The document is a presentation from the Microfinance Information Exchange (MIX) that summarizes microfinance trends in Eastern Europe and Central Asia (ECA) in 2012. Some of the key points covered include:
- ECA accounts for a small portion of global microfinance loans outstanding but has the highest median loan balance. ECA also has the highest median deposit amount.
- Portfolio quality and profitability have improved since the 2009 crisis. Loan portfolio growth and deposits have remained flat while the number of loans and deposit accounts are also flat.
- Social performance reporting from ECA MFIs has increased significantly, accounting for 21% of global reporting. However, female outreach remains the lowest globally even as
2011 and 2012 are two years of uneven recovery. What would the future hold for Project finance in MENA and EMEA remains largely an open question. Is there a war for capital? may be with caution. The presentation focuses on current PF market, explains the past and highlights some of the issues that will be encountered in the near future. Has the PPP model of long term loans secured by income stream from underlying assets been broken? The answer is a likely YES. Are there alternatives, the answer is a Definite YES.
2011 and 2012 are two years of uneven recovery. What would the future hold for Project finance in MENA and EMEA remains largely an open question. Is there a war for capital? may be with caution. The presentation focuses on current PF market, explains the past and highlights some of the issues that will be encountered in the near future. Has the PPP model of long term loans secured by income stream from underlying assets been broken? The answer is a likely YES. Are there alternatives, the answer is a Definite YES.
I delivered this presentation at the Women's World Banking conference, via WebEx in Aukland, New Zealand. The presentation provides an overview of the financial performance of the microfinance sector in the Pacific Region.
• Stable loan growth. The banking industry kept up its loan growth pace of 10.9%
yoy in Mar 09. This was partly driven by a 20-30% jump in loans classified as
“others”, which are loans extended to government agencies and non-bank
financial institutions. Business loan growth decelerated from 10% in Feb 09 to
9.5% in Mar 09 while the growth pace for consumer loans was sustained at 8.8%.
• Lethargic leading loan indicators. Leading loan indicators remained subdued in
Mar 09 – loan applications rose by only 4.8% yoy while loan approvals dipped by
0.7% yoy. The business loan segment was the culprit, with applications and
approvals dwindling 11-13% yoy and offsetting the 13-22% increase in the
indicators for consumer loans.
• Still expecting loan momentum to lose steam. We continue to expect a sharp
fall-off in industry loan growth from 12.8% in 2008 to 2-3% in 2009 given (1) the
sluggish leading loan indicators, (2) slower economic growth, and (3) the downshift
in car sales.
• Sliding lending rates. In response to the OPR cut on 24 Feb 09, banks reduced
their fixed deposit (FD) rates a few days later but BLRs for most banks were
lowered later by about 40bp in early Mar. As a result, FD rates were stable at 2.02-
2.52% but the average lending rate shrank by 105bp yoy and 33bp mom to an alltime
low of 5.16%.
• Ample liquidity. As loan growth of 10.9% outpaced the deposit growth of 8%,
banks’ loan-to-deposit rate tightened to 73.7% as at end-Mar 09 from 70.8% a
year ago. The system still has plenty of excess liquidity estimated to be about
RM219bn in mid-Apr 09 vs. RM216.8bn as at end-Mar 09.
• NPL ratio still improving, for now. Banks’ 3-month net NPL ratio declined by
73bp yoy to 2.2% in Mar 09 but was stable mom. Gross NPL ratio also fell by
154bp yoy and 21bp mom to 4.6%. The reserve coverage improved from 76.5% a
year ago to 86.4%, aided by a 16.9% yoy drop in gross NPLs against a 6.1%
decline in total provisioning.
• Maintain NEUTRAL. We remain NEUTRAL on Malaysian banks as the stillhealthy
banking numbers suggest that banks could perform better than we and the
market expect despite the downbeat economic outlook. Although banks’ net
earnings are estimated to pull back 6.5% this year, we anticipate a 17.4% rebound
in 2010. Over the longer term, many banks will also reap the benefits from their
ongoing revamps and regional expansion. Public Bank remains our top pick for the
sector.
