Enhancing Access to Finance: EBRD Experience

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EnhancingAccess to FinanceEBRD Experience

• Jean-Marc PeterschmittDirector, Bank
  LendingFinancial Institutions
• Access To FinanceInternational Conference
  Brussels, 28 - 29 October 2004

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Financial intermediation is low

• Low level of intermediation reflects
• Lack of confidence in banks and banking systems
• Low risk capacity of banks
• Insufficient capital to fund growth
• Inadequately developed banking skills
• Poor institutional environment

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Financing small businesseswhy intervene?

• Poorly served market ? Untapped opportunity
• Overcome risk averse financial institutions and
  shareholders
• Need to invest in training people (credit skills,
  marketing, develop processes, set-up systems)
• ?Need for institution building
• Provide long-term funds and promote diversity of
  instruments
• ? Joint approach by IFIs and donors

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Several niches Several actors

• Micro-, small and medium sized enterprises
• Specialised institutions micro-finance banks
• Traditional commercial banks foreign, local,
  privatised, green-field
• Leasing companies
• ?Complementary approachesEmulate Stimulate
  competition
• Work with enterprises ? better borrowers
• Work with governments ? regulatory framework

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EBRD active on several fronts
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EBRD SME prog. with commercial banks Exple
EU/EBRD SME Facility

• Launched in 10 EU Accession countries in 1999
• Three key elements
• EBRD Loans to banks and leasing companies with
  strategic commitment to finance SMEs
• Technical cooperation for 18-24 month period
• Training of loan and credit officers
• Improve loan analysis and processing(i.e. terms
  and conditions - response time for SMEs)
• Performance fee paid to intermediaries to
  contribute to start-up costs of developing their
  SME business

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EU/EBRD SME FacilityTrack record so far

• Participants 30 banks and 21 leasing companies
• 850 million LT funds approved by EBRD with 130
  million EU TC/grant support
• 700 million signed with banks, leasing co.Over
  970 million disbursed to SMEs43,000 loan and
  lease transactions (in addition to loans / leases
  from participants other funds)
• Average deal size approx. 22,000
• Loans / leases to new customersPrimarily in
  regions

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Sustainability and Future

• TC usually ends after 2 years
• Intermediaries maintain and continue to develop
  a profitable SME finance business beyond the
  EU/EBRD programme
• More efficient, lower-cost lending procedures
• Sound lending practices focused on cash-flows
• High quality portfolio (1.5 overdue for 30 days)
• Better customer service skills to be competitive
• Rural Finance Facility to focus on farmers and
  rural enterprises (EBRD 50m EU 10m)

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EBRD activities in Micro and Small Business
Finance (MSEs)

• Active in 20 out of the 27 EBRDs countries of
  operation
• Three approaches
• Microfinance banks 12 Greenfield MSE Banks
  set up by EBRD other IFIs/commercial partners
  to deliver a wide range of financial services to
  MSEs
• MSE lending through existing commercial banks 43
  partner banks in 14 countries for a total of 700
  outlets and branches
• MSE lending via NGOs loan funds and TA provided
  to 2 NGOs in the Balkans
• Donor support technical assistance / institution
  building

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EBRD Micro and Small Business Finance Track
record so far

• 700,000 business loans disbursed since beginning
  of MSE activities in 1994 (Sept 04 30,000
  loans)
• Average loan amount outstanding for the overall
  MSE portfolio of 5,200
• MSE loans commercially pricedGood portfolio
  quality (1 overdue for 30 days)
• 90 of borrowers are first time borrowers and 50
  are women
• More than 9,000 banking staff trained
• Demonstration and spill over effects

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Conclusion

• Commercial approach to lendingAssistance for
  institution building
• Various complementary approaches
• Role of public sector banking regulatory
  framework, strong legal environment, no market
  distortion, information (initiate credit bureau)
• Strengthen financial sector at large foreign
  entry, consolidation (equity finance)Promote
  strong governance confidence building
• Special EBRD focus on Early Transition Countries

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Contacts

• Kurt Geiger, Business Group Director, FI (44 20
  7338 7143 - geigerk_at_ebrd.com)
• Jean-Marc Peterschmitt, Director, Bank
  Lending(44 20 7338 6892 - peterscj_at_ebrd.com)
• Elisabeth Wallace, Director, Group for Small
  Business (44 20 7338 6169 - wallacee_at_ebrd.com)
• All details on www.ebrd.com

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