SME Finance the way forward

Transcription

1 Finance the way forward Matthew Gamser Head, Finance Forum Dubai, May 2013

2 managed well, Banking can be very profitable Key observations ROE can be very attractive (up to 25-35%) Margin compression inevitable but can be negated by establishing a total wallet P&L Key profit drivers are typically deposits and transaction banking, representing between 50-60% of total business profitability Need to take a 5-year view of product profitability Faster Revenue Growth.. Higher RoA s.. We want to double in 3 years. Returns are the best in the Group. Risk-returns are now twice as high as all our consumer banking businesses Global Product Head, Banking Standard Chartered Sept Finance Gap Challenges in SF IFC What & How IFC and G-20 IFC Footprint

3 Performance in Banking can be highly volatile if the right capabilities are not put in place PERCENT ROA Source: Mckinsey Banking rewards those with the right capabilities in place 3 Finance Gap Challenges in SF IFC What & How IFC and G-20 IFC Footprint

4 Challenges and Solutions - Overview Common weak models in EM countries today: treated as corporate for medium and/or retail clients for small 100% secured lending driven with undifferentiated products of service levels Limited product program approaches and a lack of costeffective methods to address segment Emphasis upon lending, not Banking IFC Internal Analysis, 2011 Government initiatives (e.g. procurement) Financial infrastructure Credit guarantees Unsecured/ partially secured Loan guarantees Value chain financing Credit scoring Psychometric testing Operating account track record Early warning indicators Poor business enablers Poor Customer Knowledge Finance Challenges Lack of collateral or capital Lack of credit data skills and literacy Low profitability Granular definition of supported by market research Segmentation: Specific value propositions to target specific subsegments of (e.g. women) Greater focus upon customer management Educate through non-financial advisory provision (e.g. toolkit) Provision of training, information & networking Value based sales and service coverage models Retail-style products Automated and reengineered processes Low cost channels (e.g internet, call centre) Retail and business linkages Strategy Thought Leadership Project Design/ Portfolio Finance Initiative Lessons Learned 4

5 Formal credit gap remains as large as ever at ~ $ 1 Trillion

6 82-86% (~ Tn) of total credit gap of formal s in emerging markets is represented by formal s that already have a deposit account

7 Myths and Opportunities #1

8 Acleda Cambodia using the data! - Expand operational areas and provide more conveniences to M entrepreneurs in both urban and rural areas such as: fund transfer, ACLEDA Unity (Mobile phone banking), etc. 26

9 Myths and Opportunities #2

10 GTSF Program Approach through Partner Banks Suppliers Pakistan Suppliers India Suppliers Bangladesh Suppliers Vietnam Suppliers Brazil Suppliers, Other EM Suppliers US Suppliers Germany Suppliers Japan Payment of discounted proceeds Receivables purchase from Suppliers 2 Request for finance 4 $ Fees Partner Bank SCF Delivery Solution/ Platform Funded Participation or Guarantee coverage on Buyer and country risk Payment on Invoice Due Date 3 Accepts request and initiates payment 1 Buyer acceptance Low SF utilization in emerging markets compared to OECD countries presents significant market potential 5 Buyer

11 3. It s all about banks Banks matter, but so do partnerships - with real sector large firms, and others. Myth Opportunity

12 Distributor Finance SELLER varying forms of contractual support, including First Loss/counter guarantee Seller (Anchor) Distributor Sub- Distributor End- Customer BANK: Origination and monitoring in: Receivables-based financing to Seller Overdrafts/loans to Distributors/sub-Distributors or Floor-planning & equipment financing including end-user financing Bank IFC: Funding or Unfunded risk sharing facilities/partial guarantees Advisory Services solutions for distributors and / subdistributors, for capacity building and risk mitigation, to be customized as per needs

13 and

14 Using new tools: IFC s Customer Management Excellence Program Support our clients with their growth strategies, increase profitability ratios, and augment the bank s capabilities across key areas of customer management to better acquire and retain clients The tools and models of the program include: (1) a maturity assessment tool; (2) a wallet share sizing tool; (3) a revenue projection model; and (4) a sales Du-Pont Model The program was designed to evaluate the current customer management capabilities across key areas in customer relationship management including: Identifying best customers within an Banking portfolio Targeting acquisitions and cross-sell Optimizing risk and performance based pricing Optimizing touch-points for marketing profitably Difference between standard and best-inclass banking [ROE] 6% Standard 4% Sale force skills Optimizing collections and recovery actions Managing activation and reactivation Managing loyalty for clients 3% Operations optimization 2% Managing customer campaigns Assessing fees and waivers Customer Management Items Improved acquisition 2% Optimized approval rates/ pricing 2% Active Cross Selling 1% Retention Measures 3% Collection Optimization 23% Best-in-class Managing retention and churn practices Strategy Thought Leadership Project Design/ Portfolio Finance Initiative Lessons Learned 14

15 Global Footprint: IFC has implemented 74 banking advisory projects around the world worth $50 million from Finterra (Mexico) Banco Atlantida and Ficohsa (Honduras) Ceska Sporitelina (Czech Republic) Atlantic bank (Belize) Access Bank (Nigeria) Bank Muscat (Oman) FMB and NBS Bank (Malawi) Dewan (India) AgroInvest Bank (Tajikistan) CHUEE Energy Efficiency (China) As of February 2013, the Banking advisory program had 37 active projects, with a total value of US$30 million with 86% of projects linked to investments Strategy Thought Leadership Project Design/ Portfolio Finance Initiative Lessons Learned 15