India's economic fundamentals have deteriorated in the near term leaving the country with weaker growth. The country is grappling with problems of rising inflation and booming fiscal and current account deficits. Global macro-economic environment seems equally gloomy. European debt crisis has been escalating with more and more countries finding it difficult to re-finance their government debt without the assistance of third parties. China's growth has also moderated along with other Asian countries. Against the backdrop of weak global growth and high global commodity prices, the Indian economy has taken a severe beating due to weak domestic political climate. Indian government has failed to reduce the fiscal deficit and to device structural reforms to open supply-side bottlenecks. Rising subsidy bills, slow decision making on behalf of the government due to scandals and back-tracking on reforms due to influence of regional political parties have curtailed the growth potential. Any significant economic reform or any serious effort to curtail the fiscal deficit seems unlikely in the face of general elections due in May 2014.
The weakness in the Indian economy is reflected in the Indian equity market as well. Over the last two years, the equity market has given a negative return of nearly 4% while in the last year, it gave a negative return of nearly 8%. Thus, investment in the equity market has been quite difficult. We expect the market to consolidate in a broad range in the remaining part of the year, giving us the opportunity to accumulate stocks at reasonable prices. Thus, we have attempted to create a model portfolio to generate superior returns over the market. Given the weak domestic and global economic environment, we prefer to keep more than 70% of out portfolio in liquid funds. The funds would be deployed as and when the time will be ripe.
The Philippines has made headlines recently due to its economic growth, stable government finances and the prospect of upgrade to investment grade. Find out why and whether this recent success is sustainable in the long run.
I delivered this presentation at the Women's World Banking conference, via WebEx in Aukland, New Zealand. The presentation provides an overview of the financial performance of the microfinance sector in the Pacific Region.
• Stable loan growth. The banking industry kept up its loan growth pace of 10.9%
yoy in Mar 09. This was partly driven by a 20-30% jump in loans classified as
“others”, which are loans extended to government agencies and non-bank
financial institutions. Business loan growth decelerated from 10% in Feb 09 to
9.5% in Mar 09 while the growth pace for consumer loans was sustained at 8.8%.
• Lethargic leading loan indicators. Leading loan indicators remained subdued in
Mar 09 – loan applications rose by only 4.8% yoy while loan approvals dipped by
0.7% yoy. The business loan segment was the culprit, with applications and
approvals dwindling 11-13% yoy and offsetting the 13-22% increase in the
indicators for consumer loans.
• Still expecting loan momentum to lose steam. We continue to expect a sharp
fall-off in industry loan growth from 12.8% in 2008 to 2-3% in 2009 given (1) the
sluggish leading loan indicators, (2) slower economic growth, and (3) the downshift
in car sales.
• Sliding lending rates. In response to the OPR cut on 24 Feb 09, banks reduced
their fixed deposit (FD) rates a few days later but BLRs for most banks were
lowered later by about 40bp in early Mar. As a result, FD rates were stable at 2.02-
2.52% but the average lending rate shrank by 105bp yoy and 33bp mom to an alltime
low of 5.16%.
• Ample liquidity. As loan growth of 10.9% outpaced the deposit growth of 8%,
banks’ loan-to-deposit rate tightened to 73.7% as at end-Mar 09 from 70.8% a
year ago. The system still has plenty of excess liquidity estimated to be about
RM219bn in mid-Apr 09 vs. RM216.8bn as at end-Mar 09.
• NPL ratio still improving, for now. Banks’ 3-month net NPL ratio declined by
73bp yoy to 2.2% in Mar 09 but was stable mom. Gross NPL ratio also fell by
154bp yoy and 21bp mom to 4.6%. The reserve coverage improved from 76.5% a
year ago to 86.4%, aided by a 16.9% yoy drop in gross NPLs against a 6.1%
decline in total provisioning.
• Maintain NEUTRAL. We remain NEUTRAL on Malaysian banks as the stillhealthy
banking numbers suggest that banks could perform better than we and the
market expect despite the downbeat economic outlook. Although banks’ net
earnings are estimated to pull back 6.5% this year, we anticipate a 17.4% rebound
in 2010. Over the longer term, many banks will also reap the benefits from their
ongoing revamps and regional expansion. Public Bank remains our top pick for the
sector.
