BANK ING
FOR
THE
MAJORITIES
Financing and its impact on
local/national business
Eduardo Bazoberry Fondo Financiero Prodem
Ottawa, April 2005
Bolivia
Land area: 1.1m km² Population: 8.7 million (2002)GDP: US $7.7billion (2002) Per capita GDP: US $885 (2002)Adult literacy rate(2001): Total 86%Poverty (below national poverty line):
63%Urban population: 63%Official languages: Spanish, Quechua
and Aymara *Source Worldbank www.worldbank.org , Countries at glance
PRODEM FFPSelf-sustained regulated entity76% of the money lent comes from clients with
saving depositsAccounts for 44% of the microfinance sector
savingsLargest number of savings accounts (148,000)Largest network with 79 full fledged branches
and 30 service centers across Bolivia52 smart ATMs throughout urban and rural
areas, and 40 Autonomous Points of Sale (PAV´s)
ROE 2004: 18%Equity: 8,8 Millions $us
WHERE MICRO
ECONOMICS MAKES SENSE!
PRODEM FFP NETWORK
38,946,587
46,162,000
63,818,953
84,379,806
35,000,000
40,000,000
45,000,000
50,000,000
55,000,000
60,000,000
65,000,000
70,000,000
75,000,000
80,000,000
85,000,000
$US
2001 2002 2003 2004
DISBURSEMENTS
Total disbursements:
233.307.346
OUR IMPACT
CLIENTS (By economic sector)
-
5,000
10,000
15,000
20,000
25,000
30,000
DIC 01 DIC 02 DIC 03 DIC 04 FEB 04
1. Cattle & Livestock
2. Production
3. Commerce
4. Services
5. Transportation
Cartera * Clientes Cartera * Clientes Cartera * Clientes Cartera * Clientes1. Cattle & Livestock 4,016,422 4,703 4,884,119 4,060 6,428,420 3,911 8,378,472 4,314 2. Production 5,698,213 3,558 8,013,519 3,561 11,615,704 4,264 14,734,166 7,664 3. Commerce 12,325,647 8,092 15,028,763 6,425 20,665,400 7,167 28,268,505 23,944 4. Services 7,776,101 4,420 10,139,873 4,823 14,284,842 6,285 21,534,701 14,872 5. Transportation 3,811,481 1,761 6,071,942 2,517 9,021,668 3,622 13,579,278 5,824 TOTAL 33,627,864 22,534 44,138,215 21,386 62,016,034 25,249 86,495,123 56,618
DIC 01 DIC 02SECTOR
DIC 03 DIC 04
CLIENTS (By economic sector)
CLIENTS (By gender)
12
,28
8
12
,50
2
15
,45
4
27
,25
9
10
,24
6
8,8
84
9,7
95
29
,35
9
7,000
12,000
17,000
22,000
27,000
32,000
DIC 01 DIC 02 DIC 03 DIC 04
1. MALE
2. FEMALE
GENDER DIC 01 DIC 02 DIC 03 DIC 041. MALE 12,288 12,502 15,454 27,259 2. FEMALE 10,246 8,884 9,795 29,359 TOTAL 22,534 21,386 25,249 56,618
AVERAGE LOAN SIZE
1,492
2,064
2,456
1,528
1,400
1,600
1,800
2,000
2,200
2,400
2,600
$us
DIC 01 DIC 02 DIC 03 DIC 04
ITEM DIC 01 DIC 02 DIC 03 DIC 04LOAN PORTFOLIO 33,627,864 44,138,215 62,016,034 86,495,123 No. CLIENTS 22,534 21,386 25,249 56,618 AVERAGE LOAN 1,492 2,064 2,456 1,528
FINANCIAL SERVICES AVAILABLE TO OUR CLIENTS
MICRO LOANS: US$ 50 TO 7.000MICRO LOANS: US$ 50 TO 7.000
Flash Loans US$ 50 to US$ 300Flash Loans US$ 50 to US$ 300
Micro Credit LineMicro Credit Line
Agricultural – LoansAgricultural – Loans
Seasonal LoansSeasonal Loans
Guarantee: Personal, quasi-mortgage, Guarantee: Personal, quasi-mortgage,
custody ofcustody of
documents, time deposits, savings accounts,documents, time deposits, savings accounts,
solidarity groupsolidarity group
FINANCIAL SERVICES AVAILABLE TO OUR CLIENTS
SMALL SIZE LOANS:SMALL SIZE LOANS:
US$ 7.001 TO 40.000US$ 7.001 TO 40.000
Credit LineCredit Line
Mid-term LoansMid-term Loans
Guarantee: Mortgage, timeGuarantee: Mortgage, time
deposits, saving accountsdeposits, saving accounts
FINANCIAL SERVICES AVAILABLE TO OUR CLIENTS
MEDIUM SIZE LOANS: US$ 41.000 TO 200.000MEDIUM SIZE LOANS: US$ 41.000 TO 200.000
Credit LineCredit Line
Mid-term LoansMid-term Loans
Guarantee: MortgageGuarantee: Mortgage
LOAN PRODUCT PORTFOLIO WELL DIVERSIFIED LOAN PRODUCT PORTFOLIO WELL DIVERSIFIED
