Roshika Singh and Sylvester Ogbakiri

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Deloitte and EMG Helping Banks Unlock the
Profit Potential of Small and Medium Enterprises

• Roshika Singh and Sylvester Ogbakiri
• Workshop on Technical Service Provision for MSMEs
• Eko Hotel and Suites, Victoria Island
• June 28th, 2006

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Todays Discussion

• About Deloitte and Emerging Markets Group, Ltd.
• Our Work in MSME Finance
• Potential Approaches to MSME Finance in Nigeria

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Deloitte At A Glance

• One of the worlds largest and fastest-growing
  professional services firms
• Expertise in audit, tax, Consulting and Financial
  Advisory Services.
• More than 90,000 professionals in over 130
  countries
• More than 25 of global revenues from serving
  financial institutions
• Global expertise in lending technologies, payment
  systems, small business finance, mortgage
  lending, capital markets operations,
  securitisation, Basle II compliance, anti-money
  laundering, etc.
• Recognised as the organisation that believes in
  and can deliver seamless, integrated
  professional services (Emerson Review, 2004)

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Akintola Williams Deloitte in Nigeria

• Largest locally-owned accounting and audit firm
  in Nigeria
• Founded fifty-two years ago by now retired
  Akintola
• Expertise in corporate finance, enterprise risk
  services, due diligence, merger integration,
  accounting, tax, audit and consulting services
• Worked with fifteen financial institutions in
  Nigeria over last five years
• Consulting arm engages in project management,
  information technology, human capital, energy
  infrastructure and utilities, operations and
  strategy services as well as economic studies
• Corporate Finance Unit provides first-class
  services in due diligence and business valuation
• Enterprise Risk Services Unit deals with Business
  Risks and Corporate Governance matters, which is
  usually an important issue for financial
  institutions.

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Our Work in Nigeria

• Nigeria Helping BPE manage technical assistance
  for DFID
• Nigeria Establishing linkages with water
  associations and fund management
• Nigeria Funds management for census for
  European Union
• Nigeria Funds management for immunization for
  World Health Organization
• Nigeria Conducted due diligence services for
  EIB International Bank Plc
• Nigeria Conducted due diligence services for
  Bond Bank Plc
• Nigeria Conducted due diligence services for
  Reliance Bank Plc
• Nigeria Provided merger integrations and
  advisory services to Skye Bank Plc
• Nigeria Conducted due diligence services for
  Magnum Trust Bank Plc
• Nigeria Conducted due diligence services for
  Nal Bank Plc

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Our Work in Nigeria / South Africa

• Nigeria Conducted due diligence services for
  NBM Bank Plc
• Nigeria Conducted due diligence services for
  Trust Bank of Africa Plc
• South Africa First Rand Bank Limited
  Establishment Of A New Micro-Finance Division
• Nigeria Conducted due diligence services for
  Afro-Exim Bank Plc
• Nigeria Conducted due diligence services on
  Assurance Bank for NSITF
• South Africa Regional Fund Managers
  Financial Deepening Challenge Fund
• Zimbabwe Reserve Bank of Zimbabwe
  Establishment of A Depositor Protection Scheme
  For Zimbabwe
• Nigeria Provided pre-merger advisory services
  to Sterling Bank Plc
• Nigeria Provided pre-merger advisory services
  to Skye Bank Plc

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EMG At A Glance

• Twenty years as Deloittes specialised
  development consulting unit
• 200 staff in London, Washington, Brussels and
  projects around the world
• Clients include World Bank, DFID, USAID, EU,
  African Development Bank, and state-owned and
  private commercial financial institutions
• Now independent, but associated with Deloitte and
  still retain strong links with Deloitte
  particularly across African continent
• Dedicated practice units in financial sector
  development, agribusiness, health care, tourism,
  private sector development, and public sector
  reform
• Expertise includes micro- and SME finance,
  leasing, credit information systems, value chain
  finance, housing finance, capital market
  development, AML, financial sector regulation,
  pension reform, etc.

