Transcript Company Overview

Your Partner in Growth and Development
SME Banking:
FINA GROUP
© Copyright FINA Bank Ltd. 2007
Presentation by Frank Griffiths,
FINA Group CEO
World Bank Workshop on SME Financing
Dar es Salaam, Tanzania
June 26-27, 12007
SME Banking: FINA Group
Your Partner in Growth and Development
• Economy Overview
• State Policy Overview
• FINA Group and FINA Bank Ltd. Kenya
• Technical Assistance on Bank Downscaling
• Principles and Approach
• Lessons and Examples
© Copyright FINA Bank Ltd. 2007
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Economy Overview: Kenya
Your Partner in Growth and Development
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Population 36.9 million
Median Age: 18.6 years
Inflation: 9.7% Feb. 07, expected to continue moderating in 2007
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GDP +6.0% (2006) vs. +5.8% (2005)
– forecast 2007: IMF +5.7%
• GDP per capita USD 1,200 (2006)
• USD/KES 66.96 (31/05/07)
Kenyan Shilling grows stronger due to FCY inflows from Kenyan Diaspora,
agriculture, tourism, S. Sudan reconstruction. Expected moderate
depreciation closer to elections
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Unemployment rate 40% (2001 estimate)
Population below the poverty line 50% (2000 est.)
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Economy Overview:
Banking Sector, Kenya 2006
Your Partner in Growth and Development
• Current min core capital requirement Kes250m /USD 3.7mln
Recent budget increasing to Kes1bln /USD 14.7mln by 2010
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44 banks, total banking assets Kes751bn / USD 11bn (2006)
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Multinational Banks (Barclays, Standard Chartered, Citibank, Stanbic) - 35% of
market share
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Next 5 biggest local banks (by asset size) – 33% of market share
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34 remaining banks – 21% of market share
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T-bill yield:
 91-d 6.487% (auction Jun18’07)
 182-d 7.028% (‘’)
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Access to SME finance
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SME Banking: FINA Group
Your Partner in Growth and Development
• Economy Overview
• State Policy Overview
• FINA Group and FINA Bank Ltd. Kenya
• Technical Assistance on Bank Downscaling
• Principles and Approach
• Lessons and Examples
© Copyright FINA Bank Ltd. 2007
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State Policy Overview, Kenya
Your Partner in Growth and Development
• Government slow to modernize
• Petty bureaucracy
• Licensing requirements
• Out dated legal framework
– Land registry
– Company law
– Judicial system
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State Policy Overview, Rwanda
Your Partner in Growth and Development
• Membership of EAC
• Move to anglophile legal system
• Desire to modernize
• Corruption dealt with swiftly
• Permits easy to obtain
• Embrace investors
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SME Banking: FINA Group
Your Partner in Growth and Development
• Economy Overview
• State Policy Overview
• FINA Group and FINA Bank Ltd. Kenya
• Technical Assistance on Bank Downscaling
• Principles and Approach
• Lessons and Examples
© Copyright FINA Bank Ltd. 2007
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FINA Group Snapshot
Your Partner in Growth and Development
•FINA Bank Kenya & Rwanda: Regional SME focus
Total staff 268: 5 branches in Kenya, 5 branches in Rwanda.
Total Group Assets: USD 147mln
By 2010: 4 countries, 30 – 35 branches
• Group achieves returns equal or
superior to banks of comparable size
that do not have an SME focus
• Social Corporate Responsibility
Projects & Community Development
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Your Partner in Growth and Development
FINA Bank Kenya:
background
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Small private bank, historically focused on larger, Asian-owned businesses
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New shareholder repositioning bank to address the broader SME sector
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Multi national & experienced Board of Directors
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Multicultural and diverse senior management
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20th bank in Kenya by asset size (2006)
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Increasingly competitive banking market
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Poor skills of lending staff and legacy credit culture
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Underdeveloped SME borrowers’ finance skills, reporting standards and
legal framework for lending
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SME Banking: FINA Group
Your Partner in Growth and Development
• Economy Overview
• State Policy Overview
• FINA Group and FINA Bank Ltd. Kenya
• Technical Assistance on Bank Downscaling
• Principles and Approach
• Lessons and Examples
© Copyright FINA Bank Ltd. 2007
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Technical Assistance
Your Partner in Growth and Development
Donor:
Financial Sector Deepening Trust Kenya
Technical Assistance Provider: ShoreBank International Ltd.
