Opportunity Bank, Serbia - MFR · 2018. 11. 12. · Clients at third loan cycle Social Rating Committee: April 2016 Previous Social Rating: A- November 2013 SOCIAL RATING RATIONALE
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Standard Social Rating
Social Performance Management
Client protection, social responsibilityOutreach
Quality of the servicesD C B BB A AA
Institutional data
Individual
Opportunity Bank, Serbia
CLIENT PROTECTION AND
SOCIAL RESPONSIBILITY
QUALITY OF THE
SERVICES
OUTREACH
Active borrowersActive saversGross outstanding portfolio, EuroTotal active savings, EuroBranchesTotal staff
Dec-15Social indicatorsRural coverage, clientsFemale clientsFemale staffFemale staff in managementAverage disbursed loan amount, EuroClients at third loan cycle
Social Rating Committee: April 2016 Previous Social Rating: A- November 2013
SOCIAL RATING RATIONALE
20,585 32,055
55,663,613 9
284
Feb-16
Good social performance management and client
protection systems. Social mission likely to be
achieved.
SOCIAL PERFORMANCE
MANAGEMENT SYSTEM
The breadth of outreach is good, as the FI is well established in all Serbian districts, and in particular in
the rural areas. The outreach to households with vulnerable demographic characteristics is good, while
the outreach for women is adequate. The FI closely monitors the alignment to the target population by
classifying them as poor, very poor and low income.
The FI offers a good varietry of financial services that meet the economic needs of the target client.
The accessibility and flexibility of their credit products are good, which is also reflected in the high
scores of client satisfaction surveys. The client drop-out rate is adequate but improvable and the offer
The context risk factor for client over-indebtedness is medium: the penetration of microfinance
services in the areas of operation and the growth rates of competitors in the past years are
reasonable, the level of multiple borrowing is intermediate and the information available from the
credit bureau is good.
The market saturation (demand and competitors penetration) is assessed on an annual basis in all
branches and regions. There is evidence of corrective measures taken in the past to ensure that
the current growth is sustainable. After facing harsh competition from ProCredit on the medium
sized segment, OBS adjusted its strategy to grow in the rural areas with smaller sized loans.
6.0%
35.6%Growth in active borrowersGrowth in outstanding portfolioGrowth in number of staffGrowth in number of branchesPAR 30
Dec-15Dec-14Dec-13
15.0%13.3%18.3%
46.2%19.5%
Investors' alignment to the institutional double bottom line: GoodProfitability compatibility with client well being and long term sustainability: Good
Oper. Self-sufficiency (OSS)
11.2%27.4%5.5%
1.0%8.2%
115%113267
20.7%11.6%-11.1%4.2%1.8%6.3%
11.0%1.7%9.3%1.4%111%109%116310
1.2%
21.5%
4.5%
117%
7.0%12.5%
0.7%5.0%0.8%105%106%
96274
11.8% 11.8%
Adjusted Return on Assets (AROA)
Operating expense ratioFunding expense ratio Provision expense ratioPortfolio yieldRisk coverage ratioCost of funds ratio 7%
4.9
35.3%5.0%
20.1%56%
Source: OBS data adjusted by MicroFinanza Rating4.9
6%4.9
32.3%6.6%
20.9%59%
Growth compatibility
with sustainability and
client well-being
MicroFinanza Rating 8
OBS, Serbia
+
+
+
+
+
+
+
+
1.3 Social performance
measurement
Back in 2013, the Board had established that 1 to 10% was the desired range for ROE. In July 2014,
the Risk Appetite Statement enlarged the range reaching a ceiling of 20%. However in February
2015, the definition of a precise range was abandoned. Instead, the ALM policy of OI require that
each time that ROE exceeds 10%, explanations must be given to the BoD in order to assess
potential mission drift risk. In the case of OBS, knowing that its capital is denominated in RSD, the
OI network considers that an ROE of 10% is the minimum level to compensate the annual drop of
RSD against EUR and USD. Actual return would be gains above 10%, however by convention, it
should not exceed 18% (BoD guideline). The current business plan projects a maximum ROE of
16%. No dividends are being paid to OI and the full profit is reinvested in the business. It can be
thus considered that there is an acceptable consistency between the institution’s social goals on
one side and the targeted level of profitability as set by the BoD on the other side.
The compensation of top management is fully transparent.
Social information consolidation, analysis and reporting: Good
Measurement of the target client: AdequateMeasurement of the quality of the services: AdequateMeasurement of the change/impact: Adequate
Relative to its size, the institution demonstrates an adequate capacity to monitor the client
characteristics relevant to its mission and the alignment of the outreach results to the target
population. Some relevant data is captured electronically in the MIS, including urban vs. rural
location, number of household members, poverty category (internal definition), etc.
Characteristics such as household assets (e.g. house, land), financial exclusion (e.g. clients without
previous access to formal credit), clients belonging to a marginalized group (e.g. disabled) or the
financed activity are not part of the available consolidated dataset. Some client profile data
relevant for the mission are collected for individual clients on paper (e.g. family income and
expenses, previous access to credit, etc.) but are not consolidated in a unique database and cannot
be used for aggregate analysis.
Management
compensation alignment
to the double bottom
line
Target client
The financing structure is transparent as the reported leverage ratios incorporate all funding
sources, including any off-balance sheet ones. Audited financial statement are available upon
request.
The institution has good risk policies to protect the liabilities towards the customers, including
savings.
Investors' alignment to
the institutional double
bottom line
Profitability
compatibility with client
well being and long term
sustainability
A significant portion of the profits generated is directed to actions, programs or products that
increase value to clients. An SPM (Transformation) budget has been established, allowing to
structure spending on non-financial services such as education through trainings on topics such as
agricultural production, women empowerment, etc. Also, the SPM procedure protects delinquent
clients that find themselves in very compromising financial situations, under certain conditions.
This pilot measure was enforced for Retail clients in late 2015 and was expected to spread to the
entire clientele by March 2016. Also, following the market trend, effective interest rates have
overall decreased over the last period.
