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„Which Business Models for Growth in Europe?“ PowerPoint PPT Presentation


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„Which Business Models for Growth in Europe?“. Silvia Rico – Fundación Nantik Lum (Spain) Veronika Thiel – nef (UK) Giampietro Pizzo – Microfinanza (Italy) Moderator: Martin Jung – EVERS & JUNG. EMN Conference Milan, 5 th June 2009. Content Structure. Economic Situation

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„Which Business Models for Growth in Europe?“

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„Which Business Models for Growth in Europe?“

Silvia Rico – Fundación Nantik Lum (Spain)

Veronika Thiel – nef (UK)

Giampietro Pizzo – Microfinanza (Italy)

Moderator: Martin Jung – EVERS & JUNG

EMN Conference Milan, 5th June 2009


Content Structure

  • Economic Situation

  • Legal Framework

  • Mission, Target group and Uncovered Demand

  • Geographical Outreach and Scale

  • Relationship with Banks and Insurance Companies

  • Products

  • Portfolio Characteristics

    • Lending Methodology and Collaterals

    • Monitoring and Productivity

    • Portfolio Quality Indicators

  • Profitability and Sustainability

    • Income and Cost Structure

  • Business Development Services

  • Perspective and Challenges for Growth and how to meet it

  • Conclusion (main Success Factors or Hindrances for Growth)


Three Countries – three Situations


Economic Situations

  • Spain

  • 46.2M inhabitants

  • 22% rural population

  • GDP per capita: €23,704

  • GDP growth:1.2%(2008)

  • Number of SMEs/ 1000 inhabitants: 58

  • Informal sector in % of GDP: 22.5%

  • UK

  • 61 M inhabitants

  • 19% rural population

  • GDP per capita: €25,700

  • GDP growth: 0.7% (2008)

  • Number of SMEs/ 1000 inhabitants: 26

  • Informal sector in % of GDP: 12.5%

  • Italy

  • 60 M inhabitants

  • 32% rural population

  • GDP per capita: €28,057

  • GDP growth: 1.5% (2008)

  • Number of SMEs/ 1000 inhabitants: 62

  • Informal sector in % of GDP: 27%


Legal Framework

  • Spain

  • No specific regulation for MFIs

  • Banks, savings banks and credit cooperatives are regulated by the banking law

  • Social entities (Social Microcredit Support Organisations) and Foundations of savings banks (Social Work) are regulated by their specific law (associations and foundations‘ law)

  • UK

  • No specific regulation for MFIs/CDFIs

  • Personal lending MFIs need to have consumer credit license

  • Some forms of incorporation require certain conditions by law and registration with the Financial Services Authority (FSA)

  • Otherwise, MFIs are not regulated by the FSA

  • Italy

  • No specific regulation for MFIs

  • Banking and non banking financial institutions are regulated by the law

  • Some institutions providing non banking microcredit are regulated by banking legislation (TUB art. 106)

  • Foundations and NGOs do not have a specific supervision or legal framework.


Mission, Target Groups and Uncovered Demand


Geographical Outreach and Scale - Spain

Aprox. 20 Savings Banks (out of 47) of which 10 are most active and one microcredit bank (Microbank la Caixa)

Nationwide: 2 (Obra Social Caixa Catalunya and Microbank la Caixa)

Regional coverage related to the Savings Banks’ territory

Social Microcredit Support Organisations (SMSOs) provide Business development Services


Geographical Outreach and Scale - Spain

Microcredit Supply Distribution in Spain


Geographical Outreach and Scale - UK

England by Region

East Anglia2

East Midlands2

London4

North East4

North West5

South East4

South West4

West Midland4

Yorkshire6

Nationwide 1

Northern Ireland 1

Scotland 1

England 35

Coverage is ok, but can be patchy in certain areas, especially rural ones.


