Transcript Slide 1

EBRD’s Support to Territorial
Development
Francesca Pissarides
Office of the Chief Economist
Lisbon, 3 December 2007
What is the EBRD?



AAA-rated international
financial institution founded
in 1991, owned by 61
national and two intergovernmental institutions
€ 20 billion capital base
The largest lender and
private equity investor in
Central & Eastern Europe
and CIS
What are the EBRD’s objectives?

To promote transition to market economies by
investing mainly in the private sector

To mobilise significant foreign direct investment

To support privatisation, restructuring and better
municipal services to improve people’s lives

To encourage environmentally sound and
sustainable development
Foundations of EBRD operations

Apply sound banking principles to every
project

Support but not replace private investors

Advance the transition to a full market
economy
How does EBRD support territorial
development?
Some examples:

Municipal and environmental infrastructure

Agribusiness sector
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Non-financial support to small and medium
sized enterprises

Financial support to micro, small and medium
sized enterprises
And also large projects → Russia, Kazakhstan
Agribusiness development

Involvement spans all activities throughout the
production chain, from processing and trading to
food distribution, packaging and retailing

Leveraging on upstream linkages in farming
sector
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Major role in developing the sector by supporting
local and foreign corporate clients as well as
micro, small and medium-sized enterprises with
both debt and equity financing
Municipal and Environmental
Infrastructure
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Commercial structuring of financing for local authority
infrastructure, equipment and services

Promotion of commercialisation and corporatisation
of services
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Support for improved legal / regulatory structures
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Facilitation of appropriate private sector involvement
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Environmental improvement in line with EU directives
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Financial support from EU, others
EBRD helps local authorities meet their infrastructure needs
Municipal business: sectoral
breakdown (cumulative)
2,800
2,400
1,600
1,200
800
400
0
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
€ mm
2,000
Urban transport
Solid waste
Water wastewater
Other sectors (incl. district heating)
Non-Financial support to SMEs

