Transcript Zhanna Zhakupova - e-MFP

Going through crisis:
ACF case
ACF Presentation
Prepared by Zhanna Zhakupova,
Executive Director
Microcredit Organization Asian Credit Fund LLC
Asian Credit Fund (ACF)
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Microcredit organization based in Almaty
Founded by Mercy Corps in 1997
During 1997 -2007 primary focus was
secured development lending to small and
micro enterprises to foster job creation
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$22 mln. to 5,528 small and micro entrepreneurs
to sustain and create more than 22,000 jobs
Average outstanding loan balance at YE 2007
was $7,200 (150% of GNI per capita)
ACF - development lending institution
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Special development loan products
 SME Growth Loan
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Residential Mortgage and Home Improvement
Loan
Partnership with corporations
Mittal Steel SME Resource Fund – cooperation
for regional development
 Chevron – artisans development
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Strategic Philanthropy targeted rural youth
Economic crisis: impact on Kazakhstan
Kazakhstan GDP growth rate (2000 - 2010)
16,0%
14,0%
13,5%
12,0%
10,0%
8,0%
9,8%
9,7%
9,8%
9,3%
9,6%
10,7%
8,9%
7%
6,0%
4,0%
2,0%
0,0%
3,2%
1,1%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
%
Economic crisis: impact on Kazakh banks
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Four of the major banks were rescued by the
government at the end of 2008
At the end of 2009 Kazakhstan's total
external debt was $111.7 billion or 104% of
GDP
By S&P the current share of problem loans of
Kazakh banks is 40% to total loan portfolio,
with restructured loans is about 50%.
The total write-off in baking system since
crisis equaled to 8.6% to GDP.
Impact of crisis on ACF performance
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SME sector was heavily affected: a 50%
decline in income
Impact on ACF performance
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ACF delinquency escalated: the highest PAR was
22.9% in April 2009, with restructured loans as far
as 40%
 Financial cost increased
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Currency devaluation by 20% in February 2009: hedging
cost increased two times
LLR expenses significantly increased
Demand for loans decreased and loan portfolio
was declining
 Company income shrinkage undermined
company long term existence
ACF Action Plan
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Introduction of group loan product in April
2008
 Targets
underserved (rural households) - no
mission drift
 Smaller size of loans – less riskier
 Higher margin
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Managing bad debts
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Debt Collection Unit
 Appropriate LLR
 Debt work out strategy for each client
 As of 30 September ACF collected 50% of write
offs
ACF Action Plan
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Keep ACF lenders and shareholder updated
on actions and results
Keep discipline and manage staff moral – no
layoffs, new hiring
Financial Literacy and Debt Counseling to
better manage client relationship
Revenue less affected than portfolio (KZT mln)
700
600
500
400
300
200
100
0
2006
2007
2008
Gross Loan Portfolio
Operating expense
2009
2010
31-Oct-11
Interest & free income
Results of new strategy
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In July 2010 company reached break-even
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company continued showing profit then each
month
As of end of October 2011
 PAR
>30 days + restructured loans is 2.2%
 active clients increased from 700 to almost 7,500
 LOP reached pre-crisis level of $4.0 mln after the
lowest level of $1.75 mln. in Jan 2010
 staff number increased from 30 to 100
 significant geographic outreach to rural areas
Results of new strategy
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New lenders came to ACF due to
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positive outlook for country
 shareholder intention to create holding
company
 improved company performance
Lessons learned
 New business model can be a right
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response to crisis
Appropriate loan products
Diversification of lending capital sources is
must
Foreign currency risk shall not be only
responsibility of MFI and/or its clients
Current challenges
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Interest rate ceiling introduced by country in
May 2011
Managing operational cost in sparsely
populated country
Financial costs are still high
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intentionally high LLR
most of loans to ACF are of high price
Equity investment is required
Thank you !
www.asiancreditfund.com