India's economic fundamentals have deteriorated in the near term leaving the country with weaker growth. The country is grappling with problems of rising inflation and booming fiscal and current account deficits. Global macro-economic environment seems equally gloomy. European debt crisis has been escalating with more and more countries finding it difficult to re-finance their government debt without the assistance of third parties. China's growth has also moderated along with other Asian countries. Against the backdrop of weak global growth and high global commodity prices, the Indian economy has taken a severe beating due to weak domestic political climate. Indian government has failed to reduce the fiscal deficit and to device structural reforms to open supply-side bottlenecks. Rising subsidy bills, slow decision making on behalf of the government due to scandals and back-tracking on reforms due to influence of regional political parties have curtailed the growth potential. Any significant economic reform or any serious effort to curtail the fiscal deficit seems unlikely in the face of general elections due in May 2014.
The weakness in the Indian economy is reflected in the Indian equity market as well. Over the last two years, the equity market has given a negative return of nearly 4% while in the last year, it gave a negative return of nearly 8%. Thus, investment in the equity market has been quite difficult. We expect the market to consolidate in a broad range in the remaining part of the year, giving us the opportunity to accumulate stocks at reasonable prices. Thus, we have attempted to create a model portfolio to generate superior returns over the market. Given the weak domestic and global economic environment, we prefer to keep more than 70% of out portfolio in liquid funds. The funds would be deployed as and when the time will be ripe.
The Philippines has made headlines recently due to its economic growth, stable government finances and the prospect of upgrade to investment grade. Find out why and whether this recent success is sustainable in the long run.
Tendencias 2006 2011 del mercado microfinanciero en america latina y el caribe
2012 Eastern Europe and Central Asia Regional Snapshot
1. Microfinance Information Exchange
2012 Eastern Europe and Central Asia
Regional Snapshot
The Premier Source for Microfinance
Data and Analysis
This presentation is the proprietary and/or confidential information of MIX, and all rights are reserved by MIX. Any dissemination, distribution or copying of this
presentation without MIX’s prior written permission is strictly prohibited.
2. Agenda
1. ECA microfinance in a global context
2. Social performance management in ECA
3. ECA funding
4. Bosnia & Herzegovina: Crisis recovery?
5. Kyrgyz Republic: Stricter regulations to avoid over-indebtedness
6. Azerbaijan: Responsible pricing versus profitability dilemma
7. Conclusions
2
This presentation is the proprietary and/or confidential information of MIX, and all rights are reserved by MIX. Any dissemination, distribution or copying of this
presentation without MIX’s prior written permission is strictly prohibited.
3. ECA microfinance in a global context
1. ECA microfinance in a global context
2. Social performance management in ECA
3. ECA funding
4. Bosnia & Herzegovina: Crisis recovery?
5. Kyrgyz Republic: Stricter regulations to avoid over-indebtedness
6. Azerbaijan: Responsible pricing versus profitability dilemma
7. Conclusions
Return to the main agenda slide
3
This presentation is the proprietary and/or confidential information of MIX, and all rights are reserved by MIX. Any dissemination, distribution or copying of this
presentation without MIX’s prior written permission is strictly prohibited.
4. ECA microfinance in a global context
On MIX Market, ECA accounts for
100%
only 3% of global loans
90% outstanding, but has 10% of the
global portfolio. ECA MFIs have
80% the highest median outstanding
loan balance globally equal to
70%
USD 1,930.
60% S. Asia
MENA ECA’s median outstanding
50% LAC deposit amount accounts for
40%
ECA over USD 2,037, which is almost
EAP 4 times that of the second
30% Africa highest average in LAC, driven
by the fact that most ECA NBFIs
20% are not allowed to attract
deposits and banks are the
10%
primary deposit-taking
0% institutions. The downscaling
Loans GLP Deposit Accounts Deposits banks increase the average
Outstanding
deposit balance due to the
Source: MIX Market, 2013. View the graph data here. inclusion of commercial deposit
accounts. ECA’s global coverage
share is small, with 7% of global
depositors and 9% of global
deposits volume.
4
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presentation without MIX’s prior written permission is strictly prohibited.