Products offer a fair value to the clients for their price; this is reflected by the analysis carried out
by the institution of some key aspects of competitors' pricing and client feedback. In the client
satisfaction survey conducted in November 2015, on a sample of 131 clients, 99% claimed they
would cooperate again with OBS. However 84% of sampled clients pointed out interest rates and
loan terms as the worst features of OBS offer. The Marketing department provides monthly
reports to the top management highlighting pricing trends on the market, both for credit and
saving products.
The top management compensation is consistent with the institution's social mission. The top
management compensation is set by the BoD and takes into account the CEO performance. The
gap between the top three management and the bottom three field staff compensation is justified
and it is below the peer groups (standing at 17.3). The incentive-based top management
compensation takes into account both financial and social performance indicators.
MicroFinanza Rating 9
OBS, Serbia
+
+
+
+
+
+
+
+
+
The system to monitor the change in clients’ lives is acceptable considering the size of the
organization. However, the progress is monitored with few indicators (e.g. job creation), which
address only in part the social mission which in the case of OBS indicates also mentions children's'
future and communities. The tool used to measure the change in the poverty level of clients is the
declared household income, compared over two credit cycles.
Staff recruitment and training alignment to the mission: AdequateStaff evaluation and incentive alignment to the mission: Adequate
Social information
reliability and reporting
1.4 HR alignment to the
mission
The majority of the information on the client satisfaction and the clients profile (including the
poverty rate) is periodically consolidated and analysed at the institutional level. The large majority
of the social performance information is reported to the management in a timely and frequent
manner and to the BoD on a quarterly basis.
The MIS has the capacity to disaggregate the client data (including the poverty status) by most the
relevant characteristics: region, product used, urban vs. rural location. The disaggregated data
reliability is adequate.
Information is collected to monitor the use of products and services by the different client
segments, including the target population. This is mainly done through Client Satisfaction surveys.
The middle management (e.g. branch managers) has information on how the products, services
and delivery models help clients to reduce risks and cope with common emergencies, invest in
economic opportunities and address anticipated household needs. However, no formal analysis
has been conducted so far on the topic on an extended scale.
The information about the client satisfaction is formally analysed on average yearly, covering the
overall service, and some product components such as the relationship with field employees,
product terms - amount, cost, term and frequency. The findings are analysed by client segment,
even if not in detail for all the client characteristics of the target population. Representative client
surveys and focus group discussions with clients are regularly used to collect the client feedback
on the satisfaction with the financial services.
The drop-out rate is monitored on a monthly basis using a reliable formula. The system allows for
a friendly review of the level of the drop-out rate, its trend and the concentration in the branches.
The drop-out rate is also available by client segments.
Quality of the services
Change / impact
The quality and reliability of the information currently collected on OBS clients' profile, their
satisfaction and the change in their lives is overall adequate. All the aspects of the information
management process, including personnel responsibilities, methods for the collection, storage,
analysis, quality control and reporting are clear and documented in policies. The institution’s
practices reflect the social data management policies. The data collection and data entry are
covered during the initial staff training of loan administrators and client advisors. The Quality
Control department periodically checks the accuracy of the social data collected on the field and
entered in the MIS as part of their tasks.
The institution discloses social performance data in a transparent manner through the current
social rating. In addition, it has conducted a social audit and includes social information in its
annual report. The independent validation of the social information is updated with a moderate
frequency, having the previous social rating been carried out more than 2 years ago. Some of the
information included in the annual report is updated on a yearly basis.
A good system is in place to measure the poverty level of clients and the alignment of the poverty
outreach results to the social goal of the mission. The poverty assessment tool used is the per
capita household income. The poverty level of clients is measured for clients that have joined OBS
since January 2014, for all products except from the Business segment. The representativeness of
the client sample is still to be enlarged.
MicroFinanza Rating 10
OBS, Serbia
+
+
+
+
-
Staff recruitment and
training alignment to the
mission
The alignment of the staff appraisal to the mission is moderate. The evaluation structure does not
formally cover any specific aspect of the employee contribution to the social mission, such as their
adherence to the institutional values, and their ability to recruit target clients (following SPM
criteria). However, the quality of the customer service is informally reviewed by the loan officers
supervisors on a regular basis.
A new incentive scheme was launched for the Business segment in October 2015 and for Agro in
March 2016. This new incentive scheme does not encourage the provision of big loan amounts
since they have a lower weight in the bonus system. It will not apply for the Retail segment since
there amounts are already limited (no more than EUR 5,000). However, the staff incentive scheme
does not include explicit criteria linked to the institutions' social goals to ensure the staff
orientation towards the achievement of the mission.
Staff evaluation and
incentive alignment to
the mission
The staff recruitment process is well aligned to the mission. The candidate interviews and the
reference checks include the screening of the candidate’s commitment to the institutional social
goals and willingness to support the mission. An exchange over the perceived mission and values
of OBS usually takes place. However, the inclusion of social criteria on the hiring process is
currently only a practice and it is not yet documented in OBS HR hiring policy.
The staff training contributes to the dissemination of the mission to the personnel, since it's
formally part of the topics to be addressed. The induction trainings provided to the staff includes
an overview of the mission and values, the social goals and the client protection principles. Besides
the presentation of the topics, the trainings do not specifically include practical simulations of how
the social topics translate into the daily work of the staff. The frequency and coverage of the social
performance training is acceptable, considering the branch network and employee turn-over.
The mission dissemination among the staff is adequate. The management and the field staff
overall share a uniform understanding of the target population and the desired change in clients
lives. However, small differences in the interpretation of the institution's social goals exist across
branches or between old and new employees, mainly due to the change of the mission wording
The formal HR policies are exhaustive and cover wages, benefits, working conditions, safety at
work, anti-harrassment safeguards, freedom of association, grievance resolution, whistle blower
policy, disciplinary procedures and possibe sanctions.
A non-discrimination policy for the staff is formalized and covers sex, race, and religion, but does
not cover HIV status, disability or sexual orientation. Thus, the risk of staff discrimination is low.
The CEO also proactively discourages favouritism towards recruiting family members of staff or
related parties.
The existing HR policy complies with the national labor laws.
