annual review - International Finance Corporation

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IFC ADVISORY SERVICES | ACCESS TO FINANCE

ANNUAL REVIEW

IN PARTNERSHIP WITH OUR DONORS

About IFC IFC, a member of the World Bank Group, is the largest global development institution focused exclusively on the private sector. We help developing countries achieve sustainable growth by financing private sector investment, mobilizing capital in international financial markets, and providing advisory services to businesses and governments. We play a catalytic role by demonstrating the profitability of investments in emerging markets. Established in 1956, IFC is owned by 184 member countries and works in more than 100 countries. IFC’s vision is that people should have the opportunity to escape poverty and improve their lives.

IFC Advisory Services | Access to Finance IFC Advisory Services are a substantial part of IFC’s business and a critical tool for extending our reach and expanding our impact. To help the private sector in emerging markets, IFC provides advice, problem solving, and training to companies, industries, and governments. Access to Finance is one of four advisory services business lines that correspond to IFC’s operational strategy. Access to Finance Advisory Services’ priorities are to help clients provide both broad-based financial services—such as credit, savings, and insurance products—to individuals, and employment generation by supporting sustainable lending to small and medium enterprises.

Our Donor Partners Support for IFC Advisory Services is strong and includes partners and donor governments, multilateral institutions, and private donors such as foundations. Access to Finance Advisory recognizes our donors and partners that include: African Development Fund, Australia, Austria, Belgium, Bill and Melinda Gates Foundation, Canada, Denmark, European Union, Finland, France, Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ), Inter-American Development Bank, Ireland, Islamic Development Bank, Israel (Bank of Israel), Italy, Japan, KfW Entwicklungsbank, Kuwait, Luxembourg, The MasterCard Foundation, Millennium Foundation, the Netherlands, New Zealand, Norway, OMIDYAR Network Fund, INC., Republic of Korea, Saxony (Germany), Spain, Sweden, Switzerland, United Kingdom (UKaid from DFID), United States (USAID), and Visa International.

FOREWORD

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OVERVIEW

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OUR PRODUCTS

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FINANCIAL INSTITUTIONS

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MICRO / RETAIL Insurance Microfinance Responsible Finance Housing Finance

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SMEs and BUSINESSES Agrifinance The SME Finance Forum SME Banking Leasing Trade Finance Risk Management Environmental and Social Risk Management Global Microfinance Risk Management Program Sustainable Energy Finance

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FINANCIAL INFRASTRUCTURE

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Credit Reporting Secured Transactions Securities Markets Program Retail Payment Institutions and Innovations

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ACCESS TO FINANCE FOR WOMEN ENTREPRENEURS

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An Opportunity to Make a Difference The Women in Business Program in Action

PORTFOLIO DATA AND DEVELOPMENT IMPACT Development Results Development Effectiveness Monitoring, Evaluation, and Learning IFC Development Golas for Financial Services FY12 Project Highlights

CASE STUDIES – HIGHLIGHTS

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Europe and Central Asia Albania: Leading the Way in Residential Energy Efficiency Armenia: Unlocking the Renewable Energy Potential Bosnia and Herzegovina: Pioneering Debt Advice Center Helps Over-Indebted Micro Entrepreneurs Georgia: Crisis Response Creates the Foundation for Risk Management and Small and Medium Enterprise Banking Kyrgyzstan: Creating a Commercially Oriented Credit Bureau Tajikistan: Deposit Services Manage Risks in Microfinance Lending Ukraine: Developing a Viable Agri-Insurance System

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Latin America and the Caribbean Honduras: Focus on Small Businesses Boosts a Bank’s Loan Portfolio Peru: A Microfinance Institution Focuses on Small-Scale Savings

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Middle East and North Africa Oman: A Credit Line Helps Spawn a Chain of Cafés Pakistan: Change at HBL Pakistan Crucial for Small Business Banking Success

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South Asia India: Enabling the Last Mile of Banking in India India: Helping Women Micro Entrepreneurs Flourish in Low-Income States

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Sub-Saharan Africa Ghana: Collateral Reforms Expand Financing to Small Enterprises IFC and The MasterCard Foundation: A Partnership to Improve Financial Services for Millions Nigeria: Access to Finance for Women Entrepreneurs Works Well for Everyone Sub-Saharan Africa: Helping the Private Sector Issue Bonds Boosts Development Sub-Saharan Africa: Pioneering Microfinance Institutions Tackle Tough Markets and Turbulent Times

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SHARING KNOWLEDGE Introduction Knowledge Products

CONTACTS

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East Asia and the Pacific 20 Philippines: Banking on an Ally to Promote Sustainable Energy Finance 20 Vietnam: Secured Transactions Reform Frees Up Financing for Small and Medium Enterprises 20

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There is now broad recognition in the development community that engagement with the private sector is the way to lift billions of people out of poverty, giving them access to essential goods and services. Small businesses play a vital role in this by serving as engines of socioeconomic growth and job creation, because micro, small, and medium enterprises remain the largest employers in many low-income countries. Yet, nearly half of the 400 million businesses in emerging markets continue to lack the financing they need to grow and their unmet financing needs total more than $2 trillion. Lack of access to finance extends to individuals, with almost 2.5 billion adults still having no access to formal financial services. Improving access to finance for individuals and businesses can provide broader development gains on a number of levels. At the household level, it can help families to build assets, manage risks, and increase consumption. At the level of individual businesses, better access to finance can result in higher rates of job growth and higher tax payments. On the macroeconomic level, there is evidence that better integrated financial systems increase growth and reduce inequality. A sustainable approach to development is necessary to ensure that development gains achieved today will benefit future generations. IFC works with the private sector to help maximize the catalytic role it can play by filling in financing and knowledge gaps in areas such as renewable energy, efficient technologies and emissions reduction. IFC plays a critical role in increasing access to finance for households and businesses, not only through its investments and financing, but also through its advisory work, by providing diagnostics, capacity building, and sharing of best practices to its financial intermediary clients. At IFC’s Access to Finance Advisory, our priorities are to help clients provide broad-based financial services—such as credit, savings, and insurance products—to small and medium enterprises (SMEs) and to individuals. Our offerings are multi-faceted:

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■ We build bank and non-bank financial institutions, with an emphasis on institutions that serve SMEs or provide microfinance, agriculture finance, housing finance, leasing, trade finance, insurance, and sustainable energy finance. ■ We improve financial infrastructure such as credit bureaus, securities markets, and collateral registries and promote principles of responsible finance. ■ We also provide advice to governments on improving their legal and regulatory framework to foster increased access to finance. At the end of fiscal year (FY) 2012, we had an active portfolio of 245 access to finance projects in 71 countries, valued at $294.4 million. Our FY12 project expenditures totaled $76.1 million. In all, 64 percent of project expenditures attributable to clients in individual countries went to IDA countries and 9 percent to fragile and conflictaffected countries. IFC’s Access to Finance Advisory work is delivered mainly through our regional offices, with more than 200 dedicated staff members worldwide. A key aspect of our work is close collaboration with the World Bank to deliver development results, including through our work on financial inclusion, investment climate, microfinance, and the Global Partnership for Financial Inclusion of the Group of 20 (G-20) countries.

Access to Finance Advisory looks back at another successful year when we carried on with our commitment to improve access to financial services for individuals, households, and small businesses. As in previous years, we combined IFC’s investment and advisory services in our initiatives for financial intermediaries—92 percent of our advisory clients are also Investment Services clients.

We continued to lead the private sector’s engagement in the financial inclusion agenda by playing a pivotal role in the Global Partnership for Financial Inclusion of the G-20, particularly in the areas of SME finance data, agrifinance and women-owned businesses. The partnership is designed to improve access to finance for businesses and individuals that most need it.

The 2012 Annual Review takes stock of our accomplishments and progress in providing world-class advisory services for financial institutions and the broader financial infrastructure.

Throughout the year, IFC’s Access to Finance Advisory continued to advance the responsible finance agenda, working to embed its principles into the DNA of financial institutions and supporting a client-centric approach in product design and delivery for households and micro, small, and medium enterprises. IFC was the host of the third annual Responsible Finance Forum, which convened nearly 200 participants from the financial sector, bilateral and multilateral donors, and the broader international community.

We can report outstanding business results in FY12: ■ By December 2011, IFC’s combined advisory/investment reach to households and firms through our financial institution clients expanded substantially, reaching an estimated 19.7 million micro loans and 3.3 million SME loans respectively (for total outstanding portfolios of $19.8 billion and $181.2 billion). ■ We grew our business responsibly, maintaining a tight focus on the poorest countries and fragile and conflictaffected states, and continued with our initiatives targeted at climate change. ■ Our client base expanded significantly in the last fiscal year, showing especially strong growth in the Middle East and North Africa, South Asia and Sub-Saharan Africa. To date, our combined investment and advisory clients are over 1,000 entities in nearly 100 countries. ■ We forged new partnerships that are bound to increase our leverage substantially. Notable were partnerships with the government of the United Kingdom and The MasterCard Foundation that cumulatively resulted in $100 million of new funding to be used for SME and micro/retail finance initiatives.

In FY12, our team rolled out a portfolio of knowledge products—including diagnostics, training, and best-practice guides—that we shared with our clients as part of our work in supporting access to finance globally. Our programs would not have been possible without the continued generous support of our donor partners. Donations from governments, institutions, multilateral organizations and private foundations contributed to the program as a whole and to specific projects around the world. I proudly acknowledge the dedication and professionalism of our staff for their incredible work in FY12. With a strong team in place and the access to finance agenda as prominent as ever, I am certain that we can all look forward to another rewarding and excellent year ahead.

■ We helped establish the first collateral registries in China and Ghana, facilitating more than $3.5 trillion in financing secured with movable property. About $1 trillion of that went to SMEs. ■ In the area of SME finance, we spearheaded and launched important initiatives. Noteworthy was the SME Finance Initiative, a catalytic investment and advisory effort that will provide assistance to banks targeting SMEs in more challenging and under-served markets. We also launched the SME Finance Forum, a knowledge-sharing initiative launched upon the request and with the mandate of the G-20 members.

PEER STEIN Director and Global Business Line Leader Access to Finance Business Line IFC Advisory Services

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FINANCIAL INSTITUTIONS MICRO / RETAIL Insurance The future presents both opportunities and risks for institutions and individuals. The ability to survive a big negative economic shock depends on one’s resilience, which itself is a factor of one’s accumulated wealth and ability to create more in the future. Insurance provides those with minimal capacity to absorb economic hardships an opportunity to transfer the financial burden of burden of drastic events to a risk carrier in return for a small regular payment. This ability to transfer risk to a third party gives businesses and individuals the opportunity to undertake rewarding but riskier activities. This in turn promotes higher productivity and growth. IFC’s Access to Finance Global Insurance Advisory aims to increase access to insurance by promoting appropriate insurance products, developing service delivery channels, and building necessary skill-sets in the markets. The three focus areas are agriculture insurance, health insurance, and microinsurance. The goal in each area is to expand financial markets offerings, create employment, disseminate best practices, and contribute to economic growth by mitigating risks and increasing income-generating activities.

The agriculture insurance activities are primarily supported by the Global Index Insurance Facility (GIIF) program, a multi-donor facility which aims to develop effective and sustainable markets for index-based weather and catastrophic risk insurance in developing countries. During the past year, GIIF has helped its project partners on the ground overcome challenges in collecting data, creating distribution channels, and conducting training. GIIF also has strengthened its collaboration with the International Bank for Reconstruction and Development (IBRD) by supporting regulatory and policy reforms for index-based agricultural insurance across Latin America and the Caribbean, the Pacific, and Sub-Saharan Africa. One important development is the establishment of the Ukraine Agricultural Insurance Pool, supported by the IFC Ukraine Agri-Insurance Development Project. With IFC’s assistance, the pool offers a common data management system for its members, the development of new products for producers, reinsurance of products with reputable reinsurers, and coordination between the private sector and government stakeholders. IFC’s help allows Ukraine’s agri-insurance sector to develop quality products for the market as well as establish a modern corporate governance structure with open and transparent procedures. Over the last six months, Global Insurance Advisory also has ramped up its activities in health insurance and microinsurance, primarily in Asia and Africa. There are more than six projects in the pipeline at advanced stages of implementation. We have secured $2 million from the Performance Based Grant Initiatives (PBGI) window for supporting projects in health and microinsurance.

Microfinance IFC is the World Bank Group’s lead investor in microfinance and one of the leading multilateral investors in terms of outreach to microfinance institutions, working with 150 institutions in more than 60 countries. IFC’s investee clients had a combined outstanding portfolio of nearly 8 million microloans worth nearly $12.6 billion as of December 2010. IFC committed $546 million in 51 projects with financial institutions in FY12. Also, as of June 30, 2012, IFC had a committed microfinance investment portfolio worth $2 billion, and IFC Advisory Services provided assistance to 70 projects at a cost of $53.6 million. International Livestock Research Institute representatives conduct livestock insurance training for Masai herders in Kenya.

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Since pioneering commercial microfinance in the mid1990s, IFC continues to lead innovation in the field, using developments in technology, financial products, and policy to help financial institutions reach a greater number of people in a more cost-effective way. IFC’s goal for microfinance is to expand access for underserved populations to a diverse range of high-quality financial services, while maximizing development impact and ensuring institutional sustainability. IFC works toward this goal by effectively delivering tailored investment and advisory services to a range of financial intermediaries. In doing so, IFC continues to play an important role in demonstrating the business case for commercial microfinance and promoting it as an asset class to private institutional investors. By creating and supporting commercially viable microfinance institutions, IFC helps its clients attract the private capital needed to scale up and respond to unmet demand for microfinance.

Loan officer from an IFC client microfinance institution—Access Bank, meets a borrower in Tanzania.