5. ECA growth and portfolio quality
12 12
Loan portfolio growth continues for ECA,
Millions
Number of loans/deposit accounts
USD, Billions
10 10 while the number of loans outstanding and
GLP and deposits
8 8 deposits remain flat.
6 6
4 4 Banks are the main drivers of deposits
2 2 trends, considering NBFIs are not allowed
0 0 to attract deposits outside of Central Asia.
2008 2009 2010 2011 Deposit-taking NBFIs in Central Asia,
GLP Deposits however, continue to grow. In 2011,
Loans outstanding Deposit Accounts deposits in Tajikistan nearly doubled,
Mongolian NBFIs experienced 50% growth in
5% deposits, and the one deposit-taking NBFI
4% in Kyrgyzstan increased deposits from USD
100,000 in early 2011 to almost USD 1
3% million by 3rd quarter 2012 serving over
2% 1,500 depositors.
1%
0% Portfolio quality continued to improve since
2008 2009 2010 2011 2009, as PAR>30 decreased to 2.9%.
PAR>30 (Medians) ROA (Medians)
Meanwhile, profitability for ECA MFIs
increased by 0.3% since 2010. Positive trends
Source: MIX Market, 2013. View the 1st graph data here. View 2nd graph signal an ECA recovery from the crisis.
data here.
5
This presentation is the proprietary and/or confidential information of MIX, and all rights are reserved by MIX. Any dissemination, distribution or copying of this
presentation without MIX’s prior written permission is strictly prohibited.
6. Social performance management in ECA
1. ECA microfinance in a global context
2. Social performance management in ECA
3. ECA funding
4. Bosnia & Herzegovina: Crisis recovery?
5. Kyrgyz Republic: Stricter regulations to avoid over-indebtedness
6. Azerbaijan: Responsible pricing versus profitability dilemma
7. Conclusions
Return to the main agenda slide
6
This presentation is the proprietary and/or confidential information of MIX, and all rights are reserved by MIX. Any dissemination, distribution or copying of this
presentation without MIX’s prior written permission is strictly prohibited.
7. ECA social performance reporting
Share of ECA in global SP reporting
ECA accounts for 21% of the
global social performance
ECA
19% 21%
reporting, as MFIs in the
Africa region continue to focus on
4% EAP social performance
17% LAC management.
30% MENA
9%
S.Asia
ECA increased its social
performance reporting by
SP reporting growth 54% in 2012 with a total of
over 180 MFIs reporting to
Africa
MIX. National associations
S.Asia participating in the Start-up
ECA Fund for social performance
reporting supported their
EAP
member MFIs in reporting
MENA data. MIX has played a
LAC fundamental role by
facilitating this reporting.
0% 20% 40% 60% 80% 100% 120%
Source: MIX Market, 2013
7
This presentation is the proprietary and/or confidential information of MIX, and all rights are reserved by MIX. Any dissemination, distribution or copying of this
presentation without MIX’s prior written permission is strictly prohibited.
8. Gender outreach and staff composition
Source: MIX Market, 2013. View graph data here.
Although female outreach in ECA is the lowest globally, it has increased by 2% since 2010.
However, ECA has the second highest percentage of female board members, managers and staff.
Conversely, in South Asia where female borrowers comprise a large percentage of borrowers, the
board and management’s gender composition are comparatively low.
8
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presentation without MIX’s prior written permission is strictly prohibited.
9. Gender outreach and group loans
60% ECA’s portion of female staff and
Share in percentages (medians)
female loan officers increased almost
in unison over 2011, which indicates
MFIs hired female staff mostly for the
Female staff front office. The share of female
50%
Female LOs borrowers also grew by 2%.
Female borrowers
Of the countries in the ECA region,
Russia has the highest median share of
40% female board members, loan officers,
2010 2011 staff and borrowers.
ECA number of loans outstanding
100%
The use of group lending in ECA grew;
the share of group loans rose from 19%
80%
in 2008 to 23% in 2011 in terms of
60% loans outstanding. However, group
40% loans only account for 5% of the total
20%
GLP signaling lower average balances.
,
0%
Kyrgyzstan, Kazakhstan, Azerbaijan
2008 2009 2010 2011
and Tajikistan are the markets with
ECA Group Loans ECA Individual Loans over 20% of loans in group lending.