Female staff in managementFemale members of the BoD
A formal grievance mechanism is in place to allow employees to raise concerns in a confidential
manner if needed. However, the formal grievance system does not seem to be effectively used by
the staff. Employees can also use informal channels to present their complaints.
All employees have a formal employment contract.
ManagementStaff turn-over ratio
Other line and administrative staff
Labor climate
monitoring
Loan officers4.8%
24.7%
35.6%
The gender balance is overall good: the composition of staff is well balanced (female staff over
50% during period of analysis), while female management and BoD members are slightly under
represented (34.9% and 25% respectively).
The staff turn-over rate is slightly lower than the benchmark. Especially when comparing OBS with
NBFIs in Serbia, the peers have been experiencing staff turnover above 17% in the period of
analysis (MixMarket , 2016).
The trend is stable; however, staff turn-over is concentrated in loan officers.
2.1 Social responsibility
towards the staff
Personnel gender
balance
Staff turn-over
Contractual conditions
and benefits
Total staff
The safety conditions for the field staff are good for the context: cash handling in the field is
prohibited and a safety policy is in place (training and equipment are provided to the staff to
mitigate the safety risks).
The institution conducts formal staff satisfaction surveys annually, collecting the staff feedback on
aspects such as the workload, training, communication, participation, and the leadership from
supervisors. The employee satisfaction surveys are conducted anonymously. The results are
analysed and shared with management.
15.9%
Staff leaving for better working conditions or higher salaries in the banking sector are among the
main reasons of turn-over. OBS has also dismissed staff due to underperformance or insufficient
compliance with the bank's regulations.
The HR function calculates the staff turn-over rate, monitors its level over time and its
concentration by staff category. The employees leaving the organization go through an exit
interview and a written analysis of the reasons for staff turn-over is conducted.
2. Client protection and social responsibility
13.0%
Female staff
13.0%14.5%15.6%14.5%14.0%
34.9%25.0%15.3%
The HR policies are available to the staff and uniformly applied in the practice.
Human resource policies
and occupational safety
MicroFinanza Rating 12
OBS, Serbia
+
+
+
+
+
+
+
+
+
+
+
The sales techniques are not considered to be aggressive, as there is no evidence of cases where
the individual borrowers or guarantors may be put in a situation where they are forced to sign
credit or guarantee contracts.
The context risk factor for client over-indebtedness is medium: the penetration of microfinance
services in the areas of operation and the growth rates of competitors in the past years have been
reasonable, the level of multiple borrowing is intermediate and the information available from the
credit bureau is adequate.
Some specific features of the products design risk to harm clients, as clients borrowing in EUR have
to agree that the foreign exchange risk is upon their responsibility, as per NBS requirement. Also,
the cost of insurance for pensioner loans is incurred to OBS, except for the newly launched
product for pensioners of 75 to 79 years of age, who instead need to abide by a compulsory saving
worth 30% of the disbursed loan amount.
The acceptable pledges of collateral and the guidelines on how collaterals are registered and
valued are fully formalized in policies. When the borrower's assets are sold to repay a delinquent
loan, the assets' value is usually lower or in line with the outstanding loan.
The clients drop out reasons are formally investigated and tracked for a representative share of
exiting clients. Beside managing the individual exit cases, a consolidated analysis is conducted at
the level of the organization and of each branch to identify the main reasons of client drop-out.
Moreover, the concentration and trend of the reasons are specifically reviewed. The analysis is
conducted at least quarterly and reported annually. The method used to categorize the exit
reasons is appropriate to the aim of the analysis.
The management demonstrates a full understanding of the needs and preferences of the different
client segments. Thorough and formal research has been recently collected about the target
clients characteristics, the clients needs for products and delivery channels and the potential
barriers they face. The products and delivery channels are frequently adjusted based on clients'
needs and preferences, as demonstrated by the changes in the new products recently introduced,
such as the retail loan for pensioners of age 75 to 79.
Appropriate product design and delivery: GoodPrevention of over-indebtedness: GoodTransparency: ExcellentResponsible pricing: AdequateFair and respectful treatment: ExcellentPrivacy of client data: ExcellentMechanisms for complaint resolution: Excellent
The loan disbursement is not mainly based on guarantees for any product.
Salaries are based on a transparent salary scale.
2.2 Client protection
Appropriate product
design and delivery
A formal staff performance appraisal is conducted for all employees annually. The performance
results are used for individual development plans, promotions and raises. Career opportunities are
provided with transparent criteria.
Evaluation, training and
development
Prevention of over-
indebtedness
Contractual conditions
and benefits
The staff training is good: the majority of the staff receive effective trainings as appropriate to
their functions at least annually, according to a formal training plan and a dedicated budget. The
access to external trainings, besides internal training, is reasonable. The induction of new staff
covers the essential skills for each position.
Salaries are in line with the microfinance labour market for some of the employees, while the
remuneration of managers and some back office positions is slightly below the market. This was
the main finding of the comparative analysis of OBS salaries against those of other banks in Serbia
in Oct-15. However, because of the strong social mission and different target market compared to
other banks, this difference in salary is reasonable. The salary policy, nonetheless, respects the
minimum wage regulation.
MicroFinanza Rating 13
OBS, Serbia
+
+
+
+
+
+
+
+
+
+
The system to review and report client data through the credit bureau is very good: the
consultation and sharing of client data is formalized in the credit policy and covers all loans in all
cycles. The credit bureau covers the main formal financial providers which are relevant for the
target market of the organization and the information is updated with an appropriate frequency
(i.e. daily).
The management and Board of Directors' awareness and concern for the risk of client over-
indebtedness is appropriate to the context. Some proxies are used to estimate the client over-
indebtedness risk (e.g. % exclusive clients versus clients with multiple loans). The system used by
the management and BoD to monitor the portfolio quality is good, relying on a complete set of
indicators - PAR, restructured, refinanced and write-off - with an appropriate frequency, and
concentration indicators - ageing, product, etc. -, and a vintage analysis to monitor the portfolio
per client advisor.The internal control verification of the policies to mitigate the risk of client over-indebtedness is
good. The client repayment capacity calculation and thresholds and the debt exposure calculation
and thresholds are verified by the internal control through both a desk review and client visit. The
credit bureau consultation undergo a desk or a client visit verification.
