Transcript Folie 1 - World Bank

Profiling Financial Institutions
Operating in Difficult Environments
The Case of MEB, Kosovo
Hanns Martin Hagen
Vice President, KfW, Financial Sector, Europe
Session VI
The World Bank/Brookings Conference on Access to Finance, 2006
KfW – who we are…
2

Promotional bank of the Federal Republic of Germany.

Founded in 1948 as a corporation under public law.
Shareholders: Federal Republic of Germany (80%),
German federal states (20%).

Headquarters: Frankfurt am Main;
Branch offices: Berlin and Bonn.

Balance sheet total at the end of 2005: EUR 365 billion.

Employees at the end of 2005: 3,710.

KfW bonds have been assigned the highest rating by
Standard & Poor's, Moody's and Fitch Ratings.
KfW – what we do…
Promotion of developing & transition economies
is one of KfW’s four main fields of activity
Financing volume in 2005
EUR 38.7 billion (+12.2%)
3
Financing volume in 2005
EUR 15.5 billion (+10.7%)
Business volume in 2005
EUR 12.1 billion (+1.7%)
Financing volume in 2005
EUR 2.6 billion (+2.6%)
What we do... The Case of MEB, Kosovo
Kosovo, 1999
Who wants to open a bank here?

March 1999: Civil war ended by NATO
intervention

June 1999: UN Interim Administration for
Kosovo (UNMIK) established

July 1999: UN Civil Administrator for
Kosovo Bernard Kouchner decided that:
„... commencement of banking initiatives
is essential for the revival of the economy
of Kosovo.“
(UN Resolution 1244 [1999])