WHAT IS RESPONSIBLE FINANCE? The financial sector, including microfinance, has seen enormous growth recently, but intense competition has provoked overindebtedness and coercive credit collections in countries such as India and Bosnia. The ongoing financial crisis in Europe has underscored the importance of accountability and transparency for a more stable and resilient financial services sector. Responsible finance has since emerged as a tenet to help re-focus the industry on the needs of customers and provide more appropriate financial services. For IFC, embedding responsible finance into the DNA of financial institutions supports a client- centric approach in product design and delivery customized for end-clients, households, and micro, small, and medium enterprises. IFC works closely with client institutions to design a strategy and action plan for responsible finance that includes: (i) transparency and good governance; (ii) recruiting, training and motivating staff; (iii) appropriate product design across a range of customer needs in addition to credit (savings, insurance, housing finance, and pensions); (iv) developing tools/systems/processes for appropriate risk management; (v) fair pricing; (vi) innovative delivery channels; (viii) transparent credit reporting; and (ix) customer financial awareness/financial literacy. By embedding the principles of responsible finance into core delivery of financial services, the financial institution is able to appropriately manage risk, balance profitability with inclusive finance, and contribute to long-term sustainability and wider systemic growth. Responsible finance goes beyond microfinance and spans the financial sector to include insurance, housing finance, mobile banking, SME finance, and other industries. For example, in housing finance, offering a longer-term product to meet customer needs, raising customer financial awareness and customizing credit-appraisal processes allows institutions to service a range of clients—urban, rural, banked, and unbanked. In risk management, responsible finance supports the building of a strong asset base for longer-term sustainability. In credit reporting, strengthening responsible access to credit improves transparency and allows a wider set of choices for clients. In advisory services, the focus is on building the capacity of our more than 700 global clients to implement this client-centric approach and create a sound and harmonized financial sector. All of the above is closely coordinated with IFC’s investment arm, increasing the effectiveness of our due diligence and post-investment supervision of our clients.

OUR PRODUCTS

IFC was the host of the third annual Responsible Finance Forum on April 23, 2012, an event that convened over 150 participants from the financial sector, bilateral and multilateral donors, and the broader international community. The Forum highlighted the need for helping strengthen responsible finance initiatives beyond microfinance, extending it into commercial banking, housing, insurance, mobile banking, and credit reporting institutions. The forum was coordinated with CGAP, the German Federal Ministry of Economic Cooperation and Development, the Netherlands Ministry of Foreign Affairs, and Principles for Responsible Investment, and for the first time brought together leaders from the Global Partnership for Financial Inclusion of the G-20, World Bank Group, IMF, and prominent private sector representatives to share experiences in putting responsible finance into action. The next Forum is planned for the spring of 2013.

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OUR PRODUCTS

Housing Finance With increasing urbanization and growing population, more than one billion low-income people in developing countries worldwide live in slums that often lack infrastructure such as water and sanitation. There is an enormous unmet demand for low-income housing finance because of the lack of financing options for low-income households that accounts for as much as 90 percent of the housing needs. Small amounts of finance could significantly improve these people’s living conditions, further resulting in higher productivity and lower costs of services and consequently, economic growth and job creation. IFC is a global leader in both advisory and investment services for housing finance. Over the past few years, IFC completed projects to study and develop affordable housing solutions for middle- and lower-income populations in countries such as India and Uganda. In India, our advisory services projects have led to investments in housing finance institutions specifically targeting workers in states with inadequate access to finance. For example, IFC and Dewan Housing in 2011 created a joint venture, Aadhar, to offer mortgages on a large scale to underserved people. IFC’s investment in Aadhar was more than $4.4 million. In its first year, Aadhar has established 15 branches in six states and extended more than 1,100 home loans to India’s poorest, targeting customers with household incomes of up to about $400 a month. IFC works in close cooperation with the World Bank to bring advisory solutions that complement and complete the development cycle to some of the world’s poorest markets, including conflict-affected countries. For example, IFC developed training and support services to introduce housing microfinance products that would allow people to upgrade substandard homes or build new ones. The First MicroFinance Bank-Afghanistan (FMFB), founded in 2004 with IFC support, created a program that has extended small housing loans to more than 12,000 people, building a well-performing housing finance portfolio of $9.7 million since 2009. These small loans, averaging $1,200 each, have made it possible for Afghan families living in poverty to improve their housing conditions. For more than 30 years, IFC has supported the expansion of residential mortgage lending as a tool for financial market development and a key ingredient to improving housing conditions. IFC has undertaken a number of initiatives to make this a reality. For example, IFC is assisting Sogesol, the microfinance unit of a Haitian bank, to redesign its housing microfinance loan product to expand access to finance for housing renovation and repair to low-income households—a service that is greatly needed after the earthquake that destroyed thousands of homes in Port-auPrince in January 2010.

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IFC has provided advisory services and investments to primary and secondary mortgage market players to expand the reach of housing finance in many countries around the world, including Argentina, Bangladesh, Colombia, Honduras, Indonesia, Kenya, Mexico, Nigeria, Republic of Korea, Romania, Russia, Rwanda, and South Africa. Of the direct client projects, 75 percent are in IDA countries. Our priority projects—often undertaken with the World Bank— include support for increased access to housing solutions among lower-income social groups, risk management, promoting responsible finance, affordable green housing, and further development of housing finance in least developed markets, such as Latin America, South and Central Asia, and Sub-Saharan Africa.

SMEs and BUSINESSES Agrifinance Development of the agriculture sector is critical to advancing the Millennium Development Goal of halving the proportion of people who live in extreme poverty and who suffer from hunger by 2015. To target the large rural poor population in developing countries, agriculture investments must improve on-farm productivity, post-harvest practices, and the trade and marketing of agricultural commodities. Despite the significant financing needs of farmers and agribusinesses, the financial sector lacks the appetite, incentives, and skills to target and service the sector and its supply chain. Lack of broader access to financial services limits opportunities for agri-enterprises and smallholders to adopt efficient technologies and allocate resources wisely. IFC has a number of initiatives to increase the supply of finance to the agriculture sector and its supply chain. IFC’s Access to Finance Agrifinance Advisory primarily supports: ■ Banks, financial institutions, and non-bank financial institutions in building necessary skills, developing products, and finding ways to mitigate and manage lending risks. ■ Farmers, farmer-based organizations, and agribusinesses along supply chains in building capacity through targeted financial training, supply chain analysis, linkages to financial institutions and markets, and innovative financial products. Access to Finance’s Agrifinance projects are underway in seven countries and five projects are in the pipeline for FY13. Globally, Agrifinance advisory services are offered in three areas: ■ Financial institution capacity building. IFC works with financial institutions to develop targeted services for agricultural producers and SMEs in all stages of the

agricultural value chain, from input financing for production, to working capital for trading and transportation, to warehouse finance for processing and exporting. The advice addresses specific risk-management practices, credit processes, and the development of sales channels and new products unique to agri-lending.

Separately, IFC’s Global Warehouse Finance Program focuses on increasing financial institutions’ supply of post-harvest finance, secured by agricultural commodities stored in warehouses. Lines of credit or risk-sharing facilities from IFC partially guarantee agriculture portfolios based on pre-agreed and pre-established criteria.

■ Supply chain analysis and borrowers’ needs assessment. IFC helps an institution undertake systematic market research in selected target countries, regions, or agriculture sectors. Such an analysis includes a general SWOT assessment, a mapping of key priority segments in the supply chain around selected commodities, an estimate of the potential market for financial services, an assessment of borrowers’ needs, and gap analysis of financial offerings. Advisory Services also help financial institutions develop targeted products for the sector, which may include a supply chain finance program implemented through value chain actors.

IFC also brings together banking and insurance expertise to reduce the risk of agricultural activities and thereby improve access to finance. The Global Index Insurance Facility, an initiative focused on developing weather index insurance products, supports the development of riskmitigation tools.

■ Borrower support. This pillar trains agribusinesses, farmers, and farmer-based organizations in the preparation of business plans and loan applications. The focus is building the capacity of service providers to mediate between financial institutions and agribusinesses or farmers. Access to Finance Advisory uses Sustainable Business Advisory tools and resources to link financial institutions to supply chains and farmers.

IFC is responsible for implementation and management of the private sector window of the Global Agriculture and Food Security Program (GAFSP), a multilateral mechanism to scale-up support to help poor countries reduce poverty and improve rural livelihoods and food security. IFC’s Access to Finance Advisory works closely with the GAFSP program to increase innovative financial services aimed at increasing the commercial potential of small and medium-sized agri-businesses and farmers. IFC, through Access to Finance’s Agrifinance Advisory, is also the lead implementation partner for work undertaken on Agrifinance for the SME Banking Subgroup of the Global Partnership for Financial Inclusion of the G-20

THE SME FINANCE FORUM — WWW.SMEFINANCEFORUM.ORG The SME Finance Forum promotes access to finance for underserved small and medium enterprises worldwide by facilitating knowledge-sharing and collaboration among financial institutions, policy-makers, researchers, and donors. The Global Partnership for Financial Inclusion of the G-20 countries launched the Forum in April 2012. Korea, the Netherlands, and the United Kingdom support the SME Finance Forum, which is managed by IFC. The SME Finance Forum features news, events, publications, success stories, and expert interviews on SME finance. It contains a discussion forum and a vibrant LinkedIn community with more than 800 members. Going forward, the Forum will work with the World Bank Group institutions and other partners to make SME finance data widely available as interactive maps, charts, and dashboards. The Forum will explore the social and economic impact of providing finance to SMEs, and will identify opportunities for SME finance growth and obstacles in the policy environment.

OUR PRODUCTS

The SME Finance Forum team also manages grants and disseminates lessons learned from the G-20’s SME Finance Challenge Fund. The G-20 launched the challenge in June 2010 to find the best models worldwide for public-private partnerships that catalyze finance for SMEs. Thirteen challenge winners received grants through funds from Canada, the Netherlands, the Republic of Korea, the United States, and the United Kingdom.

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OUR PRODUCTS

SME Banking The development of SMEs has taken center stage in the global development agenda in the past year as countries focus on rebuilding their economies following the recent financial crisis. SMEs are critical to this recovery because they employ a significant portion of the population. Studies indicate that formal SMEs contribute up to 45 percent of employment and 33 percent of gross domestic product in developing economies. These numbers are significantly higher when they include SMEs operating in the informal sector. Despite their importance, SMEs remain underserved, particularly in emerging markets, with many financial intermediaries reluctant to target the sector. In an effort to address this issue, IFC offers a package of investment and advisory services for financial intermediaries committed to expanding financial services to SMEs. IFC’s Access to Finance Advisory has been helping financial intermediaries recognize and seize the untapped and profitable opportunities that the SME segment represents. IFC achieves this through strategy design, market segmentation, product development, expansion of a sales culture, streamlining credit risk management processes, and leveraging technology to reduce service costs. IFC remains a knowledge leader in this field by developing industry benchmarks, creating and disseminating tools and publications, supporting networks, and showcasing best practices to efficiently target the SME segment globally. IFC had an active portfolio of 44 SME banking projects spanning 33 countries and totaling $33.9 million as of June 2012. About 77 percent of client-facing projects were in IDA countries, and 21 percent were in conflict-affected or fragile states. Twelve percent of client-facing projects included a component to implement or improve finance models for women-owned SMEs.

In the past year more than 10 training events and workshops were organized in several countries, including India, Kazakhstan, Lebanon, and Saudi Arabia. The training was targeted at mid-level bank officers and provided an overview of SME banking fundamentals, analysis of global best practices, and instruction on adapting these practices to local and regional markets. The SME Banking Program also developed new training modules with advanced material targeted at more sophisticated banks that already operate in the SME segment and are looking to scale-up their operations. This type of training was successfully piloted in Qatar and Mexico, with more than 50 people participating. A key event came in June when IFC co-hosted the 2012 SME Finance Meeting of Development Finance Institutions in Luxemburg. The annual conference of development finance institutions brought together key actors in the donor community and private sector bank representatives, allowing the exchange of ideas on increasing access to financial services for SMEs. Topics of discussion included the new SME Finance Initiative and Global SME Finance Forum, the G-20’s SME finance agenda, and the tracking and measurement of the impact of SME finance on job creation. The SME Banking Program undertook several activities that helped cement IFC’s position as a global thought leader in SME finance. As the technical lead for the SME Finance sub-group of the Global Partnership for Financial Inclusion of the G-20, IFC developed three publications: (i) the SME Finance Policy Guide, which included policies and recommendations related to regulations and supervisory framework, financial infrastructure, and public sector interventions related to SME finance; (ii) Scaling Up Access to Finance for Agricultural SMEs Policy Review and Recommendations; and (iii) Strengthening Access to Finance for Women-Owned SMEs in Developing Countries. Also as part of the G-20 activities, IFC launched the Global SME Finance Forum. Another FY12 initiative was the development of the Customer Management Excellence Program, which will allow IFC to help banks upscale their SME banking operations, improve their service to SME clients, and offer a wider range of products and services to them.

Small business owners in Bangladesh have benefitted from the SME finance program of BRAC bank.

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Working jointly with the investment team, the SME Banking Program launched the SME Finance Initiative. The first donor, the Government of the United Kingdom (UKAid, previously UK Department for International Development) contributed $120 million to be disbursed to IFC in tranches. The initiative will focus on developing projects that support access to financial services for SMEs in selected countries in Sub-Saharan Africa and South Asia, and two countries in the Middle East and North Africa. IFC and UKAid expect this initiative to reach 200,000 SMEs and contribute to the generation of a significant number of jobs in these priority regions.