The client repayment analysis is performed for every loan and it is based on a client visit for the
majority of first cycle loans. The simplified process for retail loans does not contribute to the risk
of over-indebtedness, as the key elements of the analysis (i.e. income, expenses, additional loans)
are covered; the simplified analysis is subject to fairly prudential criteria.
The individual cash-flow analysis is good: a reasonable estimate of the client repayment capacity is
calculated through a detailed analysis of the client income, the business and family expenses as
well as liabilities from other sources. However, no specific conservative criteria are applied to
volatile income sources, and the potential obligation of the client as a guarantor is not considered.
The repayment capacity policy is well disseminated and uniformly implemented by the staff. The
training, field mentoring and coaching provided to the junior loan officers by the senior staff and
supervisors maintain an adequate quality of the repayment capacity analysis, considering the staff
growth and turn-over.
The portfolio quality is good and shows a positive trend. Client over-indebtedness may be one of
the factors contributing to late payments, even if not necessarily the main one. The corrective
measures taken to improve the portfolio quality are appropriate.
The staff incentive scheme and the productivity targets value portfolio quality, as much as the
portfolio volume and number of clients, contributing to preventing the risk of over-indebtedness.
The incentive scheme considers not only portfolio quality ratios, but also absolute amounts of
portfolio at risk, partly mitigating the risk of under-estimating the portfolio quality issues given the
current high growth and the consequent large share of young portfolio over the total portfolio.
A loan rescheduling policy exists and it is applied for late clients who have the “willingness” to
repay but not the capacity to repay. The policy formalizes the cases of specific distress under
which clients can be eligible for rescheduling (e.g. death of relative; natural disaster leading to
destruction of asset or production tool; sickness; etc.). Rescheduled loans are approved by
supervisors with a higher level of responsibility (Chief Risk Officer) compared to the original loan.
Rescheduling can also be considered if clients have demonstrated good history of repayment and
request a rescheduling due to business or personal problems. Policies also indicate the option of
reaching informal repayment agreement (i.e. without changing the loan contract) with late clients.
A loan write-off policy is in place, which abides to the NBS regulations. Loan refinancing is also
available as an option for exceptional cases.
The productivity targets and the incentive scheme parameters are reasonable as compared to the
industry benchmark. The variable remuneration (if any) does not exceed 100% of the total
remuneration on average. Targets are not standard for all loan officers, but they are differentiated
according to the experience or area served by loan officers, avoiding excessive pressure for each
specific context.
MicroFinanza Rating 14
OBS, Serbia
+
+
+
+
+
+
+
+
+
+
+
Source: survey on recent clients. See annex 3 and 4 for more details.
+
+
Opportunity Bank 24%
The savings documentation given to the clients includes interest rates, fees (for account opening,
closing, withdrawals, maintenance and any other operation), withdrawal limits (when applied),
minimum and maximum balances, use of savings in case of credit default.
The insurance product documentation provided to the clients lists the complete information on
the cost and how premiums are collected; specific events and amount of loss covered; length and
term of coverage, and how to file a claim or contact information for making a claim.
The total amount that the client pays for the product is clearly presented to the clients, as required
by the local regulation.
The clients are given a hard copy of the contract and other documents they sign; however, they do
not receive a copy of other documents they sign, such as the consent form to access credit bureau
information or documentation regarding the pledge.
The effective annual interest rate or range of interest rates is disclosed for all loan products, in
accordance with the local regulation.
Avg. annual
percentage
rate (APR)
Average
transparency
index
Transparency
Responsible pricing
Fair and respectful
treatment
The code of conduct indicates the organizational values and standards of professional conduct
that are expected of all employees. The code has been reviewed and approved by the BoD.
The institutional transparency index, obtained as the weighted average of the transparency index
of the different loan products, is high, indicating a small difference in general between the nominal
interest rate disclosed to the clients and the effective interest rate calculated according to the
international standards (MFT methodology).
The communication with the clients is effective: the documentation and oral communication are
in the local language and front line staff receives a training on client communication, including the
techniques that address literacy/financial literacy limitations.
The clients are given adequate time to review the terms and conditions of the product, ask
questions and receive additional information prior to signing contracts: clients take home and
review product documentation including an amortization table and a summary sheet of terms,
conditions and costs prior to sale.
The collection policy describes the specific steps to follow in case of default (after how many days
the FI will take action and what those actions are) and the acceptable and unacceptable collection
strategies (e.g. using violence or humiliating language, calling the client after 8pm).
The price of all the loan products representing more than 25% of the portfolio is in line with the
peer group of the market: the Annual Percentage Rate (APR) is does not deviate more than 15%
from the average APR of the loan products with a similar loan size on the market.
The higher APR level for one or more products compared to the peer group is partly justified by
the higher operating expenses due to the higher penetration in rural or remote areas.
Clients receive clear and full documentation on all costs of the loan products (interest and fees),
fees and conditions for early repayment and for late payments.
Active
clients
Outstanding
portfolioCredit products
Average loan
balance,
Euro
Average loan
balance / GNI
pc
44%
19%
1.00
Micro Personal Loans for Pensioners
(RSD)96.0%
96.0%24% 19.2%43.1%
100%
1,017
2,157
MicroFinanza Rating 15
OBS, Serbia
+
+
+
+
+
+
+
+
+
+
+
+
Enviromental products: Moderate
Community projects: GoodEnvironmental risk management: Moderate
Community protection policies: Good
The collection culture is not based on the zero tolerance for PAR principle, avoiding to increase the
risk of unethical behaviour in collection due to excessive pressure on the staff. The appropriate
collection culture is demonstrated by the PAR targets set at achievable levels for the areas of
operation, the reasonable PAR levels considered for the incentive scheme, and the gradual impact
of PAR on the incentive scheme (e.g. PAR 5 <15% to have 50% bonus, <10% to have 100% bonus).
The collection practices applied in the field are well monitored: the staff behaviour during
collection is verified during the visits of clients with late payments conducted by quality control.