IFC, EBRD, KfW and FMO
asked to support establishment of
(a) new bank for Kosovo
(b) safe, efficient, reliable payment
system
4
Kosovo, 1999:
Post-conflict environment
•
90% of inhabitants ethnic Albanians
•
Deep divisions between Albanians and their
former Serb oppressors
•
Violent clashes between Albanians and
Serbs despite presence of 40,000 peace
keeping troops and foreign police
=>
Difficult security situation,
e.g. Christmas 1999:
- two hospitals robbed
- one foreign aid office robbed
5
Post-conflict Kosovo, 1999:
Social and economic environment
Yugoslavia‘s poorhouse...
•
Population: 2.5 million
•
GDP/capita: USD 750 (Indonesia / Djibouti)
•
> 50% living under poverty line
with a devastated post-war economy
•
•
•
•
•
6
Infrastructure and housing severely
damaged
Economy shrinking
(GDP growth, 1998: - 2.5%)
Unemployment > 50%
Formal financial sector ceased to exist
Dinar consumed by inflation
=> Deutsche Mark as legal tender
Micro- and small entrepreneurs
Market Survey by DOEN Foundation, 1999 (1)
Relevance
200 medium and large enterprises:
20% of GDP
5,000 micro- and small entrepreneurs:
80% of GDP
Methodology
=> structured interviews with 866 randomly
sampled entrepreneurs in Kosovo
Characteristics of the interviewed
entrepreneurs
63 % traders
18 % other services
13 % manufacturing / craftsmen
6 % farmers
7
Micro- and small entrepreneurs
Market Survey by DOEN Foundation, 1999 (2)
1. Enterprises on average rather small
-
for 522 (of 866) respondents business main source of family income
-
fulltime entrepreneurs: inventory ~ EUR 5,000; 2 employees
2. Micro- and small entrepreneurs well experienced
-
2/3 in business for >5 years
3. Lacking financial services
-
Only 2 % had access to credit during last 3 years
-
Only 6 % had a savings or current account
8
Micro- and small entrepreneurs
Market Survey by DOEN Foundation, 1999 (3)
4. Attributes of a Bank Ranked by Respondents „Very Important“
Safe deposits, reasonable interest rates
82 %
International Ownership of bank
73 %
International money transfers at affordable rates
63 %
Easy to reach (good branch network)
61 %
Low collateral requirements
58 %
Reasonable interest rates, loans
39 %
Quick credit decisions
35 %
Competent staff
23 %
Friendliness
11 %
Local Ownership
10 %
Wide choice of financial services
9
3%
The Founding of
Microenterprise Bank of Kosovo
Opening: 17 January 2000
Equity and Shareholders:
Paid-in equity: EUR 2.3 million
FEFAD
21.7 %
21.7 %
21.7 %
17.4 %
17.4 %
Characteristics:
- fully licensed bank
- focus on financial services
for micro and small enterprises
10
Products at bank
opening:
- savings deposits
- money transfer
- micro enterprise loan
Microfinance Bank of Kosovo
Safe place to save
(Development of deposits, 01 - 06/2000)
Volume of deposits, in € (area)
No. of deposits (columns)
10.000
18.000.000
9.000
16.000.000
8.000
14.000.000
7.000
12.000.000
6.000
10.000.000
5.000
8.000.000
4.000
6.000.000
3.000
2.000
4.000.000
1.000
2.000.000
0
0
n
ai
Ju
M
rz
00
00
00
00
11
r
Ap
M
00
00
b
n
Fe
Ja
Deposits of natural persons
(average: EUR 274)
Deposits of legal persons
(average: EUR 6,820)
Microfinance Bank of Kosovo
Money transfers in high demand
(no. of money transfers, processed monthly, 01 - 06/2000)
2379
1975
1494
1217
1303
244
Jan
Feb
Outgoing money transfers
(total volume, 01- 06/2000:
€ 32.1 million)
12
March
April
May
June
Incoming money transfers
(total volume, 01- 06/2000:
€ 224.6 million)
Microfinance Bank of Kosovo
Slow start in micro lending
(loans outstanding, end of month, 01 - 06/2000)
Loans outstanding, volume in €,
end of month (area)
No. of loans outstanding,
end of month (columns)
600
550
500
450
400
350
300
250
200
150
100
50
0
1.200.000
1.000.000
800.000
600.000
400.000
200.000
0
n
ai
Ju
M
rz
00
00
00
00
13
r
Ap
M
00
00
b
n
Fe
Ja
Micro Loans < EUR 1,000
Small Loans > EUR 1,000
MEB, Kosovo
Ambitious Business Planning (06/2000)
06 / 2000
2003 (Plan)
Clients
8,021
16,000
78,000
Customer deposits, no.
9,254
16,000
73,000
Customer deposits
(volume, in million €)
16.1
48
73
Loans outstanding
(volume, in million €)
1.4
3.3
70
Money transfers
(volume, in million €)
256.7
450
78
Profit (Loss) after tax
(0.4)
(1.0)
0.5
2
4
10
Branches, no.
14
2000 (Plan)
Micro Enterprise Bank
Quo vadis?
Challenges
 Attract and train qualified staff
 Expand branch network to rural areas
 Develop financial services according to the need of
micro and small entrepreneurs
 Contribute to financial sector development in Kosovo
 Positive impact on micro-enterprise clients
Quiz-Question:
On 30 June 2000 MEB had 8.021 Customers, many of them poor.
How many clients does MEB have on 30 May 2006?
15
Micro Enterprise Bank, Kosovo
Branching out into rural areas
MEB
4 branches
2000
ProCredit
2006
27 branches
+ 8 mobile
branches
Mobile branch Kamenica:
76 villages, 63,000 inhabitants,
only 1,900 reached from Gjilan
16
ProCredit Bank, Kosovo
Attract and train local staff
2006
2000
75 staff
10 expatriates
558 staff
4 expatriates
5 local management
35 loan officers
58 local management
25 banking services
314 banking services
182 loan officers
Challenges
Challenges
-
lack of qualified local staff
(Universities in Kosovo had been
closed)
-
training local middle and
top management
-
no bank training facilities in Kosovo
-
staff hired by other
banks
=> Training held at FEFAD Bank, Albania
17
ProCredit Bank, Kosovo
Developing Deposit Services
2000:

Standard Savings Account

Current Account
2000-2006:

Time Deposit Accounts

Savings Plan “ProFit Plus”
18
ProCredit Bank, Kosovo
Maturities of deposits increased
(2000 – 2005, volume)
300
EUR million
250
200
150
100
50
0
2000 2001 2002 2003 2004 2005
Legal maturity < 3 months
19
Legal maturity
> 3 months < 12 months
Legal maturity
> 12 months
ProCredit Bank, Kosovo
Quantitative development of deposits
(01/2000-03/2002)
Number of deposits,
(line graph)
Volume of deposits,
in TEUR (columns)
400.000
350.000
120.000
Conversion to
EURO
100.000
300.000
80.000
250.000
200.000
60.000
150.000
40.000
100.000
20.000
50.000
Ja
n
0
M 0
rz
0
M 0
ai
00
Ju
l0
Se 0
p
0
N 0
ov
0
Ja 0
n
0
M 1
rz
0
M 1
ai
01
Ju
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Se 1
p
0
N 1
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0
Ja 1
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0
M 2
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0
M 2
ai
02
Ju
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0
N 2
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0
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03
0
20
0
ProCredit Bank, Kosovo
Qualitative development of Deposit Services
Introducing Debit Card „MEB X-Card“in 2002 (1)
Motives for Introduction of Card
Challenges

High and swiftly increasing number of
cash transactions
=> strain on PCB’s systems


Long queues in front of box offices =>
inconvenient for clients


Cards / ATM less costly in long run
- in US: cost of for bank:
cash withdrawal at ATM: USD 0.21
cash withdrawal at teller: USD 1.08

Card offers clients 24 h access to
accounts
21
Introduction of Cards, ATMs and
POS make high investments
necessary
Large card operators not interested
(in 2002)
ProCredit Bank, Kosovo
Qualitative development of Deposit Services
Introducing Debit Card „MEB X-Card“in 2002 (2)
Meeting the challenges
Services


ATM Withdrawal (easy to use, voice
instructions)

Balance inquiries

Payments at ATMs (also for loan
repayments)

PoS purchases (e.g. supermarkets,
petrol stations)
System and expertise supplied
by Compass+
(Magnitogorsk, Russia)
 102,000 cards issued
to clients
 82,000 active cards
 34 ATMs
 256 PoS terminals
 Maestro card member
(since January 2004)
22
ProCredit Bank, Kosovo
Quantitative development of deposits
(01/2003-05/2006)
Volume of deposits,
in TEUR (columns)
Number of deposits,
(line graph)
360.000
250.000
340.000
200.000
320.000
300.000
150.000
280.000
100.000
260.000
240.000
50.000
220.000
200.000
J
23
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03 03 i 03 l 03 03 03 04 04 i 04 l 04 04 04 05 05 i 05 l 05 05 05 06 06 i 06
r z a Ju ep ov an r z a Ju ep ov an r z a Ju ep ov an r z a
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N
ProCredit Bank, Kosovo
Small deposits still the focus
(no. of deposits as of 05/2006: 214,325)
IIa (11,2 %)
IIb (2,2 %)
III (0,7 %)
Medium- and
Large Deposits
IIa: € 1.000 – € 10.000
IIb: € 10.001 – € 50.000
III: > € 50.000
Very small and
Small Deposits
Ia: < € 500
Ib: € 501 – € 1,000
Ø-Size of Deposit
Ia: € 81
Ib: € 749
Ø-Size of Deposit
IIa: € 3.254
IIb: € 19.578
III: € 63.285
I b (39.1 %)
24
I a (49.2 %)
ProCredit Bank, Kosovo
Developing Loan Products: Overview
2000:

Micro- and Small-Enterprise Loans
2006:

Express Micro-Loans

Small-Enterprise-Loans

SME Loans

Housing Loans
- only repeat clients
- up to EUR 15,000
- up to 7 years
- for rehabilitation / renovation only
- no mortgage as collateral required