■ Leasing Leasing can play an important role in promoting a sustainable private sector in emerging markets, since it particularly helps underserved markets. By leveraging little or no down payment, SMEs are able to obtain productive equipment through leasing and increase productivity, jobs, and incomes. Leasing is less developed in emerging markets, yet it remains an important complementary source of investment finance, especially in countries where the collateral regime and the information infrastructure are weak. Building on extensive sector-level work, IFC leasing programs are focused on integrating leasing into a comprehensive approach to bridge the gap in access to finance. Leasing also plays a role in Sustainable Energy Finance and Agrifinance projects. The Global Leasing Toolkit, developed by IFC with support from Japan, has been very well received by stakeholders. The toolkit guides financial institutions in how to provide lease financing to SMEs and helps facilitate IFC’s innovative approach, particularly in climate change, food security, and Islamic finance. The toolkit continues to play a key role as IFC works with and through financial institutions to increase sustainable leasing services for SMEs. IFC has organized a number of events, mostly in Africa and Asia, to distribute the toolkit to financial institutions, policy makers, and other stakeholders, as part of its efforts to share best practices and lessons learned.

Trade Finance IFC’s $3 billion Global Trade Finance Program offers confirming banks partial or full guarantees to cover payment in emerging markets for trade-related transactions. IFC’s Trade Advisory Program is an integral component of this larger program and is designed to help local banks build their trade finance capacity. The advisory program provides the client institutions with training and support to upgrade their skills in structuring basic and complex trade finance transactions, improve their techniques for mitigating trade finance risk, upgrade the operational and technical skills of their trade finance back offices, and transfer current international best practices in trade finance to local markets. These programs have now been standardized and replicated in all regions and in local languages where necessary.

Risk Management The objective of IFC’s Global Risk Management Advisory program is to strengthen financial institutions’ risk management capacity and frameworks, loan portfolio monitoring, and nonperforming loan management and workouts capacity, while supporting the development of emerging distressed-asset markets. The program was initially launched in response to the 2008 global financial crisis to address risk management and nonperforming loan challenges in emerging markets. Today, it engages client financial institutions to demonstrate that their growth and resilience to future crises requires implementation of better risk-management systems and processes. Through longer-term engagements and in-depth institutional building work with client financial institutions, the program takes a comprehensive approach by focusing on all aspects of sound risk management, including risk governance, market risk, liquidity risk, credit risk, operational risk, asset liability management, and capital adequacy. A lesson from the global financial crisis is that all of these risk areas are interconnected and that one type of risk can often be transformed into another type. At the sector level, Access to Finance Advisory disseminates best practices and conducts awareness-raising efforts. Since early 2009, 117 risk management financial sector workshops and conferences have been held in 36 countries across all IFC regions. A wide institution-building effort engaging 81 financial institutions across all regions continues through the use of diagnostics and capacity-building projects. The program develops risk-management tools to identify issues and support capacity-building work with client financial institutions, as part of its knowledge management agenda.

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OUR PRODUCTS

On a selective basis, IFC places experienced trade finance experts with issuing banks to help the banks develop trade finance skills. In close collaboration with the International Chamber of Commerce, IFC developed a trade finance certification program that makes use of e-learning. IFC also organizes workshops for SME exporters and importers around the world. Since June 2006, 4,552 bankers, exporters and importers from more than 65 countries have benefited from 173 trade training courses offered by IFC’s Global Trade Finance Program.

The port at Tema, Ghana is a major trade route for Ghana’s imports and exports.

OUR PRODUCTS

The program also supports the development of emerging distressed-asset markets, especially in Europe and Central Asia, as part of a wider sector-level distressed-asset-resolution initiative, coordinated within the World Bank Group. Additionally, the program works in emerging markets to encourage the adoption of best practices in responsible and ethical collections for servicing companies and banks’ collection departments. This effort is also closely coordinated with the ongoing agenda for responsible finance led by IFC and the World Bank. ■ Environmental and Social Risk Management The environmental and social risk management product provides three types of advisory services: (i) advising banking regulators on standards or guidelines for local financial industries in environmental and social risk management, green lending, and improvement of their footprint in banking operations; (ii) developing a training program and building technical capacities in environmental and social risk management for consulting networks in various regions; and (iii) developing and testing tools that help financial institutions identify gaps in their environmental and social risk management practices and make necessary improvements. The primary goal of the product is for financial institutions in emerging markets to follow good environmental and social standards similar to and/or consistent with IFC performance standards. Environmental and social risk management is at the early stage of an entry product that requires further testing and development. Nevertheless, the product was well received in East Asia and the Pacific, Latin America and the Caribbean, and Sub-Saharan Africa in FY12. The most active projects were in Bangladesh, China, and Vietnam, while Indonesia, Nigeria, Peru, the Philippines, and South Africa could be the next countries to set up projects with dedicated resources. A global Knowledge Management program was set up at the end of FY12 to facilitate cross-regional learning and the testing and finetuning of this product.

Officials conduct container health and safety examinations at the DP World Port of Caucedo in the Dominican Republic.

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■ Global Microfinance Risk Management IFC’s Global Microfinance Risk Management Program was developed in response to the microfinance market crises witnessed in various markets across the globe. Uncertainties in regulatory environments as well as funding challenges faced by microfinance institutions as a result of the global economic downturn have forced microfinance institutions to revisit the strengthening of core institutional activities such as risk management. Promoting strong and effective risk-management practices in conjunction with other key operational practices is a focal area to ensure resilience and preparedness towards potential risks and to ultimately establishing long-term operational sustainability. IFC’s Global Microfinance advisory team has worked with all its regional offices to host workshops for risk-management practitioners as well as to conduct diagnostic studies with microfinance institutions focused on risk management to determine possible areas of intervention with the institutions themselves.

Sustainable Energy Finance IFC’s integrated advisory and investment services allow partner financial institutions to build and grow their sustainable energy finance business in emerging markets. Sustainable energy projects include a variety of technological or production improvements to achieve better efficiency in use of resources, such as energy, water, and other raw materials, while also reducing greenhouse gas emissions. Sustainable energy also includes renewable energy projects with wind, solar, biomass, and waste-to-energy technologies to reduce the over-reliance on fossil fuels in power generation. The potential market for sustainable energy finance in emerging markets is estimated at $100 billion a year. However, the momentum slowed in FY12 because of the global financial crisis and the uncertainty surrounding post-Kyoto international agreements related to climate change. Despite the crisis, most IFC partners have been able to maintain their sustainable energy lending programs. IFC’s financial institution partners bring value-added services to their clients in critical times, and help SMEs become more resilient, by providing support to firms in their efforts to save energy costs and improve efficiency and competitiveness. The sustainable energy finance advisory product continues to support these partners with training, marketing, and technical guidance on specific sector opportunities, and to build partnerships with energy service companies, vendors, and others for pipeline development. In several countries—including Albania, Armenia, Chile, Colombia, Macedonia, and Mexico—the sustainable energy finance program also takes on regulatory or policy work with government agencies to create drivers for energy efficiency and renewable energy investments. The sustainable energy finance program continues to produce good results in East Asia (China, Indonesia, the

Philippines, and Vietnam) and Eastern Europe (Albania, Armenia, Russia, and Ukraine). Meanwhile, the program is accelerating its engagement with financial institutions in the Middle East and North Africa (Jordan and Lebanon), Latin America and the Caribbean (Brazil and Honduras), and South Asia (Bangladesh and India). Given that a number of large sustainable energy finance projects will end in FY13, it is important that the lessons learned from program design and implementation are captured and shared across the institution. In addition, IFC is standardizing a number of tools for financial institutions to use in developing their sustainable energy finance business. Also, IFC launched some early pilot programs in Africa, East Asia, India, the Middle East, and North Africa on sustainable energy finance lending to the household and retail sectors through partnerships with microfinance institutions. As of the end of FY12 , the culmulative annual GHG reduction of IFC’s sustainable energy finance portfolio was $19.9 million tons of CO2 per year.

FINANCIAL INFRASTRUCTURE Credit Reporting Credit reporting addresses a fundamental problem of credit markets: asymmetric information between borrowers and lenders, which may lead to adverse selection, credit rationing, and moral hazards. Regulators and financial market participants are therefore increasingly recognizing the value of credit reporting systems to improve credit risk and overall credit portfolio management, as well as to enhance financial supervision, financial sector stability, and responsible access to credit. IFC has been an international leader in the development of credit reporting systems, providing support in more than 60 emerging markets worldwide since 2001. IFC supported the set-up or improvement of credit reporting systems in Bangladesh, Cambodia, Ethiopia, and Tonga in 2011 and the first half of 2012. The long-awaited Cambodian Credit Bureau (CBC), the country’s first private credit bureau, began operations in March 2012. Sixty-eight members subscribed and have provided their data on a monthly basis. The bureau database contained about 1.8 million records as of June 2012 and about 50 financial institutions have used the credit reports. In the Caribbean, IFC has engaged in a five-year program with 16 countries to create an enabling environment for credit bureaus to function on a long-term, sustainable basis.

The first-ever universal standards on credit reporting, the General Principles for Credit Reporting, were published in September 2011. The standards report was produced after two years of deliberations by an international task force, in which IFC participated. The process was coordinated by the World Bank with support from the Bank for International Settlements. IFC has been actively disseminating and promoting the new principles through channels that include outreach events, client visits, and websites. IFC’s interventions in credit reporting vary depending on specific country contexts and needs. They include legal and regulatory work, in collaboration with the World Bank, to develop an environment conducive to sharing credit information; outreach and raising awareness of the benefits of sharing credit information; advisory support for the development of new credit-information sharing systems with emphasis on micro, small, and medium enterprises; and support for the development of value-added services in markets with more mature credit-information sharing systems. Credit information sharing is critical for tackling some of the issues underpinning the latest financial crises. Therefore, IFC’s Global Credit Reporting Program supports the development of more inclusive credit reporting systems for SMEs and microfinance; better utilization of credit information data by prudent supervisors; and financial education and literacy on credit and credit reporting, which will target supervisors, regulators, lenders, and indirectly, end-users or borrowers. The activities of IFC’s program, including our regional offices, are funded by donors that include Austria, Canada, Japan, the Netherlands, Omidyar Network Fund Inc., Switzerland, and UKAid. The program also received generous support in the past from Australia, Italy, Luxembourg, the Millennium Challenge Corporation, New Zealand, Norway, and Visa International.

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OUR PRODUCTS

In India, two bureaus (High Mark and Equifax) have been providing credit reporting services for the clients of microfinance institutions. Within eight months of launching their services in late 2011, High Mark (the pioneer bureau) had more than 68 member institutions, 65 million loan records, and 3.2 million inquiries. High Mark has already covered 90 percent of the market for borrower data.

Credit information of borrowers is essential for low-risk lending in emerging markets.

OUR PRODUCTS

Secured Transactions Poor financial infrastructure limits or denies access to credit for many firms in emerging markets, especially for micro, small, and medium enterprises. IFC provides advisory services to support the development of well-functioning secured lending frameworks to provide greater opportunities for these firms. The key challenges are modernizing secured transactions laws, establishing electronic collateral registries, and training financial institutions in lending based on movable assets. IFC’s advice is provided jointly with the World Bank (through the Investment Climate advisory services) to foster the use of movable assets—such as equipment, accounts receivable, inventory, and crops— as collateral in exchange for loans. IFC is a recognized leader in the field today, providing secured transactions advice to more than 20 economies and the Organization for Harmonization of Business Law in Africa. To date, IFC has provided assistance to Afghanistan, Azerbaijan, Belarus, Cambodia, China, Colombia, Ghana, Haiti, India, Jordan, the Lao People’s Democratic Republic, Lebanon, Liberia, Malawi, Mongolia, the Philippines, Rwanda, Sierra Leone, South Sudan, Sri Lanka, Vietnam, West Bank and Gaza, and Yemen. Meanwhile, demand is increasing with projects in the pipeline in Costa Rica, Côte d’Ivoire, Egypt, Guinea, Indonesia, the Kyrgyz Republic, Nigeria, Togo, Uganda, and Zambia.

Notable accomplishments in communications and knowledge management included production of a video and a how-to-guide on China Secured Transactions Project, and publication of a Collateral Registries Survey Report. The report, based on 2010 World Bank Group surveys of collateral registries, presents examples of international best practices and the realities of registration systems in the 35 jurisdictions surveyed. Another big accomplishment was the development of a structured methodology and Monitoring and Evaluation Framework, which allows IFC to conduct a deeper assessment of project impacts and to continue make the case for the importance of regulatory reforms. In collaboration with the World Bank Development Economics Department, IFC strengthened its expected impact methodology through a more robust set of formulas and criteria based on recent project results and data from recent surveys of collateral registries worldwide. IFC’s Secured Transactions and Collateral Registries Program is funded by IFC and donors that include Luxemburg, the Netherlands, Switzerland, the United Kingdom, and the United States.

Securities Markets Program

A major milestone this year was an independent evaluation of IFC’s China Secured Transactions Project that showed the project had facilitated $3.58 trillion in accounts receivables financing, including $1.09 trillion in SME lending. Ghana also took steps toward modernizing its system by enacting registry regulations and launching an upgraded Web-based electronic registry. IFC also supported modern electronic collateral registries in Afghanistan and Vietnam, and new laws governing secured transactions were drafted in Colombia, Lao PDR, Lebanon, and Rwanda.

Properly functioning securities markets are an integral part of the financial framework and play a vital role in facilitating access to finance in developing countries. Working with the World Bank, IFC provides advisory services to help countries develop their securities markets, including bond, securitization, and equity markets. Deepening and broadening securities markets provides long-term capital for the priority growth sectors of housing, infrastructure, and SME finance, and helps expand the range of investment opportunities available to pension funds, life insurance companies, and other institutions managing social safety-net funds in developing countries.

Secured transactions have the potential to extend financing to thousands of small businesses in Lao PDR.

Well-functioning securities markets are key for sound financial infrastructure in emerging markets.

