Transcript European Microfinance Network

„Which Business Models for
Growth in Europe?“
Silvia Rico – Fundación Nantik Lum (Spain)
Veronika Thiel – nef (UK)
Giampietro Pizzo – Microfinanza (Italy)
Moderator: Martin Jung – EVERS & JUNG
EMN Conference Milan, 5th June 2009
European Microfinance Network
Content Structure
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2.
3.
4.
5.
6.
7.
Economic Situation
Legal Framework
Mission, Target group and Uncovered Demand
Geographical Outreach and Scale
Relationship with Banks and Insurance Companies
Products
Portfolio Characteristics
• Lending Methodology and Collaterals
• Monitoring and Productivity
• Portfolio Quality Indicators
8. Profitability and Sustainability
• Income and Cost Structure
9. Business Development Services
10.Perspective and Challenges for Growth and how to meet it
11.Conclusion (main Success Factors or Hindrances for Growth)
European Microfinance Network
Three Countries –three Situations
European Microfinance Network
Economic Situations
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Spain
46.2 M inhabitants
22% rural population
GDP per capita:
€23,704
GDP growth: 1.2%
(2008)
Number of SMEs/
1000 inhabitants: 58
Informal sector in %
of GDP: 22.5%
European Microfinance Network
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UK
61 M inhabitants
19% rural population
GDP per capita:
€25,700
GDP growth: 0.7%
(2008)
Number of SMEs/
1000 inhabitants: 26
Informal sector in %
of GDP: 12.5%
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Italy
60 M inhabitants
32% rural population
GDP per capita:
€28,057
GDP growth: 1.5%
(2008)
Number of SMEs/
1000 inhabitants: 62
Informal sector in %
of GDP: 27%
Legal Framework
Spain
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No specific regulation
for MFIs
Banks, savings banks
and credit
cooperatives are
regulated by the
banking law
Social entities (Social
Microcredit Support
Organisations) and
Foundations of
savings banks (Social
Work) are regulated by
their specific law
(associations and
foundations‘ law)
European Microfinance Network
UK
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No specific regulation
for MFIs/CDFIs
Personal lending MFIs
need to have
consumer credit
license
Some forms of
incorporation require
certain conditions by
law and registration
with the Financial
Services Authority
(FSA)
Otherwise, MFIs are
not regulated by the
FSA
Italy
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No specific regulation
for MFIs
Banking and non
banking financial
institutions are
regulated by the law
Some institutions
providing non banking
microcredit are
regulated by banking
legislation (TUB art.
106)
Foundations and NGOs
do not have a specific
supervision or legal
framework.
Mission, Target Groups and Uncovered Demand
Spain
UK
Italy
To promote selfemployment or economic
activity, to persons at risk
of exclusion and without
access to the traditional
financial system
Microfinance part of
wider movement of
CDFIs
Fighting social and
financial exclusion,
Creation of (self-)
employment
Ca 10 MFIs (savings banks
and one social bank)
Ca 38 offer
microfinance
MF less than 50% of their
activity
25 MF over 75% of
portfolio
TARGET
GROUPS
Vulnerable women,
immigrants, youth (more
recently), long-term
unemployed, single-parent
families, persons over 45
years, start-up entreprises
Ethnic minorities,
women, disabled (no
strong orientation
holistic movement)
Migrant
communities,
women and start-up
enterprises (most of
the MFIs have a
specific intended
target clientele)
UNCOVERED
DEMAND
Ca 840 million Euros
(applying European
Commission estimates)
No data
preliminary
estimate by RITMI:
EUR 4 billion
MISSION
European Microfinance Network
Ca 80 Microfinance
Institutions
33 MFIs surveyed
Geographical Outreach and Scale -Spain
Aprox. 20 Savings Banks (out of 47) of which 10 are most
active and one microcredit bank (Microbank la Caixa)
Nationwide: 2 (Obra Social Caixa Catalunya and Microbank
la Caixa)
Regional coverage related to the Savings Banks’ territory
Social Microcredit Support Organisations (SMSOs) provide
Business development Services
European Microfinance Network
Geographical Outreach and Scale -Spain
Microcredit Supply Distribution in Spain
European Microfinance Network
Geographical Outreach and Scale -UK
Nationwide
1
Northern Ireland 1
Scotland
1
England
35
England by Region
East Anglia
2
East Midlands 2
London
4
North East
4
North West
5
South East
4
South West
4
West Midland 4
Yorkshire
6
Coverage is ok, but can be patchy in certain areas, especially
rural ones.