TurnAround Management (TAM) & Business Advisory
Services (BAS) Programmes are non-financial
enterprise support programmes assisting private
enterprises in the SME Sector
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Not-for-profit and 100% donor funded
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Managed by EBRD London
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Works directly with enterprises, providing industry
specific advice to individual SMEs with 10-2000
employees
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Assists enterprises to operate successfully and
develop new business skills
TurnAround Management (TAM)
Programme
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Started in 1993
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Almost 1,300 projects in 27
countries
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Private enterprises with 100-1,500
employees
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Uses industry specific
management expertise
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Works at senior management
level of enterprises
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Maintains a database of over
3,200 advisors
Business Advisory Services (BAS)
Programme
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Started in 1995
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4,245 projects with 3,667
enterprises to date in 17 countries
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Currently 23 local offices
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Private micro, small and medium
enterprises
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Utilises local consultancy services
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Removes barriers to growth
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Develops local consultancy
capacity
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Over 1,600 accredited consultants
TAM/BAS Programme Team
Based in London/EBRD
TAM
BAS
1,282 projects in 27 countries
4,245 projects to date in 17 countries
(Currently 23 local offices)
Aggregate turnover USD 18.5 billion
Total employees 860,000
Engaged 1,600 local consultants
Aggregate turnover EUR 10 billion
Total employees 312,000
During evaluation we have found
• 82% projects rated satisfactory or better
• Productivity increased by 26%
• Turnover increased by 26%
During evaluation we have found
• 92% projects rated satisfactory or better
• Productivity increased by 16%
• Turnover increased by 28%
• Employment increased by 19%
Financial Support to MSMEs
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Objective:
– Provide sustainable access to financial
services to micro and small enterprises
not catered for by the formal financial
sector
Principles
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Ensure fast and broad outreach, including remote
areas, i.e. disbursements of loans under $2,000
within 24 hours and >1,850 outlets
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Ensure commercial viability of MSE lending as
building block for sustainability
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Integration of MSE lending operations into formal
financial system as a standard product, including
micro loans under $1,000
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Efficient use of Technical Assistance funds: with clear
and measurable performance benchmarks / CGAP
Best Practice Standards
Results
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Loan Range
– Micro Loans typically between $50 and $10,000
– Small Loans typically between $10,000 and $200,000
– Medium up to $500,000
– Overall average loan size $5,968
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Over 4,400 loans per working day disbursed
Lending through existing commercial banks
– 55 active partner banks
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Lending through specialised microfinance institutions
– 13 “Greenfield” MSE Banks, delivering wide range of
financial services to MSEs, where EBRD participates
– 22 NGOs
Successes (end September 2007)
2.8 million loans disbursed for US$ 18.4 billion
–
–
–
–
88,000 loans disbursed for $600 million monthly
Arrears over 30 days: 1.6% of portfolio
Strong year on year growth
10,450 banking staff intensively trained (on the
job, minimum one year)
Total Number of MSE Loans
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Disbursed as of September 2007
Ukraine,
484,638
Belarus, 9,625
Caucasus,
382,312
Central Asia,
835,540
South Eastern
Europe,
649,164
Russia,
413,994
Moldova,
Mongolia, 60,391
19,131
Total Volume of MSE Loans
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Disbursed as of September 2007 (million US$)
Ukraine, 3,493
Belarus, 107
Caucasus,
1,446
Central Asia,
3,382
Moldova, 162
Mongolia, 49
South Eastern
Europe, 4,865
Russia, 4,925
Objectives of technical assistance in
MSE lending
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training well qualified lending personnel,
putting in place streamlined and well monitored
lending procedures, and
replacing collateral-based lending with proper cashflow based credit analysis
Strict attention to terms & conditions to:
i) lower transactions cost for banks and borrowers,
and
ii) increase the boundaries of who’s ‘bankable’
TA covers initial start-up training costs and regional
expansion on a declining scale as local experts start
to replace external experts.
Banks always co-finance
Subsidy efficiency
(Kazakh Small Business Programme)
800
12%
700
10%
600
8%
US$
500
400
6%
300
4%
200
2%
100
0
0%
2000
2001
2002
2003
TC Efficiency by number of loans (left axis)
2004
2005
2006
TC Efficiency by volume of loans (right axis)
May-07
Commercial banks, dedicated
Microfinance banks and NGOs
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Where there are commercial banks that meet
standards, TA and loan funds are provided
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Where no suitable commercial banks are
available, specialised MFIs are set up
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NGOs – ‘best-practice’, track-record, and
preferably ‘commercialising’ so that they can
attract capital market funds rather than scarce
donor resources for lending
Greenfield Microfinance Institutions
Total
Assets
(EUR
mln)
Total Equity
(EUR mln)
Gross Loan
Portfolio
(EUR mln)
Number of
Loans
RoAE
Portfolio-atrisk
KMB, Russia
710
75
575
58,984
17.5%
1.6%
Microfinance Bank of
Azerbaijan
42
5
36
16,675
15.8%
0.1%
ProCredit Albania
221
17
90
29,720
18.1%
2.7%
ProCredit Bosnia
152
13
118
38,656
9.5%
0.8%
ProCredit Bulgaria
346
27
244
49,732
18.4%
1.2%
ProCredit Georgia
191
31
140
58,967
8.4%
1.9%
ProCredit Kosovo
436
25
219
52,015
38.4%
1.2%
ProCredit Macedonia
110
12
73
21,277
13.4%
0.9%
ProCredit Moldova
27
2
19
14,096
40.5%
1.2%
ProCredit Romania
219
20
158
29,621
9.7%
1.1%
ProCredit Serbia
501
44
307
87,554
7.1%
0.7%
ProCredit Ukraine
267
31
227
49,270
15.1%
0.9%
3,222
302
2,206
506,567
17.7%
1.2%
TOTAL (or avg. %)
NBMFIs: IMON, Tajikistan
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Started as the National
Association of Business
Women in Tajikistan
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Provides over 2,000
loans monthly
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Serves over 18,000
clients with a portfolio of
$7.8m
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Transforming into a
deposit-taking MFI
Issues in more difficult environments
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Exposure Issues: Undercapitalisation of banks limits onlending capacity (first-loss, risk sharing, and co-financing
funds needed to leverage EBRD funding)
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Technical Capacity is scarce and far more extensive
intervention required:
– Lack of basic skills in all spheres
– Individual problems greater but their sum does not add up to
impediments, but rather opportunity to work with
management and build-up efficient lending departments thus
contributing to well-functioning banks
– Institution building at its best
– Broader intervention, e.g. facilitating equity investment, TFP
and other products
Innovation in MSE lending programmes
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Increase rural lending and village outreach, e.g.
mobile micro-banks at ProCredit Georgia and
Procredit Moldova; mobile units and credit unions in
Mongolia
Farm Lending – specialised loan officers
(crop/climate patterns)/modified group methodologies
Push extremes – particularly, express micro loans
(under $1,000, no collateral, 24 hrs.) and longer term
fixed asset loans as borrowers grow
Looking Forward: New Initiatives
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Developing rural finance and agri-lending
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Local currency funding
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Institutional transformation (Azerbaijan, Bosnia,
Kazakhstan)
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Commercial syndication
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Specialised lending products: energy efficiency, tourism,
etc.
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Remittances
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Legal and regulatory framework support
Innovations to increase efficiency, market outreach and competition
Why not more MSE lending?

The MSE market penetration remains low in
most countries
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Market opportunities remain unexploited
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Banks still have a lot of room to enter the
market
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Existing loan products might not be complete
answer (training, insurance, etc.) to clients