Clients are protected by a non-discrimination policy.
2.3 Green index and
social responsibility
community
Privacy of client data
Mechanisms for
complaint resolution
The system in place to protect the confidentially and integrity of client information is very good:
the employees cannot download any parts of the database on their computers, the data back-up is
performed daily, the staff in charge of entering the data into the MIS is trained for the task, the
passwords are changed periodically and allow different access levels and client files are kept in a
secure place with limited access (external storage service).
The clients are requested a written consent to share their personal and financial information with
the credit bureaus and (when applicable) insurance companies.
A comprehensive written privacy policy is in place, defining the gathering, processing, use,
distribution and storage of client information. The policy covers current staff and those who leave
the organization.
The clients are effectively informed on how to submit a complaint through a variety of channels:
orientation provided by the staff during or before the loan disbursement, loan documentation,
and in communication materials visible in the branches. The pamphlet that explains the formal
and informal ways clients can complain is particularly effective in informing the clients about this
mechanism.
The induction training of all the staff involved in complaints handling (e.g. loan officers, customer
service officers, branch managers, complaint dedicated staff) includes a session on how the
complaints mechanism works, the role of every position (including the loan officers) in the process
and how to appropriately manage complaints until they are completely resolved (how to handle
complaints and refer them to the appropriate person for investigation and resolution). However,
the role of every position in the process is not covered in full detail.
There is a very good reporting system in place to ensure that all the complaints from the branches
reach the complaints handling staff. The oral and written complaints received at the branches are
recorded in a report describing the type of complaint and its resolution. The report is submitted by
the branches to the staff in charge of handling the complaints at the central level monthly. In
addition, branch and credit office managers have a minimum number of informal complaints they
have to report to the head office every month.
The employee performance evaluations review the ethical behavior, professional conduct and the
quality of interaction with customers of the staff involved dealing directly with clients.
A formal complaint mechanism is in place. The complaint handling system defines that complaints
must be resolved in a timely way (8 days, as per regulation), with a differentiated response
depending on the severity of the complaint. The clients seem to make an active use of the system
and this trend has been increasing.
All staff involved in collection (e.g. loan officers, branch managers and collection staff) receives a
comprehensive training covering the loan recovery procedures and the acceptable debt collections
practices.
MicroFinanza Rating 16
OBS, Serbia
-
-
-
+
-
--
+
+
Environmental awareness raising activities have not been conducted yet with the staff. However,
the internal environmental risk is reduced thanks to some mechanisms to reduce use of paper.
The institution engages in socially responsible projects that benefit significantly the community,
including donations to schools, training for clients and non-clients, and other involvement of the
staff in community projects. The funds redistributed to the community are identified as a separate
item in the budget development process.
Social responsibility
towards the community
Green index
Green non-financial services such as awareness raising activities on the environmental risks,
training on environmentally-friendly practices, or environmentally-friendly businesses have not
been conducted with the clients in the last 5 years.
The environmental risk of the clients' activities is not evaluated and categorized per level of risk.
The environmental risk is a factor considered in the loan approval decision: the activities with a
high environmental risk are not financed, in compliance with the detailed list of environmentally
risky activities defined in the exclusion list. However, the loan contracts do not include clauses
requiring clients to improve environmental practices.
The environmental strategy has not been formalized so far. The environmental protection goal is
not among the formalized institutional values. The BoD members have not recently participated in
awareness raising activities on environmental regulation, risks and opportunities. There is
currently no specific person in the organization that has been appointed to manage environmental
issues. The institution's environmental practices are not included in the annual report or reports
sent to BoD or the investors.
OBS does not currently collect information on the environmental risk of the clients' activities.
The institution does not provide specific green loan, saving or insurance products.
The exclusion of activities harmful for the community such as terrorism, money-laundering and
child labour from the activities that can be financed is formalized in an exclusion list and internal
policy. The capacity to verify the compliance to the exclusion list/policy is adequate: the type of
activity the clients engage in are generally verified by quality control during the frequent client
visits.
MicroFinanza Rating 17
OBS, Serbia
+
+
+
+
+
+
+
+
Household Budget Survey 2014, Social Inclusion and Poverty Reduction Unit Government of the Republic of Serbia
Geographical coverage: ExcellentAlignment of the geographical outreach to the mission: Good
Breadth of outreach: AdequateAlignment of the depth of outreach to the mission: Good
Growth in active borrowers
27,87817,093
54,493,5448
20.7%46.2%
55,663,6139
13.3%15.0%
73,216,906
Rural operations
Poverty
100%40.3%59.7%
35.3%64.7%
Serbia, population57%43%
Opportunity BankActive clients
19.2%Outstanding portfolio
22.3%37.8% 32.6%22.4% 18.3%20.6% 26.8%
Total, Opportunity Bank
Total, SerbiaUrbanRural
919.5%
Opportunity Bank
Active borrowersActive saversGross outstanding portfolio, EuroTotal active savings, EuroBranchesGrowth in outstanding portfolio
Dec-14
Jan-15
Dec-15
32,05520,544
Urban operations
3.1%16.2%15.0%
8.9%6.7%
BELGRADECENTRAL SERBIASOUTH SERBIAVOJVODINA
64,973,525
12.2%
Jan-14
Regions of operation
100%
Source:
The breadth of outreach indicated by the number of borrowers compared to the regional
benchmark is adequate.
The number of borrowers is in line with the average of the institution in the country.
The average growth of borrowers in the last 3 years has been good compared to the benchmark
(country and scale).
The average growth of borrowers in the last 3 years shows a positive trend although the growth
pace has been reduced.
Based on the available data, the outreach to households with a relatively low education level is
limited. According to UNESCO data, in 2002 23.9% of Serbians had completed only primary school;
among OBS clientele the share of clients with only primary education is below 1%.
The coverage of rural areas, with a concentration of financially excluded population, is very large.
The share of rural clients is significantly higher than the national average (43% against 60%). This
breakdown clearly illustrates the strategical shift that took place since 2013, when rural operations
represented only 38% of the active clientele.