Agricultural Loans
25
ProCredit Bank, Kosovo
Developing Loan Products: Agro Loans
Eligible Clients and Loan Conditions

Clients generate income from agricultural
activities

Have minimum 2 seasons of business
experience

Tenure: max. 36 Months

Irregular/seasonal repayment possible

Minimum amount: EUR 100

Collateral:
micro loans (< EUR 5,000) no collateral,
small loans (< EUR 10,000) moveable
securities,
medium loans (> EUR 25,000) moveable
securities plus 1 guarantor
26
ProCredit Bank, Kosovo
Quantitative development of lending
(outstanding loans in € million, 01/2002 – 05/2006)
Outstanding
loan portfolio
in million € 180
160
Agro-Loans
140
HousingRehabilitation
Loans
120
100
SME-Loans
80
Small Enterprise Loans
60
Micro Enterprise Loans
40
20
Jan Apr
02
02
27
Jul
02
Okt Jan Apr
03
03
02
Jul
03
Okt Jan
04
03
Apr
04
Jul
04
Okt Jan Apr
05
05
04
Jul
05
Okt Jan
06
05
Apr
06
ProCredit Bank, Kosovo
Good quality of loan portfolio
(portfolio at risk (>30 days), 01/2002 – 12/2005)
PAR
outstanding portfolio
total write-offs: 1.21 mEUR
total recovered: 297 kEUR
180
amount outstanding (mio)
5.00%
160
4.50%
4.00%
140
3.50%
120
3.00%
100
2.50%
80
2.00%
60
1.50%
40
1.00%
20
0.50%
28
De
c-0
5
Ju
n05
De
c-0
4
Ju
n04
De
c-0
3
Ju
n03
De
c-0
2
0.00%
Ju
n02
Ja
n02
-
PAR
200
PAR
ProCredit Bank, Kosovo
Focus still on micro- and small loans
(micro- and small loans as % of no. of total loans as of 05/2006: 43,237)
II (9.3 %)
III (1.2 %)
Medium- and
Large Deposits
II: € 10.001 – € 50.000
III: > € 50.000
Micro- and
Small Loans
Ia: < € 1,000
Ib: € 1,001 – € 10,000
Ø-Size of Loans
II: € 3.254
III: € 19.578
Ø-Size of Loans
Ia: € 489
Ib: € 6,210
I b (36.6 %)
29
I a (52.9 %)
ProCredit Bank, Kosovo since 2000
Financial performance much better than planned...
2000 (plan)
2000 (real)
2003 (plan)
2003 (real)
2005
Deposits,
no.
16,000
26,000
73,000
124,241
196,794
Deposits
(in mio. €)
48
89
73
263
343
Loans
outstanding
(in mio. €)
3.3
3.3
70
72
171
Money
transfers
(in mio. €)
450
488
78
583
483
(1.0)
3.2
0.5
3.9
3.8
Profit (Loss)
...partly due to first mover advantage during 2000 and 2001
30
Financial Sector, Kosovo
2000... and today
Kosovo Credit
Information System
(KCIS)
Banking and Payments
Authority BPK
7 Commercial
Banks
15 Micro Credit
Organisations
87% of Fin Sector Assets
2 Foreign
(PCB, Raiffeisen)
65% of Bank. Sector Assets
31
7% of Fin Sector Assets
5 Local
Banks
35% of Bank. Sector Assets
8 Insurance
Companies
5% of Fin Sector Assets
Institutions
operating in 2000
Kosovar’s financial sector
reaching who?
5 Local
commercial
banks
Middle and
Upper Class
Raiffeisen
Bank
Economically
Active Poor
ProCredit
Bank
Poverty Line
Very Poor
Absolute Poor
32
15 Micro Credit
Organisations
Social transfers
(non-bankable segment)
ProCredit Bank, Kosovo
Market share reduced to below 40%...
...banks entered market, supported by joint donor initiative
(in red: banks receiving TA and funding from KfW (EFK))
Share in
Assets
(%)
33
Share in
Deposits
(%)
Share in
Loans
(%)
Share in
Long-Term
Loans (%)
Share in
Equity (%)
Share in
Profits (%)
(2004)
ProCredit
42.6
42.6
30.3
38.0
27.4
32.1
Raiffeisen
22.1
22.5
29.2
37.9
26.4
27.4
Kasabank
12.7
12.4
16.5
6.6
14.8
12.8
New Bank
of Kosovo
6.6
6.3
5.6
0.9
8.8
9.9
Bank for
Priv. Bus.
6.0
6.1
7.3
6.9
6.5
7.1
Banka
Kreditore
5.5
5.3
6.6
5.3
7.5
5.5
Banka
Ekonomike
4.6
4.9
4.5
4.5
8.6
5.3
ProCredit Bank, Kosovo
Any impact on deposit mobilisation?
2000
2001
Cash
Holding (in
mio. €)