Kyrgyzstan leads with over 85% of
Source: MIX Market, 2013. View female outreach data here. loans through group lending.
9
This presentation is the proprietary and/or confidential information of MIX, and all rights are reserved by MIX. Any dissemination, distribution or copying of this
presentation without MIX’s prior written permission is strictly prohibited.
10. Rural outreach in ECA
100%
ECA Percentage (average)
80% The share of rural borrowers has
increased from 54% in 2008 to 66%
60%
in 2011, while GLP in rural loans
40% has decreased from 53% in 2008
to 51% in 2011. This signals
20% decreasing average loan balances
0% in rural areas.
2008 2009 2010 2011
Share of rural borrowers Share of urban borrowers
100% MFIs that offer incentives
90%
(bonuses) to loan officers for
Rural outreach (medians)
80%
70% increasing rural outreach clearly
60% have stronger rural outreach than
50% MFIs that don’t offer the same
40%
30% incentive. MFIs with a rural target
20% in their incentive systems have a
10% 22% higher share of active rural
0%
Percentage of rural borrowers Percentage of rural borrowers
clients relative to MFIs without
for MFIs with rural outreach in for MFIs without rural this incentive.
incentive system outreach in incentive system
Source: MIX Market, 2013.
10
This presentation is the proprietary and/or confidential information of MIX, and all rights are reserved by MIX. Any dissemination, distribution or copying of this
presentation without MIX’s prior written permission is strictly prohibited.
11. Does staff turnover affect client retention rate
in ECA markets?
Bosnia and Herzegovina vs ECA Azerbaijan vs ECA
90% 90%
80% 80% Borrower retention (ECA,
median)
70% Borrower retention (ECA, 70%
60% median)
60%
Borrower retention (BiH, Borrower retention
50% 50% (Azerbaijan, median)
median)
40% 40%
Staff turnover (ECA,
30% median) 30% Staff turnover (ECA,
median)
20% Staff turnover (BiH, 20%
10% median)
10%
Staff turnover (Azerbaijan,
0% 0% median)
FY10 FY11 FY10 FY11
Kyrgyzstan vs ECA It is widely believed that lower staff turnover
yields a higher client retention rate. Reason?
90% Borrower retention (ECA,
median) Client loyalty depends on the relationship with
80%
staff, and new staff do not always maintain
70%
relationships with old clients.
60% Borrower retention
(Kyrgyzstan, median)
50%
While the broader ECA region does not fit this
40% relationship, the three biggest microfinance
Staff turnover (ECA,
30%
median) markets in the region do. In these markets, a
20% decrease in staff turnover from 2010 to 2011
10% matched an increase in the client retention rate
Staff turnover (Kyrgyzstan,
0% median) (Kyrgyzstan demonstrates the inverse
FY10 FY11 relationship).
Source: MIX Market, 2013. View client retention and staff turnover data here 11
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presentation without MIX’s prior written permission is strictly prohibited.
12. ECA funding
1. ECA Microfinance in a global context
2. Social Performance Management in ECA
3. ECA Funding
4. Bosnia & Herzegovina: Crisis recovery?
5. Kyrgyz Republic: Stricter regulations to avoid over-indebtedness
6. Azerbaijan: Responsible pricing versus profitability dilemma
7. Conclusions
Return to the main agenda slide
12
This presentation is the proprietary and/or confidential information of MIX, and all rights are reserved by MIX. Any dissemination, distribution or copying of this
presentation without MIX’s prior written permission is strictly prohibited.
13. Cross-border funding for microfinance by region
(2009-2011)
Regional Allocation of Total Commitments, 2009-2011
Cross-border funding
includes funders’
commitments for debt
financing, equity and
grants to all levels of the
financial system (retail,
market infrastructure and
policy).
To see a definition of
commitments click here.
Source: Graph taken from 2012 CGAP Cross-Border Funder Survey.
• SA, ECA, and LAC continue to be the regions that receive the highest amounts of cross-border funding
(a combined 60% of total commitments).
• Commitments in the ECA region decreased by 5% per year on average between 2009 and 2011 to
reach US$3.1 billion.
• In contrast, commitments to SSA, MENA, and EAP increased during the same period.