IT SATISFIES OUR CLIENTS’ DIFFERENT NEEDSIT SATISFIES OUR CLIENTS’ DIFFERENT NEEDS
FINANCIAL SERVICES AVAILABLE TO OUR CLIENTSSAVINGS PRODUCT PORTFOLIOSAVINGS PRODUCT PORTFOLIO
Savings account with smart card finger print Savings account with smart card finger print
recognition and with saving passportsrecognition and with saving passports
Time depositsTime deposits
Smart automatic teller machines (ATMs)Smart automatic teller machines (ATMs)
Autonomous points of sale (POS)Autonomous points of sale (POS)
INTRODUCING THE SMART CARD WITH FINGER RECOGNITIONINTRODUCING THE SMART CARD WITH FINGER RECOGNITION
ALLOWED PRODEM FFP TO REVOLUTIONIZE SAVINGSALLOWED PRODEM FFP TO REVOLUTIONIZE SAVINGS
IN RURAL AREAS. HIGH TECHNOLOGY THAT GIVESIN RURAL AREAS. HIGH TECHNOLOGY THAT GIVES
SECURITY, VERSATILITY, AND USER FRIENDLYSECURITY, VERSATILITY, AND USER FRIENDLY
ATMs AND POS
FINANCIAL SERVICES AVAILABLE TO OUR CLIENTS
ADDITIONAL PRODUCTSADDITIONAL PRODUCTS
National TransfersNational Transfers
International TransfersInternational Transfers
Life InsuranceLife Insurance
Money ExchangeMoney Exchange
Service PaymentsService Payments
Payroll PaymentPayroll Payment
Cash AdvanceCash Advance
Tax, Police and other Tax, Police and other
services collectionservices collection
Low income people are eager and able to Low income people are eager and able to
progress on their own given proper opportunitiesprogress on their own given proper opportunities
Understanding customers’ needs and financial Understanding customers’ needs and financial
possibilities are essential to create viable possibilities are essential to create viable
products and servicesproducts and services
Low income people, both in rural and urban Low income people, both in rural and urban
areas, must be key players in third world areas, must be key players in third world
economieseconomies
Rural and low-income communities are willing Rural and low-income communities are willing
and able to use technologyand able to use technology
Mass coverage of financial services requires Mass coverage of financial services requires
advanced technologyadvanced technology
CHARACTERISTICS OF OUR CLIENTS
CLIENTS
WHAT WORKED FOR US
Clear role of governmentClear role of government
Laws and RegulationsLaws and Regulations
Political independence of the Political independence of the
Superintendence of BanksSuperintendence of Banks
Floating interest ratesFloating interest rates
Second-tier government BanksSecond-tier government Banks
WHAT WORKED FOR US
DEVELOPMENT AID WELL DIRECTED (HELPED TODEVELOPMENT AID WELL DIRECTED (HELPED TO
BUILD AN INDUSTRY) BUILD AN INDUSTRY)
From ngo’s to regulated microfinance entityFrom ngo’s to regulated microfinance entity
From credit oriented to full financial services:From credit oriented to full financial services:
Saving, transfer remittances, lines of credit, Saving, transfer remittances, lines of credit,
insuranceinsurance
From social investors to local entrepreneur investors:From social investors to local entrepreneur investors:
Good CompetitionGood Competition
InnovationInnovation
OutreachOutreach
EfficiencyEfficiency
WHAT HAS WORK FOR US
LOANSLOANS
According to their needsAccording to their needs
Just-in-timeJust-in-time
Working capital vs. investment capitalWorking capital vs. investment capital
No red tapeNo red tape
Takes into account their track recordTakes into account their track record
SAVINGSSAVINGS
OTHER FINANCIAL SERVICESOTHER FINANCIAL SERVICES
ADDITIONAL VALUE ADDED SERVICES
BUT THEY ALSO DEMAND NON FINANCIAL SERVICESBUT THEY ALSO DEMAND NON FINANCIAL SERVICES
Technical Assistance:Technical Assistance:
How to improve their businesses?How to improve their businesses?