34
2003
2004
2005
668.0
589.0
529.0
404.8
297.0
Deposits
(in mio. €)
106.0
486.8
413.6
534.7
720.2
869.6
PCB Share
of Deposits
92%
72.4%
65.0%
47.7%
43.4%
39.5%
71.1%
57.8%
57.3%
59.4%
58.4%
M2/GDP

2002
Trust of savers in the banking system revived
Cash holding behaviour through ATMs and PoS reduced
ProCredit Bank, Kosovo
Impact on small enterprises ? (1)
Study by Addai / Nienborg (2004)
(interviews, 70 micro and small entrepreneurs, non-clients and clients of PCB)
Characteristics of interviewed entrepreneurs
PCB-Client
Non-client
10 %
6%
1.3
3.5
Average monthly sales turnover (previous 12 months)
€ 4,000
€ 4,500
Average investment (in
previous 12 months)
€ 7,000
€ 8,000
22 months
n.a.
% of start-ups
Full-time employees
(24 months ago)
Time as PCB client
35
ProCredit Bank, Kosovo
Impact on small enterprises ? (2)
 Difficult environment in 2002 / 2003
2000
Cash
Holding (in
mio. €)
2002
2003
2004
16.6
-2.9
-1.4
3.7
-0.5
-
-
1.6
-2.5
-1.5
Transfers by
donors
in % GDP
47
36
31
30
29
Remittances
in % GDP
13
14
13
13
14
Inflation
36
2001
ProCredit Bank, Kosovo
Impact on small enterprises ? (3)
Household expenditure
(compared to 12 months ago)
PCB-Client
Non-client
Lower than 12 months ago
25.0%
69.5%
About the same as 12 months
ago
31.0%
25.4%
Higher than 12 months ago
44.0%
3.4%
No reply
0.0%
1.7%
 Access to finance only one factor
 But, PCB-Clients cope better than non-clients
37
ProCredit Bank, Kosovo
Summarising Impact
Demonstration effects at the sector level
(a) revived confidence in banking sector
(b) set standards for banking operations (money transfers,
technology, risk management)
(c) promoted creation of the Kosovo Credit Information Service
(d) competition ensured by sector-wide TA and funding facility (EFK)
Crisis alleviation at the client level
(a) offered small home rehabilitation loans to families in need
(b) enabled small pensions disbursements to Kosovars who had
worked abroad (German, Swiss and Austrian Public pension systems)
(c) developed financial services according to need of micro
entrepreneurs thus creating and securing employment and income.
38
ProCredit Bank, Kosovo
Opportunities and Challenges
Opportunities

Partnership between public and private shareholders especially
appropriate for volatile post-conflict situations:
(a) Public shareholders able to bear higher risk / play catalytic role.
(b) Private shareholder essential know-how provider.

Full banking licence from start => flexibility to react to demand /
adopt to volatile environment
Challenges

ensuring competition

Balancing outreach, sector impact and profitability in a PPP

enhancing products/services in agricultural and rural lending
39
Solution of the Quiz-Question
(number of clients, 30/06/2000: 8,021)
End of May 2006: 231,143 clients
40