The breadth of geographical outreach of OBS is very good as its client database shows that its
presence is well established in all Serbian districts.
3.1%
3.1 Area of operation
3.2 Clients reached
Social vulnerability and
household profile
The outreach to areas poorer than the national average is moderate: the share of operations
located in areas with a higher poverty rate than the national average (South Serbia and Vojvodina)
is limited (less than 50% of the outstanding portfolio and active clientele).
3. Outreach
35.6%
Jan-13
Dec-13
20,56312,916
56,779,84745,540,792
MicroFinanza Rating 18
OBS, Serbia
+
+
+
+
The outreach to households with vulnerable demographic characteristics is good based on the
data available. The household size is slightly larger than the national (3.22 against 2.88). The
share of clients belonging to the vulnerable senior category (> 60 years old) is significant,
reaching 40% of the total clientele. It's worth mentioning that OBS is the only bank in Serbia
serving pensioners aged up to 79 years old.
The alignment between the type of financed activities and the income generation mission is good:
the share of loans financing income generating activities is high and improving compared to 2013.
The share of clients using the loans for a non income generation purpose (consumption) stands at
25%, against 46% in 2013. The largest share of loans financing consumption is dedicated to the
pensioners segment (as of December 2015, 77% of the Micro-Personal portfolio was disbursed to
pensioners).
The share of self-employed clients is high, above the peer groups and competitors such as
ProCredit, that has chosen to focus on SME rather than micro-entrepreneurs. However all non-
consumption loans are linked to formal and registered activities. The financing of start-up
businesses is allowed by policy but represents a negligible share of the portfolio (136 active loans
as of February 2016).
Financed activities
The outreach to women is adequate based on the available data. The female clients represent only
40% of the total clientele and only 29% of the outstanding portfolio. However these figures should
be put into perspective of the Serbian tradition and habits which do not promote agricultural
household or land ownership by females. A recent survey among agricultural households (96.8% of
them located in villages) that was carried out by Ninamedia on behalf of the Serbian Ministry of
Agriculture, showed that 81.9% of owners of registered agricultural households in Serbia are male,
while official statistics show that only 36% of women in Serbia own land. In addition to this,
according to a recent USAID study (2013), only 26% of businesses in Serbia are female-
owned/managed. It is worth mentioning that in the retail segment, the gender balance is good
(58% of female clients) even if this segment’s weight does not change the overall gender balance
of OBS clientele, an institution that primarily focuses on the agricultural segment.
Dec-15 Gender
Dec-15 Financed activities
71%
60%
29%
40%
Outstanding portfolio
Active clients
Male Female
8%
6%
14%
36%
45% 7%
52%
25%
Outstanding portfolio
Active clients
Trade
Services
Agriculture
Production
Housing
Consumption
Other
MicroFinanza Rating 19
OBS, Serbia
+
+
+
+
+
+
+
Reliable poverty data are not fully available at the national level and the competitors' performance
on this matter cannot be fully measured, however proxy indicators show that the poverty
outreach is adequate and improving. Following its SPM methodology, OBS closely monitors its
outreach towards clients that are classified as poor, very poor and low income (Micro Personal
Loan segment). Reliable proxy indicators show that during Q4 of 2015, 38% of the active clientele
could be classified as low income (against 34% during Q1 of 2015). In addition, the share of rural
clients climbed from 38% in 2013 to 67% as of Q4 of 2015.
The outreach to households with no house and land ownership is adequate, being in line with the
national benchmark. OBS database registers 66% of borrowers as owners of their house, reflecting
the high participation of rural families in OBS clientele as well as the national trend of house and
apartment ownership. The bulk of loans are backed by soft guarantee. In addition, the loans backed by hard guarantee,
suggests that the majority of clients may not necessarily own a large amount of assets. OBS
accepts a wide range of collateral options, depending on the amount and type of credit product.
The most common security is the promissory note (70% of active clientele) and the guarantor
(23%). Hard collateral is required only for loans above EUR 10,000 and loans with terms above 36
months; only 3% of OBS clientele had to submit this security as of December 2015 (against 4.6% in
2013). OBS is gradually reducing the share of this clientele to focus on smaller needs.
The outreach to the financially excluded seems adequate. According to the latest client
satisfaction survey (November 2015, 131 clients sampled), 99 % of surveyed clients declared the
use of other banks' services mainly for current accounts (ATM, debit and credit card facilities, and
other services that OBS does not currently offer). Although the sample size is too small to
generalize the results to the entire population, the indicator seems to suggest a rather low share
of clients facing barrier to formal financial services. As of now, there is no information on the
number of borrowers with no previous access to loans. Considering the bank priority attributed to
reaching the unbanked population, more data are needed to measure the alignment of the
outreach to the financially excluded with the mission, and identify possible areas for
improvement. Due to the general lack of financial services in the rural areas, it is safe to believe
that most of its unbanked clientele is part of the agricultural portfolio.
Nonetheless, OBS portfolio structure (and in particular the disbursed loan amounts) implies that
the share of clients with previous access to loans in banks and regulated financial institutions is
below the average of the country, suggesting a good outreach to the population excluded from
bank lending services.
Economic poverty
Dwelling and assets
Access to financial
services
Credit and saving size
The outreach to clients without previous access to formal services seems to be in line with the
national average, although formal data on this was not available.
The average loan balance (EUR 2,284, equivalent to 44% of the GNI/pc, against 73% in 2013)
indicates a broad range of segments served, including strata with smaller income, illustrating the
strategic shift.
Dec-15 Collateral
16% 7%
4%
33%
23%
43%
70%
Outstanding portfolio
Active clients
Mortgage
Deposit
Pledge
Guarantor
Client's promissorynote
MicroFinanza Rating 20
OBS, Serbia
+
+
+
Loan size by product
Loan size
449%263%104%
6%
183%31%65%19%74%48%
0.0%
2,157
Saving size
Individuals A vista FXIndividuals A vista RSDIndividuals Term FXIndividuals Term RSDLegal Entities A vista FXLegal Entities A vista RSD
Average savings
balance, Euro
13,814
Average loan disbursed ($PPP)Average disbursed loan amount, Euro
Micro Business Loans RSDMicro Business Loans EUR
65%
¹ Annual average growth in the last three periods.