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IFC and the World Bank run two well-developed securities market programs—the Global Emerging Markets Local Currency Bond (Gemloc) program and the Efficient Securities Market Institutional Development (ESMID) program—under which most of its advisory services and knowledge management products are designed and implemented. The Gemloc and ESMID programs are highly complementary since they respectively focus on the development of government and non-government local currency bond markets. Both programs operate in countries simultaneously and leverage one another. In addition, the service line plans to establish a new program to develop equity markets in frontier countries. The Gemloc program is a World Bank Group initiative that supports development of local currency bond markets in emerging-market economies to increase their investment worthiness and attract new domestic and international investment. Its primary aim is to develop government bond markets to improve the stability of the financial sector as well as implement monetary policy, pricing benchmarks, and yield curves. The ESMID program works to develop non-government bond markets to help finance sectors that have high developmental impact, such as infrastructure, housing, and microfinance. The program also aims to widen the range of opportunities available to domestic institutional investors, such as pension funds and insurance companies. The two key areas of advisory work are: (i) improving the enabling environment for local securities markets, and (ii) supporting demonstration transactions that may be facing challenges in coming to market, often because of regulatory obstacles. Gemloc country-specific advisory projects are operating in countries that include Brazil, Costa Rica, Egypt, Kenya, Morocco, Nigeria, Romania, South Africa, and Uruguay. Gemloc works with 23 emerging-market countries and has sponsored four high-level discussions on key bond market issues under its Peer Group Dialogue initiative. ESMID is operating in Sub-Saharan Africa (Kenya, Nigeria, Rwanda, Tanzania, and Uganda) and Latin America (Colombia and Peru) and is expanding to East Asia (Indonesia and Vietnam).

Our retail payment institutions work uses payments services as a point of entry for low-income populations for banking services. We support the development of innovative and sustainable business models using new technologies that deliver payment services at a low cost. We help banks develop low-cost electronic channels and identify and support start-up businesses that offer electronic and mobile payment solutions. Eventually, we form relationships with financial institutions that can offer a broader range of financial services to low-income households. We emphasize expanding access to electronic banking services in underserved countries and regions, including rural and post-conflict locations. Since inception of the global practice two years ago, mobile banking has grown from five projects to a product indevelopment with 31 active projects. The product is now deployed in all of IFC’s regions. IFC’s team combines incountry staff expertise with specialist technical know-how in retail payments, including design of business models, development of agent networks, customer uptake, product design, and impact assessment. In the last two years, our work in this area has established IFC as a recognized thought leader in electronic banking. The team has committed more than $18.4 million to date in advisory projects. In addition, the team has completed market-scoping exercises in 24 countries across Asia, Latin America, North Africa, and Sub-Saharan Africa. The goal of the retail payments and e-banking program is to develop the overall strategy in partnership with financial institutions and support its implementation. IFC Advisory Services provides the following forms of support to its clients: developing a client’s strategy and establishing a value proposition for the supply chain to ensure financial viability for the entire ecosystem; designing products for electronic channels that provide access to a more comprehensive suite of financial services (e.g. insurance and savings); and fostering consumer uptake through financial literacy and marketing. In May 2012 IFC and The MasterCard Foundation launched a partnership to increase access to financial services for an estimated 5.3 million unbanked people in SubSaharan Africa with a total funding of $37.4 million, of which about $13 million will be dedicated to developing mobile financial services in the region.

OUR PRODUCTS

By improving local bond markets and providing longterm local currency financing and investment vehicles, the Gemloc and ESMID programs help reduce financial sector risk, improve financial sector diversification, and keep funds flowing, particularly during periods of financial stress when bank lending may be under pressure or when other forms of credit may not be appropriate or available for financing or investment.

Retail Payment Institutions and Innovations

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Women in the private sector represent a powerful source of economic growth and opportunity. IFC helps transform local and global markets by strengthening women’s roles as leaders, entrepreneurs, employees, consumers, and stakeholders. Banks that understand the women’s market and the opportunities it provides have a tremendous strategic and financial advantage. Women are a major force of economic power. There is growing recognition among governments and within the private sector that investing in women and girls has a powerful multiplier effect on productivity, efficiency, and economic growth. In many developing countries, women are starting businesses at a faster rate than men, and are making significant contributions to job creation and economic growth. The opportunity cost of not investing in them is significant both for their communities and for larger economies. For example, the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) says that this region loses up to $47 billion in output each year because of women’s low rate of participation in labor markets. Furthermore, according to a recent Goldman Sachs1 report, narrowing the gender gap could result in a rise in per-capita incomes of up to 14 percent by 2020 in several economies of the Asia Pacific Economic Cooperation (APEC) union, including China, Korea, the Philippines, Russia, and Vietnam. Women represent a significant and profitable segment of the SME market. According to the Global Entrepreneurship Monitor’s 2010 Global Report2, an estimated 38 percent of formal SMEs in emerging markets are women-owned businesses. From a large-scale perspective, women entrepreneurs comprise one-third of all entrepreneurs worldwide. In some countries, four out of five small businesses are started by women3. Research has found that women from low- to middle-income countries, such as Lebanon, the Philippines, and Russia, are more likely to enter early-stage entrepreneurship than women in higherincome countries, such as Belgium and Sweden. The primary reason is that women from lower-income countries often seek additional sources of income to support themselves and their families4. Women-owned SMEs often have some of the best results in terms of their risk-return ratio and have attractive yields. While the return on assets can show volatility during crisis times, a five-year view normally shows that these women-owned businesses are profitable and have high repayment rates, providing a very solid business case for targeting women.

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However, women-owned businesses continue to face significant challenges that prevent them from taking advantage of their full potential. These challenges include: ■ Not enough is known about women entrepreneurs’ specific needs in accessing financial services. Since financing is an important means to pursue growth opportunities, addressing women entrepreneurs’ specific needs in accessing finance must be part of the development agenda. Across regions, women entrepreneurs have less access to finance than their male entrepreneurs. This is particularly problematic for women entrepreneurs who want to grow their businesses. Women entrepreneurs are not only less likely to have taken out a loan, but also the terms of borrowing can also be less favorable for women. Many country studies show that women entrepreneurs are more likely to face higher interest rates, be required to collateralize a higher share of the loan, and have shorter-term loans. ■ Women’s businesses are perceived to be higher risk, higher cost, and/or lower return, and creditors are often reluctant to lend. Financial institutions appear to be riskaverse when faced with women entrepreneurs, a client group they know little about. The reality or perception of women’s lower education, skill level, and work experience may further lessen their attractiveness to lenders. Many banks’ marketing strategies are built around a client profile that might not fit women entrepreneurs. In addition, the broader financial infrastructure—such as lack of credit bureaus or collateral registries—can limit incentives to reach out to more female clients. ■ Access to finance for women is limited by nonfinancial barriers. Non-financial barriers can include conditions in the broader business environment that may affect women’s and men’s businesses differently, such as the legal and regulatory environment or the quality of available infrastructure, and differences in education or management training. Culturally driven constraints such as women’s mobility and higher demands on their time often further limit their ability to access finance.

1

Goldman Sachs, Global Economics Paper No. 154. Global Entrepreneurship Monitor, 2010 Global Report. 3 Statistics Canada, “Women in Canada.” 4 Go4Funding.com. 5 About 25 percent of financial intermediaries that reported reach this year reported a percent greater than zero in lending to women-owned SMEs. 2

An Opportunity to Make a Difference IFC can play a significant role in addressing the challenges faced by women in accessing financing and markets by reducing gender-based barriers in the business environment and by creating opportunities for clients to promote improved working conditions for female employees, woman-focused market segmentation, and the inclusion of men and women in community relationships. IFC’s advisory and investment teams, in collaboration with several donor partners and clients, have worked to increase access to finance for women-owned SMEs in developing countries in the last seven years, as part of IFC’s role to advance responsible finance and increase access to finance for SMEs. Specifically, IFC has: ■ Invested in commercial banks to allow them to increase their lending to women entrepreneurs; ■ Provided advice to commercial banks to boost their ability to profitably and sustainably address the needs of the women’s market. Such assistance involves training of

staff, review of the Bank’s SME customer value proposition to include an approach for women entrepreneurs, and development of product bundles better suited to meet the needs of women clientele; ■ Worked with women beneficiaries to enhance their understanding of the banking system and increase their business and finance management skills, using IFC’s Business Edge management training program. As of December 2011, IFC had facilitated lending to about 62,000 women-owned SMEs, with a total value of $2.2 billion5. Through its Women in Business program, IFC has not only advanced women’s ability to access credit, but has also provided targeted hands-on training to enhance their businesses and finance management skills, making them a more viable segment for commercial banks. IFC’s experience shows that providing banking services to women entrepreneurs is a profitable business, because they have excellent repayment rates, are good savers, and contribute positively to their community’s well-being.

THE WOMEN IN BUSINESS PROGRAM IN ACTION—DEMOCRATIC REPUBLIC OF CONGO Rawbank, the largest bank by assets in the Democratic Republic of Congo, approached IFC when it wanted to improve its market share by expanding into the SME market. A post-conflict country, Democratic Republic of Congo has a very dynamic and growing sector of women-owned SMEs, and Rawbank was eager to capture this market.

Rawbank’s achievements under its Women in Business program, Lady’s First, have greatly exceeded its original expectations. Rawbank’s number of active women borrowers has grown to more than 110, from three; and its loan portfolio has expanded to $8 million, from $200,000. More than 500 women-owned SMEs have received training and legal advice. In the two years that the bank worked with IFC, it developed women-friendly and more flexible collateral options. It also created RawConseil, a legal advice desk that helps women entrepreneurs register their businesses and address challenges such as getting their husband’s permission to open a bank account. Lady’s First provided the boost that Patricia Gieskes needed to expand her fledgling recruitment firm. The entrepreneur started the Job Factory in Kinshasa in 2006, three years after the end of the Second Congo War, with the idea of providing specialized human resources services to multinational and national firms looking to open offices and hire local staff. The initial capital came from Patricia’s and her family’s savings. “That only took me so far,” says Gieskes. Rawbank, which had just launched Lady’s First, gave her a $100,000 loan to expand her training facilities, purchase new equipment, and increase her staff, since demand for her services was rapidly increasing. The Job Factory, which started with five partners in 2006, now works with more than 60 private sector organizations in the Democratic Republic of Congo. Gieskes also participated in the Lady’s First training program provided by IFC’s Business Edge, which improved her skills in managing her costs and marketing her services.

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ACCESS TO FINANCE FOR WOMEN ENTREPRENEURS

As part of its program targeted at micro, small and medium enterprises, Rawbank partnered with IFC to design and launch Women in Business Program in 2010. IFC provided initial funding of $7.5 million for SMEs—25 percent of which was for a credit line for lending to women entrepreneurs—and advisory services worth almost $200,000. IFC experts helped train women borrowers and worked with Rawbank staff to design products that address challenges commonly faced by women borrowers, such as lack of traditional collateral and lack of credit history.

Portfolio Data IFC’s committed portfolio in financial institutions that serve micro, small, and medium enterprises grew by 11 percent from the previous year, to $13.7 billion. At the end of FY12 Access to Finance Advisory had an active portfolio of 245 projects in 71 countries, valued at $294.4 million. Our project expenditure was $76.1 million, of which $62.6 million was client-facing. Sixty-four percent of client-facing client expenditures were in IDA countries and 9 percent were in fragile and conflictaffected countries. As of December 31, 2011, financial institutions that received Access to Finance Advisory assistance held 7.61 million outstanding loans worth $31.9 billion to micro, small, and medium enterprise in a range of countries in all regions.

Development Results: ■ IFC’s microfinance clients provided $6.2 billion in financing to about 7.09 million micro enterprises. ■ IFC’s housing finance clients provided $1.4 billion in housing finance loans to 40,000 homeowners.

■ IFC’s SME Banking clients provided almost $25.6 billion in financing and helped improve access to finance for about 520,000 SMEs. ■ IFC’s leasing clients provided $3.5 billion in lease financing for 49,990 micro, small, and medium enterprises. ■ IFC established and/or improved seven6 credit bureaus and registries in six countries in 2011. Bureaus and registries created through the program’s efforts helped generate more than 10 million inquiries7 (excluding China) as of December 31, 2011. ■ IFC helped establish the first collateral registries in China and Ghana, facilitating more than $3.5 trillion in financing secured with movable property, about $1 trillion of which went to SMEs.

Development Effectiveness In FY12 the Access to Finance Advisory achieved a development effectiveness rating of 77 percent for 39 projects that were rated positively—a 2 percent increase over FY11. Access to Finance also achieved a four-year average development effectiveness rating of 70 percent for 163 projects completed from FY08 to FY12. The business line’s rating steadily increased during that period, reaching the highest level among IFC’s business lines.

Improving the enabling environment for local securities markets is one of the primary areas of IFC’s advisory work.

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SHARE OF PROJECTS BY CLUSTER

INFRFAI N A N STR CI U

E A L TUR C

O/ IC R IL M ETA R

FINANCIAL INFRASTRUCTURE Credit Bureaus 7% Collateral Registries/Secured Transactions 6% Retail Payments & Mobile Banking 5% Securities Market (ESMID) 1%

A2F OTHER

A2F OTHER 4%

B US M E s SIN AND ESSES

Monitoring, Evaluation, and Learning

IFC Development Goals for Financial Services The IFC Development Goals (IDG) are high-level targets for the incremental reach IFC aims to achieve through its investments and advisory services. IFC uses the goals, along with volume targets, to drive implementation of strategy and to influence operational decision making. IFC’s contributions are counted as expected results at the time projects are committed (for investment services) or have signed agreements (for advisory services). In addition, IFC’s regular monitoring and evaluation system tracks the results during project implementation.

SMEs AND BUSINESSES SME Banking 15% Sustainable Energy Finance 11% Risk Management 8% GEM Access to Finance 3% Agribusiness Finance 2% Leasing 2% E&S Risk Management 0.36% Trade Finance 0.36%

The Financial Services goal (IDG 3) measures the expected increase in access to financial services for individuals and microenterprises (IDG 3a) and SME clients (IDG 3b) contributed by IFC’s Financial Markets (investment) and Access to Finance (advisory) projects. It also attempts to measure the increase in access to financial services for women-owned businesses or women. The increase is measured by numbers of outstanding loans, deposit accounts, insurance policies/clients insured, electronic payments, and transactional accounts. The incremental reach of IFC clients is the additional reach expected in the five years after the commitment to achieve a total reach (target) from the current reach (baseline). In FY12, Access to Finance and IFC Financial Markets continued to expand the joint financial goals to include noncredit services such as savings, insurance and payments, successfully completed the IDG pilot phase, and significantly contributed to IFC exceeding its targets for the year, especially in South Asia and East Asia and the Pacific regions. In FY12 IDG targets were to reach 15.85 million people and 1.16 million SMEs. FY12 actual IDG contributions exceeded these targets, reaching 32.84 million people and 1.54 million SMEs, of which 12.03 million people and 0.695 million SMEs came from Access to Finance Advisory work (including joint advisory and investment).