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Our Work in Africa

• Nigeria Helping Bureau of Public Enterprises
  manage technical assistance
• Nigeria Helped ECOWAS upgrade financial
  management capability
• Nigeria Reviewed operations of Plateau State
  Water Board
• Benin Worked with financial institutions to
  develop loan products for SMEs
• The Gambia Assisted in preparing a Tourism
  Master Plan
• Senegal Conducted public finance review for MCA
  Jumpstart programme
• Cameroon Provided regulatory assistance to the
  Financial Markets Commission
• Zambia Designing training program in SME
  lending for commercial bankers
• Swaziland Conducted assessment of financial
  sector, measured SME access
• Other projects in Ghana, Botswana, Kenya, Uganda,
  Tanzania and Ethiopia

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Todays Discussion

• About Deloitte and Emerging Markets Group, Ltd.
• Our Work in MSME Finance
• Potential Approaches to MSME Finance in Nigeria

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Selected Experience in MSME Finance

• Bank training in Thailand and Zambia
• SME banking in Kosovo
• New product development in Honduras
• Bank diagnostics in Tanzania
• Fisheries and agriculture banking in Kenya
• Credit reporting and information systems in
  Zambia, Madagascar, Egypt, East Timor, Mexico,
  Colombia, Brazil and Uruguay

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Bank Training in Thailand and Zambia

• Designed tailored training courses for six banks
  in Thailand, with funding from USAID and
  commercial banks
• Delivered separate programmes at each
  institution, including private and state-owned
  banks, ranging from 1 day to 3 weeks
• Topics included SME lending, credit and
  operational risk management, loan workout
• Also trained potential SME borrowers on bank
  requirements, how to complete applications
• Trained over 1,000 bankers, achieved measurable
  results in skill levels
• Now conducting a training needs assessment for
  bankers in Zambia to unlock profit potential
  among SMEs and agribusinesses

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SME Banking in Kosovo
In 2001, EMG launched a 30 million lending
facility for SMEs in Kosovo, funded by USAID. We
then received a banking license, began collecting
deposits and operated a full-service commercial
bank. After several years of profitable
operation (based on SME lending), we sold the
bank to Raiffeisen Bank of Austria.

• Selected or developed all IT and MIS capabilities
• Recruited and trained 250 staff, for all
  deparments
• Disbursed 2,400 loans mostly to SMEs worth
  65 million, with loan losses under 3
• Adapted microfinance best practices to SME
  lending
• Profitably cross-sold fee-based services to SMEs
• Expanded lending to include auto finance, leasing
  and mortgage finance, other specialised products
• Rolled out ATMs, kiosks and mobile banking units,
  opened 17 branches
• Created 22,000 new jobs through loans to SMEs.

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Other Successes in MSME Finance
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Our Work on Credit Reporting Systems

• Zambia Working with Central Bank to revise
  legal framework and attract a privately-managed
  credit bureau
• Madagascar Working with Financial Services
  Commission to design and establish a credit
  information system for microfinance institutions
• Egypt Helped Central Bank strengthen and expand
  public credit registry to include smaller loans,
  worked with commercial banks to improve data
  security, accuracy and relevance as well as
  consumer protection.
• East Timor Designed and now helping to
  establish a public credit registry for commercial
  banks, NBFIs and microfinance institutions
• Latin America and the Caribbean Working with
  the World Bank and the FIRST Initiative to
  evaluate and strengthen public and private credit
  information systems in Colombia, Brazil, Mexico,
  Uruguay, Costa Rica and Trinidad Tobago

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Todays Discussion

• About Deloitte and Emerging Markets Group, Ltd.
• Our Work in MSME Finance
• Potential Approaches to MSME Finance in Nigeria

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MSME Lending in Nigeria

• 65 of economically active population have little
  / no access to finance
• Less than 10 of some 8.4 million MSMEs have
  access to finance
• SME lending accounts for less than 9 of total
  bank credit

Implications

• Vast potential market for SME finance, with
  little competition so far
• High profit potential SME customers less price
  sensitive than large firms
• Massive potential first mover advantage
• But managing risks and reducing transaction costs
  are key challenges

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How EMG and Deloitte Can Help

• Manage risks and reduce transaction costs
  associated with SME lending

• Work with commercial banks
• Strengthen credit analysis and risk management
  practices
• Design, test and launch new credit products for
  SMEs
• Streamline lending procedures to reduce
  transaction costs
• Identify and implement cross-sell opportunities
  to improve SME profitability
• Work with SME borrowers
• Provide training on accounting and reporting
• Assist with completing loan applications
• Build linkages and offer other business
  development services
• Work with Government and other stakeholders
• Improve credit reporting and information systems
• Help improve policy and enabling environment
• Facilitate equity investments, credit guarantees
  and other forms of finance

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For more information

• Sylvester Ogbakiri
• Email sogbakiri_at_deloitte.com
• Email sogbakiri_at_awdeloitte.com
• Phone [phone]
• Roshika Singh
• Phone 44- (0) 20 7303 2288
• Email rsingh_at_emergingmarketsgroup.com

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about planning for the future

• If you are planning for a year, sow rice
• If you are planning for a decade, plant trees
• If you are planning for a lifetime, educate
  people
• - Chinese Proverb

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Thank you Very much!
Questions??