34%
Savings balance
per borrower /
GNI pc
73%1%
3,823
3123,552
21%1%
Micro Personal Loans for Pensioners (RSD)Overdraft (for businesses)Home Improvement LoansTotal
52%
15%
Total
Dec-14 Dec-15
Average loan balance, Euro 2,761
Amount of
savings
540%
2,2842,331
¹ Per borrower. ² Last period.
Active
savers
Small Business Loans RSDSmall Business Loans EURBusiness Development Loans EUR
8,028
-74.1%-18.3%
Micro Personal Loans (salary-receiver) EUR -50.6%
44%
4%4.61%0.54%11%
5,470324
7,6602,627
7,1372,4472,688
7,390
Dec-13
55.8%20.4%
100%2,709 100%
24%1%1%
24,621
Micro Personal Loans (salary-receiver) RSD
29%
3,1541,0172,3392,379
0.0%
0.0%0.0%
44%
Micro Agro Loans EURAgro Development Loans EUR
-36.0%54.8%-28.7%39.1%
2,046Micro Agro Loans RSD
Average
loan
balance,
Euro
2,8655,788
10,524
1,348
2,549
-9.7%
Average
loan
balance¹ /
GNI pc
The growth in the average loan balance in the last three periods of analysis has been below the
market trend, indicating a greater focus on less well-off segments of the population.
54.4%58.0%
126.2%233%
The average saving balance per borrower shows that OBS is reaching more low-income types of
segments, compared to 2013. The average savings balance is EUR 3,317 against EUR 5,210 in 2013.
1,623
The analysis of the average loan size by cycle for each product shows a gradual increase along with
the subsequent cycles, adequately reflecting the increasing financial needs of the repeated clients.
Growth in average loan balance¹
Growth in
portfolio share²
13%
MicroFinanza Rating 21
OBS, Serbia
+
+
-
+
+
+
Variety of types of services: credit, saving, insurance, non-financial: GoodService variety to meet diverse client financial needs: Excellent
Adequacy of credit services: GoodAdequacy of other financial services: AdequateAdequacy of non-financial services: Adequate
The financial products do not present barriers to the access of the main target population, thanks
to the accessible loan and saving size (e.g. small minimum amount), guarantee and requirements
(e.g. soft collateral policy), loan repayment schedules and the savings withdrawal conditions.
Targeting particularly the rural areas, OBS has invested in alternative delivery channels. Tablets are
in use since 2 years while it is expected that within the first half of 2016, pilot preliminary
approvals through Smartphones will be performed. Repayment usually takes place in the premises
of the branches or through other banks, while rural clients have the possibility to use the post
office network, according to payment indications provided in the loan contract. Still, the current
opening hours of the bank can in some cases hamper accessibility for the retail and business
segment but also for the savers.
The overall variety of the types of services provided is very good: credit, saving, insurance and
other financial services (overdraft, payments and currency exchanges). In addition to this, non-
financial services are provided to a share of the clients (educational training). OBS demonstrates
willingness for on-going diversification of its product offer (for instance launching of a new loan
that retroactively covers land purchase). However, the range could be further enhanced with new
products and services or with the extension of already existing ones to new segments (for instance
insurance products, currently available only for pensioners). It is worth mentioning that OBS is
currently negotiating with various stakeholders in order to provide guarantee coverage for
agricultural loans through specific European funds.
The institution is licenced to mobilize savings from the clients and currently offers saving services.
The need for clients to invest in economic opportunities and address life cycle household needs is
adequately met by the products and services offered by OBS. The flexible products characteristics
match very well the need to finance business working capital, finance business investments,
finance agriculture working capital, finance agriculture investments. To a much more marginal
extent, OBS also finances start-up businesses. However, the current offer of products does not
match all possible financial needs which also include finance of life events, finance education,
finance health, etc. The variety of saving products is adequate. OBS currently offers mainly term
and a vista saving products, both in RSD and in EUR and both for private individuals and legal
entities / entrepreneurs.
Although OBS does not provide debit/credit cards to its clients and therefore has no ATM network
in place, it has recently started offering e-banking services to its agricultural clients, mitigating
transaction costs for people based in remote areas. However this service is only used by a
negligible minority of OBS clients, due to the fact that the use of internet remains a rare practice
within this target group. Money transfers and payments are available also for non-OBS clients.
The need for clients to cope with common emergencies is adequately met by the products and
services of the institution. Clients have several acceptable options available to manage shocks in
their cash flows, such as loan rescheduling when appropriate, easily withdrawable savings in case
of emergency. The pensioner borrowers are also covered by life insurance.
Variety of types of
services: credit, saving,
insurance, non-financial
Service variety to meet
diverse client financial
needs
4.2 Adequacy of services
4.1 Variety of services
As mentioned above, insurance services are not yet available for the full range of OBS clientele.
4. Quality of the services
MicroFinanza Rating 22
OBS, Serbia
+
+
+
+
+
+
+
+
Accessibility: service
delivery, time,
procedure, guarantee
The customer service is very good as demonstrated by the very high client satisfaction with the
field staff relationship resulting from the research conducted by the institution. The latest client
satisfaction survey shows that 75% rated the quality of interaction with OBS employees as
excellent.
The loan repayment frequency is well tailored to the most frequent business and household cash-
flow patterns of the target population segments as the clients can choose among several
appropriate repayment frequency options (including grace periods when appropriate). The
repayment of the interest tends to be on a monthly basis for all products, while the repayment of
principle is tailored to the clients’ needs for all types of products except for the retail ones, which
are in any case often secured by the existence of a monthly cash inflow (salary or pension). Those
are also the only products that go without grace period, while for the rest of the credit products,
up to 6 months of grace period can be granted. Terms are overall adequate, even if longer ones
could be considered provided that this is compatible with the available funding.
The loan terms are adequately tailored to the main financial needs of the target population
segments. OBS has recently increased the maximum term amount for retail borrowers, from 6 to 7
years now, in order make monthly instalments more comfortable for clients. However, internal
discussions are ongoing to further explore term flexibility potential, to the benefit of the different
client segments.
