ПРОГРАММАПРОГРАММАМАЛОГО БИЗНЕСАМАЛОГО БИЗНЕСА

КАЗАХСТАНАКАЗАХСТАНАKazakhstan Small Business Kazakhstan Small Business

ProgrammeProgrammeKSBP-

Microfinance in Kazakhstan

Lorenz GessnerAlmaty, 10 November 2005

KSBP-Microfinance in Kazakhstan

Lorenz GessnerAlmaty, 10 November 2005

Summary

History and results

Sustainability

Lessons learned

Yesterday – the situation in 1998

MSE CLIENTS:MSE clients had very limited access to credit resources

Money was borrowed on the black market at high interest rates

Slow development of the MSE sector

KAZAKH COMMERCIAL BANKS:Disbursed loans only to very large companies and state-owned enterprises

Lack of an approach to lending to microenterprises (sole proprietorships and very small firms)

Lack of trained staff who could analyze MSE clients

Little interest in disbursing loans to MSEs (poor reputation)

KSBP - organisation of processes

IPC GmbH (Internationale Projekt Consult GmbH)

Consulting firm with 25 years’ experience in microfinance

IPC’s range of services comprises three components:Consultancy services

Project management

Bank management services

IPC developed a credit technology precisely tailored to the special conditions prevailing in transition economies

Similar projects in Russia (RSBF), Kyrgyzstan (MSFF), Ukraine (UMLP), Armenia (GAF)

Best practice banks (ProCredit Banks) in Serbia, Bulgaria, Ukraine, Romania, Albania, Russia, Macedonia, Moldova, and also in Africa and South America

KSBP portfolio as a share of partner banks´ total loan portfolio (end-June 2005)

BanksAssets

(USD billion)

Loan portfolio

(USD billion)KSBP

share (%)Branches/

OutletsEmployees

5.63 3.92 2.00 22/63 3,066

5.45 3.63 2.26 22/188 2,845

3.68 2.50 2.67 19/534 8,200

1.97 1.21 4.16 18/11 1,409

1.66 1.09 4.65 19/104 1,828

Kazakhstan Small Business Programme

Results

Kazakhstan Small Business ProgrammeResults

KSBP regional expansion with partner banks (in 47 cities and over 210 branches)

0.1

3

0.36 0.65 0.890.32 0.5 0.94

0

1

2

3

4

5

6

7

1998 1999 2000 2001 2002 2003 2004 2005

portfolio at risk - over 30 days

KSBP portfolio at risk(as of end-October 2005)

> 50,0003%

10,001-50,00020%

2,000-5,00035%

5,000-10,00015%

<1,0009%

1,000-2,00018%

Outstanding loan portfolio volume: Breakdown by loan size (as of end-October 2005)

- Express

- Micro

- Small

>24 months18%

7-12 months49%

<7 months1%

19-24 months23%

13-18 months9%

Breakdown by maturity(as of end-October 2005)

Sustainability - key factors

Adapted to target group, competitiveTerms and conditions

MSE credit department at head office, people, workflow

Organisational structures

High quality, regularity, trainingAudit

Strict, but with flexible elementsLending technology

Complete and clear description of procedures

Documentation

Continuous monitoring of profitability of MSE lending

Profitability

High quality, regularityTraining of loan officers

Easy to obtain, accessibility, serviceProducts

PRIORITIESFACTORS

Easy to obtain

EXPRESS LOANS - target group: sole proprietorships

Loans up to USD 5,000

Disbursement within 2 days

Minimum collateral - 100% current assets (stocks)

MICRO LOANS - target group: sole proprietorships, micro companies

Loans up to USD 10,000

Disbursement within 4 days

Minimum collateral - current assets, movable assets (cars, personal goods, stocks)

SMALL LOANS - target groups: legal entities, companies, sole proprietorships

Loans up to USD 200,000

Disbursement within 5 days

Collateral - fixed assets (real estate, vehicles), current assets

AGRICULTURAL LOANS - target group: sole proprietorships and legal entities in the agricultural sector

Loans up to USD 200,000

Maturities: initially up to 1 year, now up to 7 years

Collateral: more flexible approach

Repayments: initially strict equal instalments, now grace periods or varying instalments possible

New businesses: initially only existing businesses, now also new businesses set up by existing clients

Adapted to the target group

High quality

Training comprises 5 different types of seminars and intensive practical instruction– Micro– Express– Small seminars– Senior – Back Office

Training of bank auditors

Number of loan officers

trained –2,647

Number of seminarsconducted-

135

Regularity

Credit procedures

Job specifications for employees

Documents on loan officer training, selection and career opportunities

Incentive systems

Code of conduct

Complete and clear descriptions

Clientacquisition

Financialanalysis

Internal creditcommittee

Creditcommittee

Loandisbursement

CREDITCYCLE

Monitoring

Arrears

Repaymentof loan

Strict, but with flexible elements

MethodologyMethodologyTrainingTraining

MSE credit departments at head office

Example of a structure of MSE lending co-ordination at head office of a partner bank

Head of Co-ordination

Head of Co-ordination

Regional Manager

Regional Manager

Regional Co-ordination

Unit

Regional Co-ordination

Unit

Methodology and Training

Unit

Methodology and Training

Unit

2 Auditors for MSE lending

RegionalManager

RegionalManager

RegionalManager

RegionalManager

RegionalManager

RegionalManager

Head ofDepartmentHead of

Department

Contribution to overheads and profit before tax for 2004

Total: USD 20 million

KKB USD 4.0 million

BTA USD 4.7 million

HSBK USD 6.1 million

BCC USD 2.3 million

ATF USD 2.9 million

Continuous monitoring of profitability

Percentage of KSBP partner banks´ total loan portfolios financed with own funds (end-October 2005)

Banks

Outstanding volume of

KSBP loans

(USD million)

Outstanding volume financed with EBRD funds

(USD million)

Share financed with own funds

(%)

106 12 89

104 25.3 76

72 7 91

53 17.3 67

66 32.6 51

Analysis of business growth based on KSBP lending

Number of loans

Average loan amount

1 4,640

2 4,631

3 6,239

4 7,578

5 8,986

6 and more 12,897

Analysis of business growth based on KSBP lending

Number of loans

Growth of equityGrowth of number of employees

2 51% 9%

3 53% 15%

4 49% 16%

5 49% 14%

6 44% 17%

Average 51% 12%

Analysis of business growth based on KSBP lending

Loans Average equityAverage number

of employees

<5,000 9,590 2.73

5,000-10,000 32,161 5.30

>10,000 122,073 13.68

Average 20,062 3.20

Competition in financial sector

Adaptation of products and procedures to clients’ needs

Contribution to TA from partner banks enhances project success

Banks have to be engaged as early as possible (transfer of responsibilities)

Long-term interest in MSE lending depends on institution building and the ownership of the bank

KSBP - Lessons learned

New programme since Nov. 2005

EBRD-credit line of USD 100 million

Participants: Commercial banks and a non-bank microfinance organisation

Targeting on the regional outreach- access for farmers and micro-businesses in the regions

KSBP III- agricultural and rural lending