How to sell more?How to sell more?
What to produce? (Change in markets)What to produce? (Change in markets)
Understand norms and regulationsUnderstand norms and regulations
Become an exporterBecome an exporter
““Instrument’s that are their for a globalize economy toInstrument’s that are their for a globalize economy to
work. Not taken into account the local entrepreneurs”work. Not taken into account the local entrepreneurs”
OUR ENVIRONMENT We feel that the Microfinance industry in Bolivia has contributed to the impact We feel that the Microfinance industry in Bolivia has contributed to the impact
of financial intermediation for micro, small and medium size businesses by of financial intermediation for micro, small and medium size businesses by
increasing:increasing:
EfficiencyEfficiency
Stabilizing the systemStabilizing the system
Institutional sustainabilityInstitutional sustainability
OutreachOutreach
“ “Independent of how you measure the impact, Microfinance has contributed to Independent of how you measure the impact, Microfinance has contributed to
the bottom line of our economy”the bottom line of our economy”
OUR ENVIRONMENT
““Microfinance is leading the way on how Microfinance is leading the way on how
our financial system will work in the future”our financial system will work in the future”
WHAT CONCESSIONAL FINANCING NEEDS TO TAKE
INTO ACCOUNT? The level of development of the microfinanceThe level of development of the microfinance
industry in the countryindustry in the country
In Bolivia the major regulated Microfinance In Bolivia the major regulated Microfinance entities don’t need just loans for portfolio entities don’t need just loans for portfolio growth, growth, already already have accesses to savings, have accesses to savings, time deposits and the stock markettime deposits and the stock market
WHAT CONCESSIONAL FINANCE NEEDS TO TAKE INTO
ACCOUNT? Support local entrepreneurs.Support local entrepreneurs.
I quote one of the key principles of microfinance that the CGAP and I quote one of the key principles of microfinance that the CGAP and it’s 28 donors member developed and was further endorsed by the G8 it’s 28 donors member developed and was further endorsed by the G8 leaders leaders
““The key bottleneck is the shortage of strong institutions and The key bottleneck is the shortage of strong institutions and managers”. “Donors should focus their support on building capacity”managers”. “Donors should focus their support on building capacity”
Eradication of poverty through profits Eradication of poverty through profits requires advanced technologyrequires advanced technology
Private businesses are proving more Private businesses are proving more effective in solving the needs of the effective in solving the needs of the majoritiesmajorities
Important investments are needed in MIS Important investments are needed in MIS systems and connectivitysystems and connectivity
Provide financial support to local private Provide financial support to local private investors willing to take risks in investors willing to take risks in technology ventures or in the creation of technology ventures or in the creation of regulated Microfinance Entitiesregulated Microfinance Entities
ConclusionsConclusions
Philanthropy and charity are not Philanthropy and charity are not sustainablesustainable
Private investors’ foresight has driven the Private investors’ foresight has driven the microfinance industry to unexpected levelsmicrofinance industry to unexpected levels
Long term loans for low income housingLong term loans for low income housing Assume exchange riskAssume exchange risk Donors should share the Institution’s Donors should share the Institution’s
visionvision Donors rarely have the appropriate Donors rarely have the appropriate
expertise to provide practical guidelines *expertise to provide practical guidelines *
* * The CGAP Donor guidelines on good practice in microfinance Dic. 2004The CGAP Donor guidelines on good practice in microfinance Dic. 2004
ConclusionsConclusions