The majority of the target clients’ financial needs are well matched by the diverse range of loan
size options available among the different credit products and the different loan cycles. Loan
amounts are adjusted to the targeted clientele, based on the repayment capacity of each client.
The perception of clients tends to be that loan amounts and deposit sizes are tailored to their
needs.
Flexibility: term,
frequency, amount and
service
Client drop-out rate
The convenience of the service delivery channels for the clients is adequate. The coverage of the
branch network throughout Serbia is adequate, however, the branches are often located in the
cities while the target population is increasingly based in the rural parts of Serbia. OBS keeps
exploring technological solutions to address this aspect which is often perceived as a shortcoming
by clients.
The loan disbursement procedure is reasonably fast and simple for the clients: disbursing a loan
takes on average 3 working days. The documents required in case of non-mortgage loans are easy
to collect for clients and the process of filling-up the application form is supported by the filed
staff when needed. There is evidence from the client satisfaction studies conducted by the
institution that the share of clients satisfied with the disbursement procedure is good. In the
November 2015 client satisfaction survey, 57% of the sample assessed the loan disbursement
delay as excellent.
The types guarantees required are generally available to the target population and their value is
appropriate to the credit risk of the loans disbursed. There is evidence from the client satisfaction
studies conducted by the institution that the guarantee does not represent a significant challenge
for the clients. In the November 2015 client satisfaction survey, 42% of the sample assessed the
loan conditions (among which guarantee policy but not only) between good and excellent.
The client drop-out rate (calculated with MFR formula) is below the majority of the peer groups
considered (please check benchmark chart) although it remains improvable. The trend in the client
drop-out rate is rather stable over the last 3 years. The client drop-out calculated with the formula
used by OBS is lower. However the breakdown by business line reveals that the agro segment is
the most exposed to drop out, a trend that is currently under observation.
MicroFinanza Rating 23
OBS, Serbia
+
+
-
+
+
Dec-15
14.8%
Target clients leaving for other financial institutions with more diverse and appropriate products
and services (credit cards, ATMs, etc.) is among the reasons of client drop-out. Still, the price
component remains the major weakness of OBS offer, when compared to the one of the
commercial banks.
57%
24%
10%9%
22%
Jan-13 Jan-14 Jan-15
Dec-13 Dec-14
24.1%
The target segments' needs to build savings and manage their cash-flow are adequately met by the
saving services offered by the institution thanks to the diversified saving size options and the
flexible savings withdrawal conditions (periodic and objective-related for saving plans,
immediately accessible for general saving accounts). However, the delivery channels are not well
tailored to the needs of the target population (ATMs, smart cards / prepaid cards, not available).
Still, OBS offers e-banking for some specific segments. The client satisfaction research conducted
by the institution does not specifically address the savings services currently offered.
The target segments' needs to protect from business and household shocks are partly met by the
insurance services offered by the institution. The insurance product currently available for
pensioner borrowers is adequate, all costs being borne to its full extent by the bank. OBS could
enlarge its indirect insurance product offer to other segments as well. No market research to
collect the client feedback on the insurance service has been conducted so far.
The quality and relevance for the target population segments of the non-financial services is good.
The services are well designed to reduce the vulnerability of clients and increase their capability to
take advantage of economic opportunities.
The offer of non-financial services is not yet substantial, covering less than 50% of the clients.
1 Define and Monitor Social Goals1a The institution has a strategy to achieve its social goals1b The MFI collects, reports, and ensures the accuracy of client-level social data2 Ensure Board, Management, Employee Commitment to Social Goals2a Members of the Board of Directors are committed to the mission2b Board of Directors holds the institution accountable to its mission2c Senior management sets and oversees the strategy for achieving its social goals.2d Employees are recruited and evaluated based on social and financial performance3 Treat Clients Responsibly3a The MFI avoids client over-indebtedness.3b The MFI communicates clear, sufficient and timely information to the clients.3c The MFI treats their clients fairly and respectfully.3d The institution respects the privacy of client data.3e The MFI has timely and responsive mechanisms for complaints resolution.4: Design Services and Channels That Meet Clients’ Needs4a The MFI understands the needs and preferences of different types of clients.4b The MFI designs products and delivery channels avoiding clients harm.4c The MFI products and delivery channels are designed to benefit clients5 Treat Employees Responsibly5a The MFI policies protects employees and create a supportive working environment.5b Employment terms are transparent and training is provided to the employees5c The institution monitors employee satisfaction and turnover.6 Balance Financial and Social Performance6a Growth is sustainable for market conditions, allowing for high service quality6b The financing structure is appropriate to a double bottom line MFI6c Pursuit of profits does not undermine the sustainability or client well-being6d The senior managers compensation is appropriate to a double bottom line MFIG Green microfinanceGa The institution addresses environmental issues through a formalized strategy.Gb The institution manages its environmental risks.Gc The institution fosters green opportunities.
Implementation: high; intermediate; low.
ll
ll
ll
Intermediatell
Goodlll
lll
*Correspondence map between the USSPM and the Social Rating: annex 1 of the Social Rating Methodology
(www.microfinanzarating.com)
lll
5 Fair and respectful treatment6 Privacy of client data7 Mechanisms for complaint resolution
Social Rating general opinion on the Client Protection Certification
Client Protection Certification
✓
✓
Social Rating gives an indicator of the efforts
required to achieve certification.
Social Rating is not a certification, but it can be combined with a
certification with MicroFinanza Rating, a licensed certifier.
lll
Goodll
Effort required
Annex 1 - Universal Standards and Client Protection Certification
✓
Universal Standards of Social
Performance managementSocial Rating demonstrates the
implementation to the USSPM*.
ModerateModerateModerateMedium
ModerateModerateModerate
1 Appropriate product design and delivery2 Prevention of over-indebtedness3 Transparency4 Responsible pricing
lll
lll
l
ll
l
Implementation
ll
lll
Goodlll
Universal Standards of Social Performance management validated by Social RatingIntermediate