13
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presentation without MIX’s prior written permission is strictly prohibited.
14. Cross-Border funding for microfinance in most ECA
countries is decreasing
Commitments by Country*
(as of Dec. 2011, and 2009/20011 Trend)
09/11
Dec 2011 Country
Growth
$300 - $499 mln Turkey
Russia
Serbia
Azerbaijan
$100 - $299 mln Bosnia
Tajikistan
Armenia
Romania
Colors denote the amount of cross-border
Ukraine funding (USD)
Kyrgyz Republic
Uzbekistan Cross-border
Georgia commitments decreased
$50 - $99 mln
Mongolia in 2/3 of countries in
Belarus ECA as more projects
Albania were closed in 2011
Moldova than new projects were
Kazakhstan started. Cross-border
Bulgaria funding is being
Poland reallocated to other
$2 - $49 mln Montenegro regions.
Kosovo
Macedonia
* Country allocation is available for 75% of ECA committments
Turkmenistan
All data and graphs from the 2012 CGAP Cross-Border Funder Survey. 14
This presentation is the proprietary and/or confidential information of MIX, and all rights are reserved by MIX. Any dissemination, distribution or copying of this
presentation without MIX’s prior written permission is strictly prohibited.
15. Funding structure for MFIs: Equity investments
continue to grow?
Reliance on deposits as a funding
source by banks decreased in
2011, compensated by a small
increase in borrowing. This
change is driven by several banks
in Central Asia.
Equity levels for NBFIs and NGOs
continues to increase sharply
since 2009. This was led by
increasing retained earnings for
Georgian NBFIs and Bosnian NGOs;
and sharp increases in paid-in
capital for big NBFIs in Kazakhstan
and Russia, as well as BaiTushum
& Partners (Kyrgyzstan) as it
prepares to transition from an
NGO to a bank.
Borrowings decreased for both
NBFIs and NGOs. Bosnia’s
microfinance meltdown is the
main reason for the decrease in
borrowings for NGOs.
Source: MIX Market, 2013. View the graph data here.
15
This presentation is the proprietary and/or confidential information of MIX, and all rights are reserved by MIX. Any dissemination, distribution or copying of this
presentation without MIX’s prior written permission is strictly prohibited.
16. Funding structure: Debt funding for NBFIs and
NGOs decreased
Each type of funder increased their
debt funding to banks during FY 2011.
The trend is heavily driven by funds and
DFI investments in Georgia, Armenia
and Mongolia.
Financial institutions, governments and
funds decreased their presence in NBFIs
and NGOs in 2011. The main reason for
the trend is the lack of investor
confidence in the Bosnian market,
whose recovery from the crisis has yet
to be confirmed. Bosnia accounted for
over 42% of the total ECA borrowings in
2008. Currently, the share slipped to
21% of the total regional funding.
Finally, cross-border debt financing is
90% of all debt financing in ECA, a
trend which has not changed for the
last three years.
Source: MIX Market, 2013. View the graph data here. Fund lender type category is comprised of local funds and cross-
border microfinance intermediaries (MIIs). 16
This presentation is the proprietary and/or confidential information of MIX, and all rights are reserved by MIX. Any dissemination, distribution or copying of this
presentation without MIX’s prior written permission is strictly prohibited.
17. Bosnia & Herzegovina: Crisis recovery?
1. ECA microfinance in a global context
2. Social performance management in ECA
3. ECA funding
4. Bosnia & Herzegovina: Crisis recovery?
5. Kyrgyz Republic: Stricter regulations to avoid over-indebtedness
6. Azerbaijan: Responsible pricing versus profitability dilemma
7. Conclusions
Return to the main agenda slide
17
This presentation is the proprietary and/or confidential information of MIX, and all rights are reserved by MIX. Any dissemination, distribution or copying of this
presentation without MIX’s prior written permission is strictly prohibited.
18. Bosnia & Herzegovina: Profitability and portfolio
quality do not mean growth
12% In Bosnia, PAR figures and the write-off ratio
10% significantly decreased, thus helping Bosnian
8%
6%
MFIs become profitable for the first time
4% since 2009. A report on the microfinance
2% sector by the Banking Agency of the
0% Federation of Bosnia And Herzegovina,
-2% however, argues the validity of presented
-4%
figures.