6 Credit bureaus have been established in Bangladesh, Ethiopia , India (2), Lao PDR, Tonga, and Vanuatu 7 Cumulative results as of December 31, 2011

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PORTFOLIO DATA AND DEVELOPMENT IMPACT

Monitoring, evaluation, and learning are integral to the success of Access to Finance Advisory because they provide a dynamic feedback loop that deepens results and development effectiveness. Access to Finance manages its portfolio of more than 240 active projects through IFC’s Advisory Services Operational Portal. The system supports the entire advisory services life-cycle, from concept development to project completion, and captures all project data including development results and financial and client information. For Access to Finance (as well as other advisory services projects), the overall development effectiveness rating is a synthesis of the project’s strategic relevance and effectiveness (measured by project outputs, outcomes, and impacts), and the efficiency of the services provided.

MICRO/RETAIL Microfinance 24% Housing Finance 8% Insurance 3%

IDG 3b. INCREASING ACCESS TO FINANCIAL SERVICES FOR INDIVIDUALS AND SME CLIENTS (AS and IS)

40

2 32.92

1.6

In Millions

30

In Millions

PORTFOLIO DATA AND DEVELOPMENT IMPACT

IDG 3a. INCREASING ACCESS TO FINANCIAL SERVICES FOR INDIVIDUALS AND MICROFINANCE CLIENTS (AS and IS)

20 15.85 Target 10 0

1.54

1.2 1.16 Target 0.8 0.4 0

FY12

IDG 3b FOR MICROFINANCE BY REGION (AS and IS)—FY12

FY12

IDG 3b FOR SME FINANCE BY REGION (AS and IS)—FY12 0.12

0.23 0.01 10.41

9.6 0.19 0.73

4.7

2.4 0.24

5.55

18

0.26

In Millions

Sub-Saharan Africa (CAF)

East Asia and the Pacific (CEA)

Europe and Central Asia (CEU)

Latin America and the Caribbean (CLA)

Middle East and North Africa (CME)

South Asia (CSA)

FY12 PROJECT HIGHLIGHTS India Microfinance Credit Reporting The credibility of India’s microfinance sector has been in question because of a negative perception that there has been mission drift from poverty alleviation to profiteering, and to uncontrolled growth that has resulted in over-indebtedness. Phase 2 of IFC’s Microfinance Credit Reporting project in India aims to strengthen credit reporting capabilities for microfinance institutions and, therefore, support sustainable lending practices. It is expected that 3.2 million households will benefit from increased access to finance as a result. Equitas Microfinance Project Access to Finance and Financial Markets are combining efforts to provide integrated support to Singhivi Investment and Finance Private Limited (earlier known as Equitas Microfinance India Private Limited), a microfinance institution. The project will help the company scale up its operations by expanding to underserved areas and training its staff about responsible finance. The project is estimated to reach 3 million households. China Rural Collateral Reform The China Financial Infrastructure program will support the development of a rural collateral registry system, by strengthening credit bureaus and movable financing system in China. The program is expected to benefit 675,000 SMEs. Global Index Insurance Facility (GIIF) The Global Index Insurance Facility is expanding access to insurance against weather risks and natural disasters to farmers, livestock herders and others in Africa, Asia, and the Caribbean and Pacific Islands. To date 100,000 farmers and herders have access to index insurance through GIIF-supported projects. In 2012 Kilimo Salama, a GIIF project in Kenya, won the Financial Times/IFC Sustainable Finance Award in the Technology category for using mobile phone technology to insure farmers against poor harvests caused by adverse weather. GIIF’s implementing partners are working closely with insurance companies, banks, MFIs, farm cooperatives and agribusinesses to increase access to insurance to farmers and herders, increasingly linked to agricultural credit. The EU is the principal donor to the GIIF Trust Fund.

PORTFOLIO DATA AND DEVELOPMENT IMPACT

Microfinance remains key to the livelihood of thousands in Aurangabad, India.

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East Asia and the Pacific Philippines: Banking on an Ally to Promote Sustainable Energy Finance When Alberto Pascual, Senior Vice President of the Bank of the Philippine Islands, attended the first meeting for a new sustainable energy finance program in 2008, he was one of the skeptics. “I actually dismissed the idea and said to myself that this product will never take off!” he recalls. “I did not foresee that it would become one of the priority products of the bank.” Pascual since became a staunch believer and led the bank’s sustainable energy finance program until his retirement in September 2012. The bank’s sustainable energy finance team has grown from three part-time staff in 2008, to six full-time staff and a dedicated sustainable energy finance unit in 2012. They have disbursed more than $180 million in loans to green projects ranging from building retrofits, to modernization of manufacturing equipment, to renewable energy technologies such as solar-assisted air conditioners. The new team leader, Mario B. Palou, has been a long-time supporter of the bank’s sustainable energy efforts. Sustainable energy finance, which lowers businesses’ energy costs, is vitally important in a country with the highest power costs in Asia. Bank of the Philippine Islands walks the walk—it replaced its headquarters’ 30-year-old chillers with more efficient ones. The retrofit was so effective that the local electric utility looked into the bank’s energy use because its monthly electricity bill dropped by about $23,000. Consequently, the bank plans to replace the airconditioning systems for three other buildings. The bank’s sustainable energy finance program was recognized in 2011 when it was selected as one of the 14 winners of the G-20 Finance Challenge awards. The bank plans to spend the $1.2 million grant on training for its staff and to increase its activities to attract more sustainable energy finance clients. Together with the IFC team, the bank is developing new products such as green mortgages and financing for energy service companies. Also, IFC invited the bank to speak on the business case of sustainable energy finance before representatives of more than 60 banks in Jakarta in May 2012.

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Bank of the Philippine Islands’ success paved the way for other local banks. IFC’s Sustainable Energy Finance Advisory in the Philippines is now engaged with three other banks, Banco de Oro, Chinabank, and a mobile-based microfinance bank, BPI-Globe BanKO.

Vietnam: Secured Transactions Reform Frees Up Financing for Small and Medium Enterprises A 2006 IFC evaluation of the financial sector in Vietnam found that only 20 to 40 percent of households and private enterprises had access to credit. The study, conducted by IFC Advisory Services in the Mekong Region and the Foreign Investment Advisory Services, revealed that a lack of reliable credit information was cited as a particularly critical constraint for smaller firms and individuals. Furthermore, banks generally did not accept movable assets, such as inventory or receivables, as security for a loan—a restriction that mostly affected micro, small, and medium enterprises. For most SMEs, the banking sector was the main, if not the only, access to financing. Equity financing was not a viable source of long-term funding because the minimum company size to be listed was markedly larger than that of the vast majority of private enterprises. Real estate was the preferred collateral by Vietnam’s banks, followed by machinery and equipment. Negotiable instruments such as stocks, options, and derivative products also were widely accepted by banks because of their liquidity, plus motor vehicles and inventory. However, the assets of most businesses, especially SMEs, are usually movable assets. Therefore, an adequate secured lending framework, supported by an effective credit information system, was a priority for private and financial sector development in Vietnam. To meet this need, IFC began in 2006 to work with the National Registration Agency for Secured Transactions, an institution under Vietnam’s Ministry of Justice, to develop a legal framework for secured transactions. A new decree on secured transactions took effect in 2007. IFC has continued working with the agency to develop a supporting regulatory environment that would be the basis for a modern Web-based registration system for secured transactions. IFC helped draft the new regulations on secured transactions registration. In addition, IFC supported the design and development of the online regis-

tration system that has become the key tool for lenders to conduct credit appraisals and reduce their operational costs and credit risks. The reform has unlocked billions of dollars of movable assets that the SMEs can put to productive use to secure the financing they need to upgrade and expand. “Since operational, the online registry has facilitated our access to credit from banks and supported business expansion,” says Tran Thanh Tuyen, chief financial officer of Thuan Phat Import-Export Investment. “This reform will indirectly promote business growth, particularly for the private sector, making it easier for us to access credit.”

Europe and Central Asia Albania: Leading the Way in Residential Energy Efficiency Albania’s goal of becoming a full-fledged market economy continues to be hampered by energy insecurity borne out of consistent problems with supply. The frequent power shortages of recent years have had a negative effect on private-sector productivity and foreign investments. The solution to Albania’s energy insecurity is two-fold: i) increase the amount of energy supplied to the market, and ii) increase the efficiency of energy use in the market. The potential for savings seemed substantial. It is estimated that if the buildings constructed before 1990 in Tirana—about 22 percent of the city’s total housing stock—were properly thermo-insulated, the annual energy savings would amount to 280 GWh a year. The savings on the national level would be even greater as according to the same study, the housing sector in 2005 consumed 54

percent of all available electricity. The Albanian financial sector was aware of this issue but did not have appropriate energy-efficiency products to serve the nascent demand. Also, access to financial services remained low compared to other middle-income countries, with only a third of households having bank accounts. In response to these challenges, IFC initiated the Residential Energy Efficiency Project in Albania in 2010, partnering with financial institutions in an energy efficiency micro-loan project with two goals: increase the population’s access to financial services and reduce households’ energy consumption. The project has three core components: i) raising public awareness of energy efficiency; ii) offering advisory services to partner financial institutions; and iii) helping with the country’s regulatory framework to encourage energy efficiency. In the last two years of operations, the project has recorded significant achievements. It developed an energy efficiency website, in English and Albanian and hosted by the Albanian Association of Banks, to increase public awareness of the technical issues and economic benefits of energy efficiency loans. The Societte Generale Albania committed to extend more than 600 energy efficiency loans totaling $2.4 million in the next two years. This is expected to result in up to 2.7 million kWh of energy savings. A fourth partner bank was added to the project in June 2012. Also, IFC’s project team helped with the official delivery of the proposed energy efficiency legislative package to the National Agency for Natural Resources, which has oversight over energy in Albania. The new regulations, once adopted, will establish the basic principles and procedures necessary to promote the efficient use of energy in Albania and also will regulate the relationship between the state authorities and private sector.

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CASE STUDIES—HIGHLIGHTS

IFC Advisory Services and Societe Generale sign an agreement for developing and offering residential energy efficiency loan products in Albania.

CASE STUDIES—HIGHLIGHTS

Armenia: Unlocking the Renewable Energy Potential Energy security remains a critical challenge for Armenia, which has a population of about 3.2 million and limited local sources of energy. IFC has played a leading role in helping Armenia establish a sustainable market for energy efficiency and renewable energy investments. IFC’s Armenia Sustainable Energy Finance Project, launched in 2010, has four main objectives: i) support the development of renewable energy financing through local financial institutions; ii) help financial institutions develop and market their energy efficiency lending; iii) teach renewable energy project developers and local design companies about modern design solutions and new technologies; and iv) build public awareness and market demand for sustainable energy finance. In January 2010, IFC provided a $15 million loan and advice to Ameriabank CJSC, helping to finance smallscale renewable energy projects in Armenia. With IFC’s support, the bank provides long-term financing at affordable rates to customers building small hydropower plants. IFC’s engagement supported the construction of 12 small hydro-power plants with an aggregate installed capacity of 40.1MW and annual generation of 124.91 GWh. Furthermore, projects financed by Ameriabank are expected to reduce CO2 emissions by around 49,964 tonnes of CO2 equivalent a year. IFC also works with Armenia’s government on legislation to further promote renewable energy development. We analyzed a feed-in tariff for renewable energy, compared the local legislation with international best practice, and proposed regulatory changes related to the baseline and tariff calculation approach. At the request of the Ministry of Energy and Natural Resources, we developed a feasibility study template for small hydro-power plants, including

technical requirements for future plants that are supposed to use hydropower resources more efficiently. As a result, policy makers proposed adopting our template and technical requirements as part of the country’s energy law. Since a growing number of small hydro-power plants are unregulated, we signed a cooperation agreement with the energy ministry in May 2011 to develop new reliability indicators for the country’s power system based on best international practices. We presented the proposed indicators to the ministry a year later and they have been preliminary approved by policy makers and will be introduced as new regulations.

Bosnia and Herzegovina: Pioneering Debt Advice Center Helps Over-indebted Micro Entrepreneurs IFC has undertaken financial literacy efforts globally for the last few years, but began providing debt counseling to individuals for the first time in Bosnia and Herzegovina in 2010. The global financial crisis, coupled with excessive liquidity in the local microfinance market, resulted in a high level of loans in arrears in that country starting in 2009. IFC opened a Debt Advice Center in the Tuzla region of northeastern Bosnia and Herzegovina in September 2010 with a team of seven professionals who provided both general and specialized individual financial counseling to micro entrepreneurs struggling with their personal finances. Debt Advice Center staff also mediated disputes between debtors and their lenders and provided information on products and services offered in the financial sector, consumer rights and obligations, and tools to manage personal finances. In 2012, the center expanded its operations to the capital city of Sarajevo. Debt counseling, while not novel in most developed economies, was a very new service in Bosnia and Herzegovina and the region as a whole. The Debt Advice Center, which is registered with Bosnia and Herzegovina’s Ministry of Justice, has achieved significant results. Since it opened, the center has: ■ Counseled 955 individuals and provided financial training to 2,528 adults and youth; ■ Performed an over-indebtedness study in five major cities; ■ Persuaded eight financial institutions to form a debt counseling steering group; ■ Developed a client market segmentation matrix, core concepts for debt resolution, debt prioritization, and a common financial statement that better analyzes disposable income; and ■ Joined the European Consumer Debt Network, a group of similar providers in the European Union.