Donor “testing” the approach (TA only; no loan funds)
• Donor support in steps:
–Began with one month feasibility study
–Followed (after a pause) with 4 months “pilot”
–Followed (after a pause) by 5 months extension
–Followed (after 3 months) by 11 months extension
• Polices, procedures and products developed
• All new staff, including departmental management, hired and trained
• No lending took place during “pilot”; lending started during extension phase
• Loan closing process proved to be very lengthy
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Resources
Your Partner in Growth and Development
Staff
- Department Structure: Head of SME, 3 Team Leaders, 3 Relationship
Managers, 6 Relationship Officers, 5 Junior Relationship Officers, 1
Screener
Jul’05 Jul’06 Jul’07
- High Turnover
- Total # of staff trained: 31
SME Staff
7
7
19
External Resources
- Technical Assistance: on-site full-time Advisor
- FMO Loan: €3mln for 7 years
- USAID DCA Facility: USD 5mln, 50% guarantee
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Your Partner in Growth and Development
SME profile:
Nairobi & Mombasa
• Financing needs:
Kes0.3– 10mln
(USD 4,400 – 147,000):
Working capital, Asset Finance, Trade
Finance, Forex
• Formally registered business
Sole Proprietors, Partnerships, LLCs
• Up to 100 employees
• Up to Kes 50mln
(USD 735,000) in annual turnover
© Copyright FINA Bank Ltd. 2007
• Average borrower’s age:
41 years
• 60% of customers
new relationships with Bank
• 44% of borrowers
no prior credit history
• 18% female borrowers
• 1,465 jobs sustained
• 324 jobs created
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SME Portfolio
Your Partner in Growth and Development
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Amount Disbursed: Kes 335mln / USD 5mln (171 loans)
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Amount outstanding (31/05/07): Kes 308mln / USD 4.5mln (165 loans, 144 active
borrowers)
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PAR > 30 days: 2.2% (8 borrowers)
Approval & Disbursement on Accrual Basis
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Ave loan size:
≈ USD 29,200
600,000,000
500,000,000
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Ave term: 30 months
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Ave Interest Rate:
18.96% p.a.
400,000,000
300,000,000
200,000,000
Aproval
100,000,000
5/3/2007
3/3/2007
1/3/2007
9/3/2006
7/3/2006
5/3/2006
11/3/2006
© Copyright FINA Bank Ltd. 2007
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3/3/2006
Break Even: Dec’06
(14 months after roll out)
1/3/2006
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Disbursement
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SME Portfolio
Your Partner in Growth and Development
Projected growth: disburse Kes761mln/USD11mln by Dec’07
≈ 15% of total bank portfolio
Projected Growth
800,000,000
700,000,000
600,000,000
500,000,000
400,000,000
300,000,000
200,000,000
100,000,000
© Copyright FINA Bank Ltd. 2007
Dec-07
Nov-07
Oct-07
Sep-07
Aug-07
Jul-07
Jun-07
May-07
Apr-07
Mar-07
Feb-07
Jan-07
-
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SME Banking: FINA Group
Your Partner in Growth and Development
• Economy Overview
• State Policy Overview
• FINA Group and FINA Bank Ltd. Kenya
• Technical Assistance on Bank Downscaling
• Principles and Approach
• Lessons and Examples
© Copyright FINA Bank Ltd. 2007
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Your Partner in Growth and Development
Principles and Approach:
Cash Flow based Lending
Core Principles of SBI SME Credit Methodology:
• Cash flow-based – Attempt to measure the client’s real
capacity to generate future cash flow for servicing debt (not
always evident in “official” historical accounting)
– Develop lender skills in the construction of well-founded
and defensible cash flow projections
– Cash flow model – Sensitivity and breakeven analysis
• Character based – Quality and experience of management
• Interviewing and due diligence skills
© Copyright FINA Bank Ltd. 2007
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Your Partner in Growth and Development
Principles and Approach:
Human Resources;
Sales & Marketing
Transforming function-oriented analysts into client-oriented
relationship managers
• Proactive approach to sales
• Training in selling (cross-selling) skills and customer service
• Educating Customers
• Performance Incentive Schemes
© Copyright FINA Bank Ltd. 2007
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SME Banking: FINA Group
Your Partner in Growth and Development
• Economy Overview
• State Policy Overview
• FINA Group and FINA Bank Ltd. Kenya
• Technical Assistance on Bank Downscaling
• Principles and Approach
• Lessons and Examples
© Copyright FINA Bank Ltd. 2007
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Lessons
Your Partner in Growth and Development
Strengths
• Shareholders’ and top management support
• Ability to hire and train new staff
• Successful repositioning & re-branding of the bank and launch of SME products
• Donor prepared to provide long term commitment
Weaknesses
• Initial donor hesitancy
– Limited consultant resources
– Disrupted implementation effort
• Lack of skilled human resources in the field
• Cultural resistance to sales approach
• Weak original bank image in the marketplace
• Inefficient security perfection system leading to an extended turn-around time
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Summary:
Lessons for Successful TA
Your Partner in Growth and Development
• Long-term, “embedded” approach
• Alignment of goals (bank, donor and consultant)
– Patient shareholders
– Commitment & buy in of senior management
– Collaborative approach
– Adapting methods to existing structures & country context
• Design program for long term sustainability and profitability from outset
• Incentive systems for staff
• Technical Assistance designed and delivered in line with:
– Local market conditions; Maturity of financial institution;
Receptiveness of senior management
• Local staff development as an aspect of sustainability
© Copyright FINA Bank Ltd. 2007
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For More Information
Your Partner in Growth and Development
FINA Bank Ltd. Kenya
FINA Bank Rwanda
Frank Griffiths, Group CEO
P.O. Box 20613, 00200
Kimathi Street, FINA House
Nairobi, Kenya
Email: [email protected]
Steve Caley, Managing Director
Address: 20, Bld de Revolution
P.O. Box 331
Kigali, Rwanda
Email: [email protected]
www.finabank.com
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