facilitates rapid development of it. ITS SUSTAINABILITY It makes up for the higher cost of managing these operations by partially covering the effect of bad debts, which makes this business sustainable. AND GREATER SCOPE FOR ITS BUSINESS It enable us to carry out a strategy to rapidly expand our business. 22
23 Social impact of MicroBank s activity
Social impact of MicroBank activity ALSO, FROM A SOCIAL POINT OF VIEW, THE MICROCREDITS GRANTED... PROMOTE FINANCIAL INCLUSION they help the following people and companies find financing: micro-companies, small businesses and self-employed individuals, who generally find it hard to raise financing through traditional channels....they make it possible to meet the needs of financially-excluded groups (the unemployed, young people, women, etc.) CONTRIBUTE TO CREATE EMPLOYMENT...MicroBank is estimated to have contributed to creating 25,000 jobs in three years. 24
Social impact of microcredits ACCORDING TO A STUDY CARRIED OUT BY ESADE, 5 OUT OF 6 PROJECTS FINANCED BY MICROBANK ARE STILL IN OPERATION 16,259 SUCCESSFUL FINANCED PROJECTS CONTRIBUTION TO JOB CREATION Businesses that are still in operation Business with 1 employee Business with 2 employees Others Business with 3 or more employees 84% of businesses financed with a microloan are still in operation MicroBank is estimated to have contributed to creating 25,000 jobs 25 Source: ESADE Analysis of the impact of Microbank microloans
26 Lessons learned
Lessons Learned 1. Sustainability is a must and not an option Sustainability is a basic requirement to grow and reach potential demand. 2. Specialisation Carrying out a highly specialised activity in microfinance allows improving efficiency in management and makes sustainable an activity that has a social impact and that the rest of the banking system generally rejects due to the lack of profitability. 3. Financing viable projects Granting microcredits must be based on the viability of business projects, as well as the entrepreneur s capacity to carry them out. In order to assess these projects is necessary to apply banking models based on rigor and specifically adapted to our target. 27
Thank you very much www.microbanklacaixa.es 28