Reconstruction of Araks River water intake structure in Armenia will be crucial to meet the country’s energy needs.

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Georgia: Crisis Response Creates the Foundation for Risk Management and Small and Medium Enterprise Banking In the wake of the global financial crisis and a concurrent war with the Russian Federation, half a billion U.S. dollars were withdrawn from Georgia’s relatively small banking sector in just a few days. Only 30 percent of this amount quickly returned, creating a severe liquidity crisis. The result was more than $137 million in bad domestic loans representing around 15 percent of the banks’ total portfolios. International financial institutions quickly responded with funding to recapitalize several systemic banks and avoid a total collapse, including a $182 million contribution from IFC. Since Georgia lacked banking professionals with experience in managing crisis operations of this scale, IFC also reacted on the advisory side and developed a Financial Markets Crisis Response program. This was aimed at helping regulatory authorities and commercial banks build and strengthen their capabilities to manage distressed assets and ongoing risks, thereby giving the financial sector a foundation to return to growth. Constanta Bank was one of the first Georgian banks to team up with IFC, approaching the Financial Markets Crisis Response program for help in strengthening key risk fundamentals. During that project, in April 2011, Constanta was acquired by one of the largest banks in Georgia, IFC partner TBC Bank. It was agreed that Constanta would continue to target micro entrepreneurs and also upscale to SMEs.

Kyrgyzstan: Creating a Commercially Oriented Credit Bureau The financial sector in the Kyrgyz Republic recognizes the value of infrastructure that allows for sharing of credit information and has actively engaged in developing these services. Three local banks in 2003 created a private credit bureau, Credit Information Bureau Ishenim, which ranks highly against its regional peers in catalyzing the information-sharing industry. As of 2011, Ishenim was comprised of 48 financial and credit organizations that included all but three of the country’s banks and had accumulated more than 600,000 credit histories. However, Ishenim suffers from credit information that is not always complete, authentic, or timely. It must move from a not-for-profit to a commercially oriented organization to operate in a sustainable manner. IFC conducted a comprehensive diagnosis of Ishenim’s operations and wrote a stocktaking report that assesses Ishenim’s operations, interconnections with clients, and information technology. The report provides recommendations on the most appropriate business model to guide the development of credit information sharing in the Kyrgyz Republic, as well as advice on alternative business models for Ishenim’s development. Ishenim accepted the report and is considering which new model would be most appropriate. This work will help it convert into a form that is financially and technically sustainable, which will be extremely beneficial in reducing financial market risks and developing responsible lending practices in the country.

On a broader scale, the Georgian banking sector has returned to growth and better risk management practices are in place to mitigate future problems. Through a rapid deployment of resources, IFC was able to complement other efforts to help lessen the impact of the banking crisis and shorten the recovery period. Access to finance creates opportunities for people in rural parts of Kyrgyz Republic.

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CASE STUDIES—HIGHLIGHTS

Constanta’s board approved a plan to enter the SME segment with significant increase in portfolio over a threeyear period. To accomplish this growth strategy, the bank again approached IFC. IFC’s SME Banking Advisory team reviewed the bank’s operations in 2011 and began to help the bank develop appropriate products and services for SMEs. Constanta’s successful engagement with IFC advisory put the bank on the radar screen of IFC investment, which is currently in discussions on a proposal to provide $7 million in long-term financing to Constanta’s clients. The financing is important because Georgia has no commercial sources of funding for a bank dedicated to micro, small, and medium enterprises.

CASE STUDIES—HIGHLIGHTS

Tajikistan: Deposit Services Manage Risks in Microfinance Lending When IFC began advising Arvand, a microfinance institution in Tajikistan, in 2008, the company was making loans in the local currency and had only 80 deposit accounts even though it had a deposit license. The deposit base of $800 was negligible in comparison to Arvand’s funding base of $11 million in assets and the company was fully dependent on external borrowing from several investors. As a result, Arvand was extremely exposed to foreign exchange risks, and desperate to strengthen its risk management and improve its funding base. In response to these challenges, IFC’s Central Asia Microfinance Transformation Support Project helped Arvand strengthen its financial management by introducing the concepts of transfer pricing and cost/profit center accounting, launching foreign currency operations, and establishing a formalized system of risk management. Following this advice, Arvand obtained a foreign exchange license in 2010 and a money transfer license in 2011. Both licenses were instrumental in allowing Arvand to lend in hard currency, increase its number of deposits, and open correspondent accounts in a few Russia-based banks. Arvand started providing half of its loans in local currency and half in hard currency, thus mitigating its foreign exchange risk. Most remarkably, with IFC support, Arvand developed confidence and made progress in managing its funding base. When it experienced a funding deficit in July 2011, it promptly mobilized dollar-denominated deposits from the public that allowed it to bridge the short-term liquidity gap. Arvand doesn’t usually attract deposits in U.S. dollars since it is an expensive source of funding.

A small business owner in Tajikistan keeps her financial accounts intact.

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“Now we feel confident how to manage risks in liquidity, foreign exchange, and interest rates,” Shoira Sydykova, general director of Arvand, says. Since IFC’s assistance began in 2008, Arvand has disbursed almost 19,000 loans totaling more than $17 million and attracted more than 1,000 deposits totaling more than $350,000. Through its 32 offices and four branches in the south of the country, Arvand is ready to attract more than 50,000 customers as it continues its transformation into a deposit-taking institution.

Ukraine: Developing a Viable Agri-insurance System When Ukraine became independent in 1991, crop insurance was either non-existent or under-developed, even though agriculture constitutes about 15 percent of the country’s GDP. In contrast, in major agricultural producers the United States and Canada, more than 70 percent of producers buy insurance and banks require it for loans. The inability of Ukrainian banks and producers to effectively manage weather and production risks made it difficult for producers to get financing and grow their market. Because of the country’s huge untapped agriculture potential, IFC began in 2007 to build a modern agri-insurance system in Ukraine. IFC’s Ukraine Agri-Insurance Development project directly involved key stakeholders: the parliament and regulatory agency; the ministries of agriculture, finance, and economic development; private insurance companies; and farmer organizations. The new system was confirmed in legislation adopted in 2012 that sets the ground rules for a public-private partnership to support agricultural producers and increase their access to finance. IFC’s project launched into the Ukrainian market nine standard insurance products covering the main strategic crops.

Wheat crop in India. Agricultural insurance is essential for sustainable farming.

The products were developed with the leading insurance companies and in consultation with international reinsurance companies. Under the new law, Ukrainian insurance companies must sell the standard products if they want to work in government-supported programs. Sales of the products have grown steadily: currently farmers are insuring 55 thousand hectares with a sum insured of more than $36 million.

Latin America and the Caribbean Honduras: Focus on Small Businesses Boosts a Bank’s Loan Portfolio

Understanding and trusting insurance are essential components of the system. IFC’s project conducted public information campaigns for agri-producers before the planting seasons. In partnership with the extension services and local agricultural offices, the project systematically trained thousands of farmers producing crops on one-third of the arable land in Ukraine.

Small and medium enterprises are vital to the economy in Honduras, contributing 25 percent of the GDP and responsible for almost half of all jobs. However, SMEs historically have had difficulty accessing the formal financial services they need to grow and generate additional jobs in Honduras, where more than half the population lives in poverty.

The project’s sustainability is directly related to the data that is necessary to price products and conduct regulatory supervision. The project established and maintains a common data depository for the development of new insurance products, actuarially sound premium ratings, sales, and indemnity payments.

IFC Advisory Services has provided support since 2010 to Banco Atlantida, Honduras’ oldest and largest banking group, to develop its SME banking services. With IFC assistance, Banco Atlantida established a separate unit for SME products, increased the specialization of its staff in SMEs, standardized its process of analyzing loan applications, and sped up loan approvals.

The project also lobbied for the creation of a pool of insurance companies to join resources to provide quality insurance services to farmers, improve their access to finance, and maintain the data depository. The new legislation mandates the establishment of the insurance pool, which came into existence on July 1, 2012. To increase access to finance for producers, the project developed insurance products that met the requirements of banks and input suppliers. Raiffeisen Bank Aval was the first Ukrainian bank that officially introduced agri-insurance as collateral and approved all the project’s standard products. All other banks lending to farmers in Ukraine have requested and received training and support for their operations from the project.

As a result, Banco Atlantida has exceeded most of its expected targets for SME expansion. The number of loans disbursed in the second quarter of 2012 was nearly five times the target, with similar results for the amount of loans disbursed. The value of loans outstanding has grown from $49.6 million in June 2011 to $62.6 million in December 2011, while the outstanding loans with at least one installment of principal past due for more than 90 days has dropped from 9 percent to 6 percent over the same period. Furthermore, IFC has provided integrated investment and advisory services to boost Banco Atlantida’s work in sustainable energy finance. On the investment side, IFC signed a $50 million sustainable energy finance loan in 2012. Access to Finance recently signed an advisory agreement to help the bank rapidly expand its financial offerings and expertise related to sustainable energy finance, with a particular focus on smaller renewable energy projects.

“There used to be no restaurant here, no hotel here,” Martinez says. “I started these establishments with the help of Banco Atlantida. Being with Atlantida is like being with family.” Agriculture and farming remain key to Ukraine’s economy.

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CASE STUDIES—HIGHLIGHTS

The impact of IFC’s work can be seen in Banco Atlantida clients like Edit Martinez. She opened a small grocery store and coffee production business then diversified with the opening of a tourism center and hotel. Thanks to the bank’s financial services, Martinez made significant improvements to the restaurant and hotel and acquired new coffee plantations.

CASE STUDIES—HIGHLIGHTS

“I have been with the Bank since 2007, and I’m very grateful to Edyficar for giving me a loan, not just to expand my pig-rearing business, but also to buy the apartment where I live with my children,” Bartolo Rodriguez says. “I like Edyficar for the speed with which they respond, and the ease of their processes.”

Middle East and North Africa Oman: A Credit Line Helps Spawn a Chain of Cafés Loan officer at Mibanco, an IFC client microfinance institution in Peru.

Peru: A Microfinance Institution Focuses on SmallScale Savings With IFC’s help, one of Peru’s largest microfinance institutions has transformed itself into a financial institution capable of accepting deposits, and focused on mobilizing small-scale savings. Edyficar serves an area with a population of 350,000 and high poverty rates. Most of the people are micro-entrepreneurs and more than 50 percent of these are women. Edyficar’s average loan size is $1,400, the lowest among Peru’s five largest microfinance institutions. IFC’s investment and advisory teams both have helped Edyficar. The relationship began in 2004 when IFC gave Edyficar a senior loan of $3 million and a subordinated convertible loan of $1 million. The subordinated loan was converted to equity in 2007, the same year that IFC approved a partial credit guarantee of $14 million. In 2005, Advisory Services stepped in to help Edyficar become a regulated financial institution capable of accepting deposits.

As countries repair the damage to their economies from the recent financial crisis, they are focused on developing small and medium enterprises. Worldwide, these enterprises account for about 90 percent of businesses and more than 50 percent of jobs. However, banks are lending smaller amounts than before the crisis, and small and medium enterprises still have limited access to financing. More than 17 million of those formal enterprises in emerging markets have unmet credit needs, with the gap estimated at between $900 billion and $1.1 trillion. IFC uses both investments and advice to encourage lending by banks and other financial intermediaries to small and medium enterprises. BankMuscat in Oman, which received both financing and advice from IFC, gave a $7,600 credit line in 2003 to a local businessman who wanted to open an international-style coffee shop in the capital city of Muscat. Talib Mohammed Shaaban Al Farsi had operated a successful pest control business in Oman for more than a decade but wanted to do something different. The Mood Café was a hit, and by 2010, Al Farsi had received additional credit lines and loans from BankMuscat, had opened three more outlets, and was employing 14 people. His company was worth more than $500,000 and he planned to expand further.

In 2009, Edyficar obtained its license to operate as a finance company and IFC sold its equity investment. The same year, Edyficar was acquired by Peru’s largest commercial bank, Banco de Credito de Peru. Edyficar maintains its separate brand identity and continues to focus on serving economically active low-income people. IFC then embarked on a new project to boost Edyficar’s efforts to mobilize small-scale savings. Its new parent bank has an extensive network of more than 4,000 correspondent agents throughout Peru, therefore Edyficar is wellpositioned to offer small-scale savings products that are able to reach remote rural areas. IFC’s support has helped grow the value of Edyficar’s outstanding portfolio to $500 million today from $42 million in 2004, and improved access to loans in regions throughout Peru. Edyficar client Eva Bartolo Rodriguez from Hauchipa says Edyficar has helped her in multiple ways.

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International-style coffee shop in Muscat was established with the help of a credit line from BankMuscat.

“The Mood Café was a small dream that I started,” Al Farsi says. “We are looking forward to a new plan as soon as possible.” To encourage BankMuscat to lend to smaller businesses in Oman, which has high unemployment, IFC had given the bank a $100 million loan. IFC also did market research to assess the potential scope for small business banking in Oman and helped the bank develop new products targeted at smaller businesses. Oman has more than 92,000 micro, small, and medium enterprises in the formal and informal sectors and it is estimated that these smaller businesses have a financing gap of $81 million. Worldwide, IFC investee banks had more than 3.2 million loans outstanding to SMEs, totaling $181.2 billion, as of December 2011. IFC had committed $10 billion to financial intermediaries for them to loan to SMEs as of June 2012. Furthermore, IFC gave advice on small-business banking to 42 clients in 33 countries in 2012.

Pakistan: Change at HBL Pakistan Crucial for Small Business Banking Success The Board and the CEO of HBL Pakistan, the country’s largest private bank, saw great growth potential in the SME sector and planned to diversify its lending portfolio there. However, the bank’s management was unsure if their existing business model could support a profitable and sustainable SME-targeted program. The bank had close to 13,000 employees and a legacy of state ownership from 1974 to 2005.

