Operaring in a Near Crisis Environment - Essma Ben Hamida, enda inter-arabe

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Operaring in a Near Crisis Environment - Essma Ben Hamida, enda inter-arabe

  1. 1. “Operating in Near-Crisis Environments: Political Instability and Conflict, Refugees, Natural Disaster” Enda inter-arabe in the aftermath of the Tunisian Revolution Essma ben Hamida Co-Founder, Executive Director Enda inter-arabe Amman, November 2013
  2. 2. Tunisia 2011: “Arab Spring” condition
  3. 3. Spread of crime - Burning - Looting - Murder Damage includes factories but also cafes, small shops, even microenterprises in poor neighbourhoods - Rise of religious fundamentalism Desire to limit individual freedoms, especially for women Effect on economy & employment Bourguiba - 1st enlightened Arab President: - In 1956 introduced Family Code: vastly improves women’s rights and condition - Followed by Ben Ali: no freedom of speech, corruption… but security, stability, economic growth 2011 Revolution: Leads to Islamist government Since independence The revolution and its aftermath At least 30 000 jobs lost Investors head out of the country (e.g. to Morocco) Unemployment reaches 800 000; no signs of improvement Tunisia’s rating falls to dramatic levels
  4. 4. Revolution:multiple risks for enda Reputation: As soon as Ben Ali fell: “Enda belongs to Leila (his wife)”! Truth campaign quickly bore fruit. Agressivity: Some clients’ became aggressive  stress for field staff; psychologist recruited Rise of Islamism: interest contested but little impact. Fears for women’s rights Behavioural change: Some staff want to “revolutionize” Enda: first trade union formed adopts aggressive, unconstructive approach Performance worsens: growth rate, income, productivity, liquidity, PAR decline. cost of funds, inflation rise… Other factors improve: recruitment, innovative products, demand…
  5. 5. Enda Inter-Arabe
  6. 6. Impact of revolution - Credit Portfolio (M TND) 100 80 60 Portfeuille 40 0 2008 2009 2010 PAR 6 Revolution 20 5 2011 2012 2013 4.9 4 3.15 3 3.3 PAR 2 1 0 0.55 2008 0.9 2009 0.425 2010 2011 2012 2013
  7. 7. Impact of revolution - financial 100 80 Cost of funds 10% Revolution Cost of funds 6.5% 90 70 60 50 40 30 Refin Total 20 Financement étranger Financement Local 10 0 2008 2009 2010 2012 2013 6,000 100% 5,000 50% 4,000 5,222 4,304 3,000 0% 2008 2009 2011 2010 2011 4,432 4,027 4,563 3,752 TMM 2,000 2012 2013 1,000 0 % financement étranger % financement local 2008 2009 2010 2011 2012 2013
  8. 8. Distribution of risk in branches caused by political instability in 2012 Branches by risk 66% of our branches destabilized by the revolution and its aftermath Risk Level
  9. 9. Chronology of Risk Management Systems put in place Risks Faced Prior to Revolution • Increase in PAR • Risk of fraud • Regular follow up on PAR and arreers • Internal control and audit During the Revolution • Reputational risk • Security risk • Crisis committee • Strengthen communication with clients • products more flexible • Security guards in branches • safety instruction manual to all branches • Emergency procedures After the Revolution • Security risk including terrorism • Credit risk • Liquidity risk • Political risk • Global Risk management Department • Risk policies, Risk committee at Board level) • Tools to manage liquidity (d/d and h/h), scoring • New tools to manage risk • Continuity Plan • Use of media (enda achievements)
  10. 10. Credit Risk Strengthen controls during loan application process New position at branch level to reinforce loan application committee Collections department to follow up on outstanding loans (field and HQ) Detect good profiles (scoring system) Adapt collections strategy Systems/tools to prevent credit risk: scoring of loan disbursement, generational analysis, etc… • Diversify portfolio but still focussing on the poorest areas and people: • • • • • • ▫ Roll out agricultural product (Mawssem) developed with WWB support ▫ develop innovative product for start ups by youth (Bidaya) support from Swiss ▫ cooperation ▫ Geographical diversification : new branches opened in both urban and very poor Rural areas
  11. 11. Operational Risk1 • Reinforce security for branches and staff: ▫ ▫ ▫ ▫ Close branches in times of local upheavals (usually one or two days) Adapt working hours according to circumstances Adopt specific procedures to protect loan officers and funds in the field Collect regularly promissary notes from branches and store in safe place • Revise and improve procedures and control measures (risk mapping) by branch and area and product • Procedures and action plan to manage crises and handle disruption of activity: ▫ Safety Instructions Manual ▫ Emergency Procedures ▫ Business continuity planning
  12. 12. Operational Risk2 • • • • • • • Psychological listening sessions with clients and staff Training sessions in non-violent communication (staff) Salaries increased, bonus system for loan officers adjusted Loans rescheduling Disaster loan to help clients refinance loans and restart projects Greater flexibility in products Regular back up (information system)
  13. 13. Financial and Market Risk • Liquidity crisis in Tunisian banks  sharp fall in refinancing ▫ Reduce the maximum amount of housing loans ▫ Reduce the number of clients receiving education loans ▫ Slow the pace of loan disbursement, reduce growth despite demand • Rigorous follow up on treasury: ▫ Short-term planning of treasury flows ▫ Use collected cash to supply current accounts ▫ Monitor contractual commitments on key financial ratios • Cost of funds soar from 6 % to 10 and 11%: impact on enda’s income • Control running costs: ▫ No increase in loan size for good clients ▫ Pace of new openings for 2012 and 2013 reduced
  14. 14. Main lesson: don’t wait for disasters to occur, be prepared • • • • • • Need for a good risk management strategy, not wait for disasters Need for a risk management department Need for tight security measures for branches in risky areas Need for a business continuity Plan Stay close to clients, communicate regularly Train staff, communicate with them, stay close to them, give them incentives despite declining productivity and increasing PAR (loyalty to the institution and clients) • Use media and communicate on microfinance and your MFI • Call on partners, networks and friends of MF (they react!) •  a crisis always leads to an opportunity!
  15. 15. Thank you for your attention.

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