-6%
2008 2009 2010 2011
Although profitability and risk figures were
ROA PAR>30 Write off ratio
quite promising, Bosnian MFIs’ GLP and
outreach continued to drop until 2011.
1,500 500 Through the first three quarters of 2012,
USD, Millions
Thousands
both figures have remained flat.
1,200 400
900 300
Borrowings have steadily decreased for MFIs
in Bosnia & Herzegovina. Meanwhile, equity
GLP, Borrowing and Equity
Loans outstanding
600 200 grew in 2011 and 2012, as profitability
positively affected retained earnings.
300 100
0 0 Average loan balance per borrower also
continued to shrink by 8% in 2011. This
proves that the market is taking a
Loans outstanding GLP Borrowings Equity conservative approach to lending and using
security measures against further over-
Source: MIX Market, 2013. View Bosnia & Herzegovina profitability indebtedness.
and portfolio quality data here. View growth data here
18
This presentation is the proprietary and/or confidential information of MIX, and all rights are reserved by MIX. Any dissemination, distribution or copying of this
presentation without MIX’s prior written permission is strictly prohibited.
19. Kyrgyz Republic: Stricter regulations to avoid
over-indebtedness
1. ECA microfinance in a global context
2. Social performance management in ECA
3. ECA funding
4. Bosnia & Herzegovina: Crisis recovery?
5. Kyrgyz Republic: Stricter regulations to avoid over-indebtedness
6. Azerbaijan: Responsible pricing versus profitability dilemma
7. Conclusions
Return to the main agenda slide
19
This presentation is the proprietary and/or confidential information of MIX, and all rights are reserved by MIX. Any dissemination, distribution or copying of this
presentation without MIX’s prior written permission is strictly prohibited.
20. Kyrgyzstan NBFI market growth and portfolio
quality
300 500
Thousands
USD, Millions
250
Gross loan portfolio
400
The GLP and number of
Active borrowers
200
300 borrowers in Kyrgyzstan’s
150 NBFI market grew steadily in
100
200 recent years. Despite
100
positive trends in portfolio
50
quality, concerns grew
0 0 regarding multiple borrowing
2008 2009 2010 2011 Q3 2012 and potential over-
Number of active borrowers GLP indebtedness risks.
4% In the first 3 quarters of
2012, the MFI Bai Tushum,
3% who recently received a
license to become a bank,
2% experienced a decrease in
borrowers but an increase in
1% GLP They were able to do
.
this by targeting wealthier
0% clients.
2008 2009 2010 2011 3Q 2012
PAR Write-off ratio
Source: MIX Market, 2013. View market growth data here. View portfolio quality data here.
20
This presentation is the proprietary and/or confidential information of MIX, and all rights are reserved by MIX. Any dissemination, distribution or copying of this
presentation without MIX’s prior written permission is strictly prohibited.
21. Kyrgyzstan: Stricter regulation from National
Bank on NBFIs
50%
Nominal portfolio yield
40%
Throughout the past year, NBFIs gained the
(medians)
30%
National Bank’s attention over public concerns
20% regarding high interest rates. The NBKR has
opted in favor of market-based tools to
10%
influence rates instead of setting interest-rate
0% ceilings. Nevertheless, the NBKR also increased
2005 2006 2007 2008 2009 2010 2011 loan provisioning standards and limited the
NBFIs Kyrgyzstan NBFIs ECA Banks ECA fees charged to borrowers for late payments.
40%
35%
Provision for loan
For NBFIs, total expenses as a percentage of
30% impairment/Assets total assets have slowly decreased since 2008,
25%
Financial mostly resulting from the financial expense-to-
Expense/Assets
20% Operating
assets ratio falling by nearly 1.5%. The driving
Expense/Assets forces behind this trend has been decreasing
15%
Financial funding costs, as Kyrgyzstan has attracted
10% Revenue/Assets
Total Expense/Assets
much of its funding from international
5%
investors in the past few years. As such,
0% funding costs have gone down.
2005 2006 2007 2008 2009 2010 2011
Source: MIX Market, 2013. View the 1st graph data here. View the 2nd graph data here
21
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presentation without MIX’s prior written permission is strictly prohibited.