IFC’s team developed a strong rationale for the change, which was launched in June 2011, by telling a story of the unmet potential in the SME sector and the possibility of winning a big prize. The team developed the story by datamining of the bank’s existing 250,000 SME customers. IFC also briefed each of the stakeholders in the bank about the story to gain their support before big group meetings. The team then drafted messages about the project for the CEO and senior management to issue. Finally, team members met with branch and regional managers to open a dialogue with front-end staff.

Reinforcing systems: IFC’s project team emphasized to HBL management the importance of setting the right targets and incentives to encourage bank staff to increase the number of SME customers. One critical change suggested and implemented was to assign targets for the number of “New to Bank” SME depositors in addition to the deposit volume. To match the new targets, the bank introduced appropriate key performance indicators. The project team also lobbied for the bank to create a definition of an SME and to tag SME customers in the core banking system. IFC’s most important recommendation, also implemented, was for HBL to form a separate SME banking department in order to take full ownership of the business. Skills for change: The IFC team also suggested that the bank improve its staff ’s sales and marketing skills. But the credit officers, branch managers, and sales officers were not used to proactively searching for SME customers. After a skillsgap assessment, IFC designed new sales-management training and helped the bank train 125 staff members. The training turned out to be a big success, with feedback that was more than 85 percent satisfactory. Consistent role models: IFC’s team converted one of the senior members of HBL’s team into a champion of the new SME goal. That person told a meeting of more than 300 bank staff that HBL needed to start thinking in terms of the full “SME banking” model rather than the traditional “SME lending” approach.

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CASE STUDIES—HIGHLIGHTS

IFC’s Access to Finance Advisory Services team in the Middle East and North Africa region, confronted with the task of helping transform a large static organization, decided on an underlying effort to effect change in the bank’s rank and file. This approach had four assumptions: i) employees would alter their mind-sets only if they saw the point of the change and agreed with it; ii) the surrounding structures (reward and recognition systems, for example) must be in tune with the new behavior; iii) employees must have the skills needed; and iv) they must see people they respected modeling the new behavior.

A bicycle store owner in Lahore, Pakistan, where HBL has extended finance to small businesses.

CASE STUDIES—HIGHLIGHTS

South Asia India: Enabling the Last Mile of Banking in India Technology and operations provider FINO has pioneered the model of branchless banking across India. FINO, which acts as a conduit between financial services providers and their customers, has begun to play a vital role in bringing financial inclusion to the financially underserved population in India in a short span of time. The Mumbaibased company allows financial institutions to source and service low-value transaction customers and deliver financial services including savings, credit, remittances, and insurance to customers’ doorsteps. FINO is the world’s largest banking agent manager, according to a 2010 study by Consultative Group to Assist the Poorest (CGAP). The company’s work has been recognized by awards from the Financial Times and Asia Insurance Review, among others, and acknowledged by the World Economic Forum. FINO serves more than 49 million customers through 30,000 transaction points in 424 districts across 26 states in India. It has grown from about 1 million clients in March 2008, thanks in part to an integrated and coordinated package of investment and advisory support from IFC.

The second phase of advisory work focuses on linking other financial products—such as deposits, insurance and remittances—to the existing payment platform, capacity building of the Business Correspondent network, and a financial awareness campaign for FINO clients. Underway since June 2011, this phase has a budget of $1.8 million which includes an $800,000 performance-based grant from IFC.

India: Helping Women Micro Entrepreneurs Flourish in Low-income States Utkarsh Micro Finance Private Limited started in 2009 with the goal of serving unbanked women who had skills but needed financing for their micro enterprises. It began by offering micro loans through four branches—two urban and two rural—in the city of Varanasi and expanded to eighteen other districts in two of India’s poorest states, Uttar Pradesh and Bihar. A coordinated package of investment and advisory support from IFC helped Utkarsh expand. Advisory Services assisted with improved diversification of products, development of sound internal systems and processes, and the introduction of a social performance management system. On the investment side, IFC invested $1.7 million in Utkarsh and holds 16.69 percent in equity.

IFC provided a $6.8 million equity investment and holds a 13 percent stake, with a presence on the board. The first phase of its advisory services, which began in 2007, consisted of developing a business correspondent model that works with banks and uses a biometric smart card to enable government payments and delivery of financial services. The lesson from Phase 1 was that the service provider that uses technology platforms has to offer multiple products to become profitable.

The result has been impressive growth. Utkarsh has expanded from the original four branches to 77 branches that served 130,127 women clients with an outstanding loan portfolio of $17.5 million as of June 2012.

Thomas Davenport, IFC Director for South Asia visited FINO’s agent location in New Delhi.

Fortnightly client meeting with Utkarsh’s staff is in progress in Varanasi, India.

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Utkarsh’s goal for the coming year is to grow its client base to 265,000 clients by penetrating deeper in Bihar and launching operations in Uttarakhand and Madhya Pradesh states.

Sub-Saharan Africa Ghana: Collateral Reforms Expand Financing to Small Enterprises In 2007, Ghana’s credit market was geared towards large, well-known enterprises that lenders considered low-risk. Bank lending was largely based on real estate collateral, which excluded many SMEs since they typically do not own real estate. IFC set out to get around this barrier, common in SubSaharan Africa, with an initiative to develop new secured transactions systems. Ghana was the first country in the region where IFC aimed to expand access to business credit and thereby promote private sector growth. With IFC’s support, in 2008 Ghana embarked upon a reform of its movable collateral framework to encourage financing for micro, small, and medium enterprises against valuable movable assets such as inventory, accounts receivable, and machinery. After creating a new law, the Bank of Ghana established a collateral registry. It was set up as a temporary solution, but has recently been upgraded to a Web-based electronic registry that became operational in June 2012. This transition period has produced strong results, including: ■ More financing for SMEs. More than 36,000 loans have been registered in the collateral registry since its creation in March 2010. These loans accounted for almost $2 billion in financing secured with movable property as of December 2011. More than 2,000 SMEs and about 10,000 micro businesses and individual entrepreneurs have received loans, a large number of them women. ■ Greater use of movable assets as collateral. These types of collateral include inventory and accounts receivable (in 29.75 percent of the loans); investment instruments

such as shares, cash, bonds, and deposit accounts (17.99 percent); machinery, equipment, and other assets (15.54 percent); motor vehicles (14.02 percent); and household assets (12.32 percent). ■ Increased participation by financial institutions in the collateral registry. Of 52 financial institutions, 37 have registered and granted loans secured with movable property. The 37 include 16 banks, 16 non-bank financial institutions, three foreign-based banks, a non-financial firm, and a rural bank. However, a considerable number of rural and community banks still have not used the new infrastructure. A gold mining initiative illustrates how the new secured transactions system has helped SMEs in Ghana. CAL Bank developed a supply chain of Ghanaian companies to provide goods and services for big multinational mining companies. More than 100 Ghanaian SMEs have obtained more than $10 million in financing from CAL Bank to provide services such as catering and repairs and goods such as lighting equipment. The local companies are using their movable assets—such as the receivables from the mining companies and vehicles—as collateral for the loans to operate and expand their businesses. Their growth has generated hundreds of jobs and there hasn’t been a single nonperforming loan in the program’s 30 months of operation.

IFC and The MasterCard Foundation: A Partnership to Improve Financial Services for Millions Only about a quarter of adults in Sub-Saharan Africa report having a bank account at a formal financial institution, compared to 50 percent of adults worldwide. So, IFC and The MasterCard Foundation launched a $37.4 million partnership to increase access to financial services for an estimated 5.3 million people in the region.

There is tremendous opportunity for mobile banking, particularly in rural areas. Mobile phones result in lower transactions costs and reduce the cost of information. Mobile penetration rates in Sub-Saharan Africa have grown steadily over the last decade and are projected to be at 70 percent of the total population this year. Cost-effective delivery channels, such as mobile phones, can increase access to finance for millions in Africa

The partnership with The MasterCard Foundation will enable IFC to scale microfinance and mobile financial

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CASE STUDIES—HIGHLIGHTS

The partners plan to help microfinance banks expand more rapidly and develop new products and cost-effective delivery channels, while expanding coverage in new, often hard-to-reach locations. The project also aims to help providers deliver low-cost mobile financial services to lowincome customers and support the expansion of eight to ten microfinance institutions, allowing them to serve additional clients.

CASE STUDIES—HIGHLIGHTS

initiatives and share knowledge by bringing best practices from around the world to Sub-Saharan Africa, and to disseminate lessons learned in Sub-Saharan Africa globally. The MasterCard Foundation has become a major player in the field of microfinance, particularly in Sub-Saharan Africa, having forged partnerships worth more than $230 million since its inception in 2006. These partnerships have helped provide financial services to more than a million people and provided another two million with access to financial education.

Access Bank made the loan to George, beginning a relationship that worked well for everyone. Health Plus now has six outlets employing 77 workers, roughly half of them women. It has received additional support from GroFin, a $256 million IFC-backed investment vehicle in Johannesburg for rising African SMEs that need between $50,000 and $1 million to reach the next level. “We need to be in every city in Nigeria,” George says.

IFC’s microfinance and mobile financial services programs in Sub-Saharan Africa have received support from the African Development Bank, Austrian Development Bank and Swiss State Secretariat for Economic Affairs, and the governments of Austria, Denmark, Japan, Luxembourg, and the Netherlands.

Meanwhile, Access Bank has a well-performing portfolio of almost $40 million in loans to more than 550 womenowned SMEs in Nigeria—up from 60 SMEs at the time of the start of its program with IFC. IFC helped the bank build a new sales and marketing strategy targeted at women, set up women-focused teams in its three priority cities, and join the Global Banking Alliance for Women, an IFC-supported membership organization of financial institutions committed to the growth of women in business worldwide. For its efforts, Access Bank won the 2011 Financial Times/IFC Sustainable Bank of the Year-Africa and the Middle East award.

Nigeria: Access to Finance for Women Entrepreneurs Works Well for Everyone

Sub-Saharan Africa: Helping the Private Sector Issue Bonds Boosts Development

In 2006, Bukky George had just one small asset: a pharmacy in Lagos that she wanted to make the start of a top-quality national chain. Within a year, she had opened three new Health Plus pharmacies and needed additional financing. But she had insufficient cash flow and collateral, and most local banks would not lend to new womenowned firms.

Financing Sub-Saharan Africa’s development requires significant amounts of long-term investment. Local financial institutions are increasingly stepping up to meet this need, but other sources of financing are needed.

IFC’s microfinance program in Africa had partnered with more than 27 institutions across the investment and advisory businesses in 14 countries as of June 2012. IFCs microfinance partners in Africa reach 633,000 borrowers and 2.1 million depositors.

Then George met Access Bank, a fast-rising Nigerian lender that had recently received a $15 million IFC line of credit to increase its lending to women-owned businesses.

In Asia and Latin America, local bond markets have provided significant financing. Africa’s existing bond markets are popular with deep-pocketed local institutional investors but largely dominated by government paper. Heavy regulatory requirements often block potential private sector issuers from tapping them. A joint initiative is opening the doors to private sector bond issuance in Africa. Efficient Securities Markets Institutional Development (ESMID), an effort of the Swedish International Development Cooperation Agency, the World Bank, and IFC, provides advice to strengthen the regulatory framework, market infrastructure, market participants, and regional markets. Its focus is supporting landmark transactions, overcoming special challenges, and creating a demonstration effect for others to follow. So far, ESMID has facilitated regulatory approvals for bond issues of $118 million in East Africa.

Many women entrepreneurs have benefitted from increased access to finance in Nigeria, growing and expanding their businesses.

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In Tanzania, ESMID’s advice supported the first local currency bond issue by a microfinance institution. PRIDE Tanzania’s 2010 transaction raised an equivalent of $12.2 million. A 75 percent risk-sharing guarantee from the U.S. Agency for International Development allowed lead arranger Standard Chartered Bank to place the security with local investors.

After ESMID advisors helped clear some regulatory obstacles, Kenyan investment bank NIC Capital received approval for the country’s first equity-linked bond, allowing issuer Athi River Mining to raise the equivalent of $22 million in 2010 to build a $100 million cement plant in Tanzania. In addition, ESMID’s policy advice has helped reduce the approval time for bond issues from an average of 270 days in East Africa to 60 days in Tanzania and 45 days in Kenya. ESMID is also active in Nigeria and plans to expand into other parts of Africa. ESMID’s work to develop local bond markets complements IFC’s Treasury operations, which include local currency financing in multiple African countries as well as deeper partnerships with local regulators and markets. In December 2011, Ghana and the eight West African Economic and Monetary Union countries approved IFC’s plan to establish a series of local currency bond programs to strengthen local markets. These are expected to allow IFC to issue more than $1 billion equivalent in Ghanaian cedis and Swiss francs in the next 10 years.

Sub-Saharan Africa: Pioneering Microfinance Institutions Tackle Tough Markets and Turbulent Times

■ Tackling tough markets. One of IFC‘s earliest projects, ProCredit Bank Democratic Republic of Congo, was established in 2005. It achieved break-even in 2007 and serves more than 160,000 deposit accounts. Its deposit base represents an estimated 10 percent of the deposit volume and one-third of all deposit accounts in the country’s banking sector. ■ Managing in turbulent times. During a banking crisis in Nigeria in late 2009, IFC moved quickly to provide necessary liquidity to one of its pioneering microfinance banks, AB MF Bank. The bank disbursed the first local currency loan in Nigeria after the crisis. IFC’s microfinance portfolio in Sub-Saharan Africa included 18 pioneering clients in 10 countries at the end of FY12. Funding packages that link investment and advisory services in the 18 institutions have allowed 933,000 people to open savings accounts and provided small loans to 170,000 borrowers. In some markets, the clients hold a significant market share. Two clients in Madagascar, AccesBanque and MicroCred, both launched in 2007, hold 15 percent of all accounts in the Malagasy banking industry and continue to grow deposits by approximately 50 percent a year. Additionally, these two institutions account for almost 19 percent of banking sector employees, creating a skill base that infiltrates the larger market as competition increases.