European Microfinance Network
Geographical Outreach and Scale -Italy
MFIs:
Nationwide
Regional
Local
33
3
13
17
MFIs:
33
Northern Region: 17
Centre Region:
9
Southern Region:
7
European Microfinance Network
Relationship with Banks, Insurance companies,
Guarantee Funds
BANKS
Spain
UK
Italy
Savings Banks (Social
Work) and Microbank
la Caixa are the main
MFIs
Patchy. Some good
local relationships,
but not systematic
Growing interest from
Banks and its
Association (ABI) in
expanding their
involvement in
microcredit
Minor activity from
one commercial bank
(Santander-Sodecan)
(Market dominated
by 4 commercial
banks)
INSURANCE
COMPANIES
No specific
relationship
Maybe as part of
personal loan
programmes
No specific
relationship
GUARANTEE
FUNDS
None specific related
to microcredit (Yes for
entrepeneurs in
general, e.g. Aval
Madrid)
4 MFIs accredited
for state guarantee
scheme – reforms
reduced coverage
Confidi Network: 830
active entities with
Euro 6.2 billion
guarantees granted
(2003) but no real
cooperation with MFIs
European Microfinance Network
Products
Spain
Italy
UK
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Social microcredit:
personal (selfemployment) and
small businesses
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Personal lending and
business microcredit to
people rejected by
bank
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Social microcredit
(=personal lending)
and business
microcredit
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Average loan: € 9,900
Min. loans: € 1,000
Max. loans: € 25,000
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Average loan: £8,500
Min. loans: £500
Max loans: for MFIs
around £15k
Fixed: average interest
rate 13.4% (5.6-22%)
Variable: ca 5.8% over
base rate (3.5-10%)
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Average loan: € 7,192
Min. loans: € 1,800
Max. loans: € 17,000
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Average interest rate:
5,8% (from 1.8% to
12%)
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Average interest rate:
5.1%
European Microfinance Network
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Portfolio Characteristics
Spain
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Strong portfolio growth
Gross loan portfolio
(31/12/2007): € 84.4
million
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Disbursed amount: €:
97,8 million for 8,773
loans (2002-2007)
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Number of active
clients (31/12/2007):
6,922
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Retention rate (% of
refinanced clients): n/a
European Microfinance Network
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UK
Stagnating portfolio
Outstanding portfolio
£10.4m (1252 loans)
Disbursed amount:
£25m for 3691 loans
(ca 2003-2007), av.