Geographical Outreach and Scale - Italy

MFIs: 33

Nationwide 3

Regional 13

Local 17

MFIs: 33

Northern Region: 17

Centre Region: 9

Southern Region: 7


Relationship with Banks, Insurance companies, Guarantee Funds


Products

  • Italy

  • Social microcredit (=personal lending) and business microcredit

  • Average loan: € 7,192

  • Min. loans: € 1,800

  • Max. loans: € 17,000

  • Average interest rate: 5,8% (from 1.8% to 12%)

  • Spain

  • Social microcredit: personal (self-employment) and small businesses

  • Average loan: € 9,900

  • Min. loans: € 1,000

  • Max. loans: € 25,000

  • Average interest rate: 5.1%

  • UK

  • Personal lending and business microcredit to people rejected by bank

  • Average loan: £8,500

  • Min. loans: £500

  • Max loans: for MFIs around £15k

  • Fixed: average interest rate 13.4% (5.6-22%)

  • Variable: ca 5.8% over base rate (3.5-10%)


Portfolio Characteristics

  • Spain

  • Strong portfolio growth

  • Gross loan portfolio (31/12/2007): € 84.4 million

  • Disbursed amount: €: 97,8 million for 8,773 loans (2002-2007)

  • Number of active clients (31/12/2007): 6,922

  • Retention rate (% of refinanced clients): n/a

  • UK

  • Stagnating portfolio

  • Outstanding portfolio £10.4m (1252 loans)

  • Disbursed amount: £25m for 3691 loans (ca 2003-2007), av. £6773

  • 2646 clients overall (including non-MFI clients)

  • Retention rate n/a

  • Italy

  • Strong portfolio growth

  • Disbursed amount: € 43.7 million for 3223 loans

  • On the 24 surveyed institutions that provided data: disbursed loans € 6.6 million for 923 loans

  • Retention rate n/a


Lending Methodology and Collaterals


Monitoring and Productivity


Portfolio Quality Indicators

  • Spain

  • Portfolio At Risk at 30 days: 9% (3 respondents)

  • Portfolio At Risk at 90 days: n/a

  • Write off ratio: 5% (5 respondents)

  • Refinancing/ rescheduled ratio: 6% (3 respondents).

  • UK

  • PF at risk (28 responses): 22% (no split 30 days/90 days)

  • Write-offs ca 13% (27 respondents, range 0%-28%)

  • Refinancing and rescheduling – insufficient data

  • Italy

  • Data for 7 MFIs:

  • PAR30: range 0,8% - 72% (average value 25%)

  • Range of Write-offs 0% - 28%; average of 5.9%.

  • Restructured portfolio: n/a


Profitability and Sustainability

  • Spain

  • Operational Self-sufficiency: 100 % (only 1 respondent!)

  • Financial Self-sufficiency: n/a

  • UK

  • Operational self-sufficiency – average of 8.5% with one organisation at 40%

  • Some CDFIs indicate they want to be self-sufficient in 4-8 years

  • No data on financial self-sufficiency

  • Italy p.48

  • Data for 3 MFIs:

  • Self- sufficiency: ranges from 180% to 14% (average value 98%)


Cost and Income Structure

  • Spain

  • Funding Savings Banks: interest income and Social Work funds

  • Social Microcredit Support Organisations (Business Development Services): private and public subsidies

  • Italy

  • Funding (33 MFIs):

  • private funds: 13

  • public funds: 6

  • mixed funds: 4

  • n/a: 10

  • UK

  • very little data for UK

  • Unit cost av. £742

  • Capital: mostly grants


Business Development Services

  • Spain

  • BDS are provided by SMSOs acting as partners of the savings banks

  • Services are either compulsory for all borrowers or forsome, or on request

  • UK

  • Very few formal

  • Vast majority refers to business advice agencies

  • Some compulsory programmes in house

  • Case-by-case decisions

  • Italy

  • 62% of the Institutions provide training or technical assistance

  • Services are either compulsory for all borrowers or for some, or on request


Perspective and challenges for growth and how to meet it

  • Spain

  • Challenges:

  • Re-evaluate mission

  • Funding

  • Institutional capacity (staff SMSOs)

  • SMSOs to manage directly loan portfolios

  • Measure social performance and impact

  • Solutions:

  • Networking and coordination

  • Training

  • More government support

  • UK

  • Challenges:

  • Funds for operational costs

  • Funds for lending

  • Institutional capacity (staff)

  • Very little government support

  • Italy

  • Challenges:

  • Vision and strategy

  • Funding

  • Lack of scale and difficulties in meeting the demand

  • Solutions:

  • Training and mentoring

  • Networking and merging

  • Public and private partnerships

  • Solutions:

  • Market segmentation

  • Alignment with microfinance movement

  • Revision of insistence on full financial sustainability


Conclusion

  • What are the common ‘Big Issues’?

Lack of data and transparency

Lack of market segmentation/alignment

Lack of scale (=> capacity building and growth)

Lack of financial resources

Lack of coordination


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