16 Knowledge Resources Lead Implementing Partner to the G-20 Finance Sub-Group (and contributor to Data SG) Creation of Finance Forum & Global Finance Initiative Finance Stocktaking Report Strengthening A2F for Women-owned s in Developing Countries Innovative Agricultural Finance Models Finance Policy Guide Scaling up Access to Finance for Agricultural s IFC hosts the Finance Forum a G20 global initiative for inclusive knowledge sharing on finance data, research and best practices and facilitation among public/private actors in finance GPFI: Global Partnership For Financial Inclusion Shaping the Global Agenda on s and Financial Inclusion Strategy Thought Leadership Project Design/ Portfolio Finance Initiative Lessons Learned 16

17 Achievements to date News/reports on finance with daily feeds Growing LinkedIn group: over 1400 members Promotion of innovative approaches to promote finance/ Finance Challenge Data sharing/harmonization Policy dialogue (G20/AFI) Impact analysis Women s Finance Hub launched 21 April 2013!

18 Donors IFI/DFIs Global Finance Initiative: Global platform of joint delivery of AS, IS and mobilization Global Facility Participating FIs s INVESTMENT SERVICES Commercial Funding from IFIs/DFIs (up to $1.4 billion) Concessional Funding from Donors (up to $400 million ) A2F Advisory Services FI Capacity Building (target $50 million) Commercial or Blended funding to FIs through: Credit Lines Credit Enhancement Risk Sharing Facilities Capacity Building for Banks & NBFIs Global, Regional & Local Banks and NBFIs in the business Up to $4 billion new funding available for s in emerging markets (cycled 3-4 times over 10 years) 600, ,000 unserved or underserved s reached over 10 years Financial Infrastructure (target $15 million) Financial Infrastructure: Supports capacity of banks to lend and manage risk, and strengthens s ability to monetize assets 10 year timeframe. Anchor partners DFID & EIB Strategy Thought Leadership Project Design/ Portfolio Finance Initiative Lessons Learned 18

19 On the Web at LinkedIn Group: Finance Forum

20 Annexes

21 IFC Banking Advisory can support FIs in the following capacity building areas Strategy / Business Model Develop products & services Acquire & Screen Clients Serve Clients IT / MIS Support FIs to set-up Units or grow in the segment Market assessment including women entrepreneurs Business/Strateg ic Planning Organizational set-up or realignment Research needs Product Bundling Non-financial services Value proposition for women owned businesses Sales effectiveness Credit reengineering Centers or Branch redesign Alternative Delivery Channels Profitability analysis Efficiency analysis Tools for FIs Banking Guide Customer Management Banking Guide Risk Assessment Framework Banking Training Program CHECK Diagnostic Strategy Thought Leadership Project Design/ Portfolio Finance Initiative Lessons Learned 21

22 Case Study 1 Banco Atlantida, Honduras The client and the project: Largest local bank by assets with a large national network Investments: US$35 million trade line & US$50 million SEF loan Multiple product components in the Banking project: Banking Risk Management Sustainable Energy Finance Cross cuts with SBA product: Nonfinancial services & Toolkit Establishment of a Banking Unit includes: Organization structure adapted to capacity for finance Loan officers hired and trained Pricing: AS Project Value: US$ 405,000 Targets: reach (loans outstanding): 2,337 Target Value of Loans Outstanding: US$ 44 million Improving NPL levels from 9% to 5% Demonstration Effect: Led to more projects with the bank in other countries in the region. Project implementation ends 30 June, Strategy Thought Leadership Project Design/ Portfolio Finance Initiative Lessons Learned 22

23 Case Study 2 BLC Bank, Lebanon The client and the project: First bank in Lebanon and MENA to recognize business case for reaching out to women clients First member of IFC s Green Building Initiative in MENA; member of GTFP Multiple product components in the Banking project: Banking (50%) Gender Finance (30%) Risk Management (20%) Development of and Women value proposition: Market research Women in Business training design support for BLC staff Value proposition development for s, focus on women Non-financial advisory services Project implementation ends 30 June Pricing: AS Project Value: US$ 400,000 Targets: reach (loans outstanding): 10,700 (of which 17% are women) Target Value of Loans Outstanding: US$ 350 million Improving NPL levels from 9% to 5% Demonstration Effect: Women s business growing by over 60 percent, bank overall only by 20 percent. Role model for other banks in the region to serve women markets. Strategy Thought Leadership Project Design/ Portfolio Finance Initiative Lessons Learned 23

24 Case Study 3 - BINHAI RURAL COMMERCIAL BANK (BRCB) Formed 2007 through consolidation of two existing rural cooperative banks and one rural credit union in the Tianjin Binhai New District IFC committed US$32 million in equity and a 3-year comprehensive advisory program corporate governance, risk management, internal controls, and lending to s As of December 2008, the Bank had 8,895 loans worth US$765.5 million Increased its loan portfolio by 84 percent in number and by 49 percent in volume from 2007 to 2008 Over the past year, IFC provided training and advisory services and played an active role at the Board level. These are instrumental in helping the bank implement its strategy, advance its and rural financing business, improve staff quality as well as its corporate governance and risk management situation. Fengchang Qi, Chairman, Binhai Rural Commercial Bank 24