£6773
Italy
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Strong portfolio growth
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Disbursed amount: €
43.7 million for 3223
loans
On the 24 surveyed
institutions that
provided data:
disbursed loans € 6.6
million for 923 loans
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Retention rate n/a
2646 clients overall
(including non-MFI
clients)
Retention rate n/a
Lending Methodology and
Collaterals
Spain
UK
Italy
Unsecured loans –
no collateral: 56%
of loans
Unsecured loans –
no collateral:
Entrepreneurial
Microcredit - no
collateral
Personal savings:
33% of loans
Guarantor: 11% of
loans
Loans secured
against personal
guarantee – for
some 100%
Social Microcredit reference of a
social network
and/or personal
guarantee
Some experiments
with peer group
lending
Some experiments
with peer group
lending
Individual loans
European Microfinance Network
over 82% of loans
Only 2 MFIs with
group lending
methodology
Monitoring and Productivity
Spain
UK
Italy
Monitoring
procedure:
repayment record,
personal visits,
Business
Development
Services
Monitoring:
repayment record,
personal visits,
sometimes
coaching
programmes
Monitoring:
repayment record,
personal visits,
Business
Development
Services
Credit History is
checked
Credit history will
be checked but not
exclusionary
criteria
Credit history is
checked
Credit officers
productivity: n/a
n/a
n/a
Average
portfolio/CO: n/a
Loans/CO: n/a
European Microfinance Network
Portfolio Quality Indicators
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Spain
Portfolio At Risk at 30
days: 9% (3
respondents)
Portfolio At Risk at 90
days: n/a
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UK
PF at risk (28
responses): 22% (no
split 30 days/90 days)
Italy
Data for 7 MFIs:
• PAR30: range 0,8% 72% (average value
25%)
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Write off ratio: 5% (5
respondents)
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Write-offs ca 13% (27
respondents, range
0%-28%)
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Range of Write-offs
0% - 28%; average of
5.9%.
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Refinancing/
rescheduled ratio: 6%
(3 respondents).
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Refinancing and
rescheduling –
insufficient data
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Restructured
portfolio: n/a
European Microfinance Network
Profitability and Sustainability
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Spain
Operational Selfsufficiency: 100 %
(only 1 respondent!)
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Financial Selfsufficiency: n/a
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Some CDFIs indicate
they want to be selfsufficient in 4-8 years
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No data on financial
self-sufficiency
European Microfinance Network
UK
Operational selfsufficiency – average
of 8.5% with one
organisation at 40%
Italy p.48
Data for 3 MFIs:
• Self- sufficiency:
ranges from 180% to
14% (average value
98%)
Cost and Income Structure
80.00
Italy
Funding (33 MFIs):
• private funds: 13
• public funds: 6
• mixed funds: 4
• n/a: 10
68.23
70.00
60.00
50.00
40.00
20.69
30.00
22.28
19.30
20.00
1.33
10.00
European Microfinance Network
Other
Commercial
debt or
other
investment
Earned
Income
0.00
Private
Sector
(grants)
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UK
very little data for UK
Unit cost av. £742
Capital: mostly grants
Public
Sector
(grants)
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Spain
Funding Savings
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Banks: interest income •
and Social Work funds
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Social Microcredit
Support Organisations
(Business
Development
Services): private and
public subsidies
Business Development Services
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Spain
BDS are provided by
SMSOs acting as
partners of the
savings banks
Services are either
compulsory for all
borrowers or for
some, or on request
European Microfinance Network
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UK
Very few formal
Vast majority refers to
business advice
agencies
Some compulsory
programmes in house
Case-by-case
decisions
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Italy
62% of the
Institutions provide
training or technical
assistance
Services are either
compulsory for all
borrowers or for
some, or on request
Perspective and challenges for growth and how
to meet it
Spain
Challenges:
• Re-evaluate mission
• Funding
• Institutional capacity
(staff SMSOs)
• SMSOs to manage
directly loan portfolios
• Measure social
performance and
impact
Solutions:
• Networking and
coordination
• Training
• More government
support
European Microfinance Network
UK
Challenges:
• Funds for operational
costs
• Funds for lending
• Institutional capacity
(staff)
• Very little government
support
Solutions:
• Market segmentation
• Alignment with
microfinance
movement
• Revision of insistence
on full financial
sustainability
Italy
Challenges:
• Vision and strategy
• Funding
• Lack of scale and
difficulties in meeting
the demand
Solutions:
• Training and
mentoring
• Networking and
merging
• Public and private
partnerships
Conclusion
What are the common ‘Big Issues’?
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Lack of data and transparency
Lack of market segmentation/alignment
Lack of scale (=> capacity building and growth)
Lack of financial resources
Lack of coordination
European Microfinance Network