22. Azerbaijan: Responsible pricing versus
profitability dilemma
1. ECA microfinance in a global context
2. Social performance management in ECA
3. ECA funding
4. Bosnia & Herzegovina: Crisis recovery?
5. Kyrgyz Republic: Stricter regulations to avoid over-indebtedness
6. Azerbaijan: Responsible pricing versus profitability dilemma
7. Conclusions
Return to the main agenda slide
22
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presentation without MIX’s prior written permission is strictly prohibited.
23. Azerbaijan NBFI stable growth continues
400 400
Thousands
USD, Millions
NBFIs in Azerbaijan consistently
Number of active borrowers
300 300
grew in the past few last years.
Gross loan portfolio
Portfolio quality significantly
200 200
improved since 2010, and the
write-off ratio remained very
100 100
low. In 2012, the sharp increase
both in active borrowers and GLP
0
2008 2009 2010 2011
0
confirms the untapped potential
of the market.
Number of active borrowers GLP
3%
AMFA has been actively working
on developing a code of conduct
2%
for market players to set
practical guidelines for
1% responsible sector behavior.
AMFA requested assistance from
0% MIX on analysis of pricing
2008 2009 2010 2011 Q3 2012 components.
PAR>30 Write-off ratio
Source: MIX Market, 2013. View market growth data here. View portfolio quality data here
23
This presentation is the proprietary and/or confidential information of MIX, and all rights are reserved by MIX. Any dissemination, distribution or copying of this
presentation without MIX’s prior written permission is strictly prohibited.
24. Responsible pricing benchmark in Azerbaijan
Nominal Yield on GLP (weighted averages) Not all banks included in the analysis are major
50% players in the microfinance sector and
40% compete with other banks across numerous
30%
product lines. This competition has led banks
to drop their rates, and in turn their yields, to
20%
better compete with their peers. The nominal
10% yield reflects the entire product scope of banks
0% and does not distinguish the microfinance
2005 2006 2007 2008 2009 2010 portion. The yield decrease for banks does not
necessarily mean lower prices for microfinance
Azerbaijan Banks NBFIs
clients borrowing from banks.
40%
30%
NBFIs have not had the same pressure to reduce
20% rates and have kept margins steady as expenses
continue to increase. The expenses have been
10% increasing ever since NBFIs started paying
payroll taxes added by extra costs in 2011 for
0%
2005 2006 2007 2008 2009 2010
the use of a centralized credit registry. Margins
Banks - Financial Revenue/Assets Banks - Total expense/Assets have been steady because costs have also gone
NBFI - Financial Revenue/Assets NBFI - Total expense/Assets up. Usually, the costs faced by microfinance-
focused institutions can vary significantly from
Source: MIX Market, 2013. View the slide data here
the larger banks.
24
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presentation without MIX’s prior written permission is strictly prohibited.
25. Conclusions
1. Positive trends in portfolio quality and profitability figures along with the
growth in borrowers and loan portfolio in ECA signal a regional recovery
from the crisis.
2. ECA improved in social performance reporting by representing 21% of
global reporting to MIX.
3. MFIs in the ECA region increased outreach in rural areas, as group lending
remains a priority methodology in Central Asia.
4. ECA cross-border funding has decreased by average 5% each year since
2009, but equity is growing for both NBFIs and NGOs.
5. The Azerbaijani microfinance sector continues to grow, as the Bosnian
market seems to start recovering from the crisis. Ongoing regulatory
changes in Kyrgyzstan are expected to bring changes to the sector’s
performance.
25
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presentation without MIX’s prior written permission is strictly prohibited.
26. MIX Global and Project Partners
MIX partners with a dedicated group of industry leaders:
26
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presentation without MIX’s prior written permission is strictly prohibited.
27. Microfinance Information Exchange
Headquarters:
1901 Pennsylvania Ave., NW, Suite 307
Washington, D.C. 20006 USA Visit us on the Web:
www.themix.org www.mixmarket.org
Regional Offices:
Baku, Azerbaijan Contact us: info@themix.org
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Baku, Azerbaijan
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Editor's Notes
Not sure what the second blue box is trying to say in the first sentence