When IFC decided to strategically engage in microfinance in Africa in 2006, it found few well-governed and commercially sustainable local institutions that both reached the poor and provided a full menu of services. Therefore, IFC set out to establish pioneering microfinance banks. IFC worked in partnership with like-minded development finance institutions and specialized international microfinance bank holding companies such as MicroCred and Advans of France, ProCredit and Access Holding of Germany, and ACCION and FINCA of the United States. New local microfinance banks, which operate according to global best practices, were created through these holding companies. Over time, local employees were trained to take over virtually all functions of the new banks.

CASE STUDIES—HIGHLIGHTS

This model was particularly effective in low-income and high-risk countries. Some highlights of the program to date are: ■ Operating in post-conflict countries. In Cote d’Ivoire, MicroCred and Advans opened two new institutions less than one year after a civil war following the disputed 2010 presidential elections. The two IFC clients are now opening up new avenues of finance for Ivorian entrepreneurs. AccessBank Liberia opened in 2009, one of IFCs first investments there after that country’s civil war. As of June 2012, AccessBank Liberia had more than 79,000 clients.

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Introduction Access to Finance Advisory provides diagnostics, training, best practices, and capacity building. The core of our work is generating and disseminating knowledge to clients, donors, and other partners. We focus on aggregating and applying our global expertise and therefore are able to provide our clients with contextually appropriate and holistic advice. Our global Knowledge Management team supports the development of publications, manuals, and toolkits to synthesize and broadly disseminate best practices and lessons learned. Access to Finance Advisory produced numerous knowledge products and resources in FY12. These products, in tandem with our other knowledge management efforts, help build the capacity of financial institutions to improve access to financial services for end beneficiaries—individuals, households, and micro, small, and medium enterprises. The business line’s flagship annual knowledge sharing event, FinNet, focuses on bridging the knowledge gap around access to finance and sharing lessons learned on creating more inclusive financial systems. FinNet convenes IFC and World Bank staff, clients, donors and partners to exchange ideas, learn from each other, as well as to identify and discuss emerging trends and issues to increase the availability and affordability of financial services around the world. As a network and annual meeting in particular, FinNet has contributed enormously to the growth of IFC’s work in advisory financial services, including the advancement of IFC’s thought leadership, establishment of well-functioning practice groups, and strengthening the connectivity of staff globally, as well as with our clients and partners.

Knowledge Products Benchmarking Best Practices in SME Banking The SME Banking Benchmarking online survey has so far allowed 42 banks in emerging markets to assess and automatically benchmark themselves against the banking practices of their peers in credit risk management, market segmentation, business model, product offerings, and information technology/management information systems. Participating banks received a tailored report with valuable and unique information on how they compare with best-practice banks and what key operational areas they can improve to efficiently and effectively serve SMEs.

Capturing our Impact: Closing the Gaps in Access to Finance Capturing our Impact: Closing the Gaps in Access to Finance is an e-book that describes the transformative effect of giving the poor and small businesses access to financial services that previously were out of reach. It includes the stories from around the world of 20 people whose lives have changed and small business owners who have profited. These are the stories of why access to financial services can make a sustainable difference in the lives of people around the world. www. ifc.org/accesstofinance/publications

Corporate and SME Workouts: A Manual of Best Practice

FinNet 2011 in Mumbai, India, was an invaluable opportunity to exchange knowledge and share best practices.

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The Corporate and SME Workouts: A Manual of Best Practice is a guide for staff at lending institutions who handle corporate and SME non-performing loans. This manual deals with both ad-hoc and systemic financial distress and delves into how borrower problems arise in the first place. It provides guidance to staff handling individual problem loans as well as to senior managers responsible for organizing portfolio-wide asset resolution.

The balance of the manual covers many topics relevant to staff dealing with and resolving problems in connection with individual clients or loan accounts as well as a series of practical tools. www.ifc.org/accesstofinance/publications

Credit Reporting at the Base of the Pyramid This report takes a fresh look at the state of credit reporting at the base of the pyramid, describing three main approaches: credit bureaus, credit registries, and systems specific to microfinance institutions for exchanging client information. The report also examines the lessons learned for effective credit reporting, identifies key success factors as well as common challenges, and presents a summary of recommendations for policy makers, micro lenders, donors, and others interested in encouraging credit reporting at the base of the pyramid. The data and analysis for this paper are drawn from IFC and CGAP market intelligence on credit reporting systems. www.ifc.org/accesstofinance/publications

Customer Management in SME Banking Guide Customer Management in SME Banking Guide aims to share and disseminate critical information for managing the SME client relationship, allowing banks that already serve the SME sector to move beyond lending to better capture the SME Banking opportunity. Customer management is a broad concept that essentially covers: i) understanding customer needs; ii) matching customer needs to the best offers in terms of price, product, service level, and delivery channel; and iii) effectively managing the critical moments during the customer life cycle. www.ifc.org/accesstofinance/publications

Financial Access 2011 Financial Access 2011 presents an overview of the landscape of financial inclusion data, with a focus on supply-side data. It is markedly different from the two previous reports, published by CGAP and the World Bank Group, which provided data on the state of financial inclusion. The report discusses the landscape of financial inclusion data, with a presentation of key demand- and supply-side data sources and a brief look at the findings from Financial Access 2010. It also provides a discussion of supply-side data, with information on country-level data, how globallevel data build on it, and recommends ways that gaps in the financial inclusion data can be addressed by different stakeholders. www.ifc.org/accesstofinance/publications

Financial Infrastructure Report Financial Infrastructure: Building Access through Transparent and Stable Financial Systems, a report from the Financial Infrastructure group, maps financial intermediation systems and the size of the financial systems market. It provides an expanded data index for measuring financial infrastructure and identifies reforms. Financial institutions process payments, check potential borrowers’ past experiences with credit, and evaluate the suitability of proposed loan collateral. Consumers pay bills, buy houses, remit earnings, and save for retirement. All of these formal financial transactions rely on a foundation of institutions, information, technologies, and rules and standards—the infrastructure of financial intermediation. The report makes recommendations on reforms that would make the system more efficient and reliable, thereby reducing costs and increasing access to financial services. http://www.worldbank.org/financialinfrastructure

Deposit Assessment in South Asia Global Leasing Toolkit IFC developed the Global Leasing Toolkit, which comprises the Base Toolkit and four Focused Toolkits, to complement the institution-building work of IFC Leasing teams around the world and to engage with the management of leasing entities and other stakeholders. This comprehensive toolkit aims to provide a practical guide to SME equipment leasing for banks, financial institutions, and leasing entities. The Base Toolkit covers leasing principles and best practices that are universally recognized. The four Focused Toolkits cover areas of stakeholders’ interest as well as areas expected to account for a major portion of the future growth of

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SHARING KNOWLEDGE

The South Asia Deposit Assessment study series, commissioned by IFC and conducted by MicroSave, aim to increase understanding of the demand and supply of savings products for the low-income client segment in Bangladesh, India, Nepal and Sri Lanka. A series of Deposit Assessment reports enables an analysis of the demand-supply gap in savings and provides broad recommendations on the design of products adapted to this client segment. It is hoped that the products developed as a result of this study will be adopted and piloted by banks, microfinance institutions, and insurance companies.

SHARING KNOWLEDGE

the leasing industry. The Global Leasing Toolkit follows the second edition of the policies and guidelines manual published last year. Both the guidelines and this toolkit disseminate IFC’s 36 years of experience in lease market development to stakeholders, aimed at boosting SMEs’ access to lease finance. The toolkit is also available as an interactive Web-enabled CD-ROM.

Global Mortgage Toolkit IFC’s Global Mortgage Toolkit helps financial institutions create high-quality mortgagelending programs or enhance existing operations. The toolkit covers preparation of a strategy and market approach for mortgage lending, loan origination and servicing, loan pricing, funding options, risk management, and residential construction finance. The Global Mortgage Toolkit guides managers and lending staff of financial institutions that are offering residential mortgages for the first time or that wish to enhance their operations.

Global Standards for Credit Reporting This report describes the nature of credit reporting elements that are crucial for understanding credit reporting and for ensuring that credit reporting systems are safe, efficient, and reliable. It intends to provide an internationally agreed framework in the form of international standards for credit reporting systems’ policy and oversight. The principles for credit reporting are deliberately expressed in a general way to ensure that they can be useful in all countries and that they will be durable. These principles are not intended for use as a blueprint for the design or operation of any specific system, but rather suggest the key characteristics that should be satisfied by different systems and the infrastructure used to support them to achieve a stated common purpose, namely expanded access and coverage, fair conditions, and safe and efficient service for borrowers and lenders. www.ifc.org/accesstofinance/publications

G-20 Stocktaking Report IFC supports the G-20 SME Finance agenda through its stocktaking report, Scaling Up SME Access to Financial Services in the Developing World, which was presented to the G-20 leaders in Seoul. As the technical lead for the G-20 SME Finance SubGroup under the Global Partnership for Financial Inclusion, IFC led the production of the report to provide G-20

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leaders with a summarized framework through which to understand the SME finance gap and its challenges. The report documents a broad spectrum of SME finance interventions, including: i) legal and regulatory framework; ii) financial information infrastructure; iii) public support schemes; and iv) private sector schemes. The authors also highlight key proposals to G-20 leaders that would achieve a significant and sustainable scale-up of SME access to financial services across the developing world. www.ifc. org/accesstofinance/publications

Housing Microfinance Toolkit IFC’s Housing Microfinance Toolkit: Guidelines for Product Development and Operations is targeted at financial institutions planning to launch a housing microfinance product. While this toolkit is primarily aimed at microfinance providers, it can also be used by other financial institutions, including nongovernmental organizations and commercial banks, which have introduced or intend to introduce housing microfinance products. The Housing Microfinance Toolkit describes recommended housing microfinance products and parameters, operational procedures, and a set of tools and techniques for market surveys. The toolkit is divided into two parts and is targeted at managers and lending staff. The first part offers guidance and tools to develop and implement a housing microfinance product, such as a home improvement loan product. The second part covers the loan process from loan application to delinquency management.

Leasing Guidelines for Emerging Economies IFC’s Global Leasing Program developed leasing guidelines to share its lessons and experiences from 32 years of leasing market development activities. The guidelines were originally produced in 2005 and have been updated to reflect changes in the environment and lessons learned since then. The guidelines identify the key policy issues on leasing development, while examining the approach of current and past projects. The guidelines were primarily written for the benefit of policymakers and are intended as a reference manual for other stakeholders, including lessors, lessees/ SMEs, investors, banks, international financial institutions, development partners, and legal and accounting firms. The guidelines will help leasing development practitioners identify local characteristics and assess their potential impact, allowing them to make informed development and implementation decisions.

Making Security Interests Public: Registration Mechanisms in 35 Jurisdictions This report focuses on the analysis of the registration mechanisms in 35 jurisdictions, highlighting the importance of a publicly accessible registry where information on interests in movable assets can be registered. The main goals of collateral registries are to provide public notice of interests in movable assets and to establish priority in the assets described in the notice for secured creditors. The report also addresses the different registration mechanisms for security interests in movable property and their effectiveness in achieving these goals. www.ifc.org/accesstofinance/publications

Micro, Small and Medium Enterprise Database and Analysis Micro, Small, and Medium Enterprise Country Indicators Database is the largest collection of data on micro, small, and medium enterprises, put together jointly by IFC’s Access to Finance and Sustainable Business advisory services, and World BankIFC Global Indicators and Analysis. The database offers both the latest global snapshot and 20 years of historical data on the number of small enterprises in 132 world economies. The MSME Country Indicators Database provides information on the number of small enterprises in a given country, the share of employment they provide, and the change in their number in the past 15 to 20 years. It also breaks down firm sizes within the sector, growth rate trends across regions, and the composition of the small enterprises from a sector standpoint. Descriptive statistical analysis is presented on the relationship between formal density of the small enterprises and key obstacles they face, such as access to finance and informality. http://www.ifc.org/smebanking

Mobile Money Study 2011

IFC’s Mobile Money Toolkit © is a combination of both the best publicly available information and original content and newly created materials. It includes documents available from CGAP, the U.S. Agency for International Development, the World Bank, and other organizations that are doing research in the realm of mobile money. Each part contains a number of documents or tools, some specifically designed for this toolkit, and others collected from the public domain. Many toolkit components are available and can be downloaded online at www.ifc.org/accesstofinance/publications.

Product Design Case Studies In line with IFC’s Learning Agenda on responsible financial inclusion, the Product Design Case Studies were established to bridge the gap between product design/innovation and financial inclusion, increase knowledge related to product design and development processes, and focus attention on the end beneficiaries of financial products. IFC has partnered with ideas42 to research and develop the Product Design Case Studies with a particular focus on behavioral economics. The case studies present useful products and product innovations that are scalable across a broad range of markets and offer broadly valuable insights into features of successful products, customer behavior and the product development process itself.

Responsible Debt Collection in Emerging Markets This report reviews existing global retail debt-collection practices in emerging markets and recommends tangible actions that lenders and collectors can take to promote responsible and ethical standards in the field. The conclusions of this study are based on field research conducted by IFC and Oliver Wyman, industry experts’ analysis and opinion, and a survey of institutions in 20 emerging markets. The report finds that while the collections landscape varies widely across emerging markets, there are remarkable similarities in challenges faced. Across the board, the study finds potential for positive interventions in regards to governance, processes, and monitoring. It also debunks the myth that there is a trade-off between collections controls and collections effectiveness. www. ifc.org/accesstofinance/publications

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SHARING KNOWLEDGE

IFC Mobile Money Study was developed to increase understanding of mobile money and help address key issues in scaling up further development of m-money ecosystems globally. It looks at the technology required and the business models used by mobile network operators, banks, and others in Brazil, Nigeria, Sri Lanka, and Thailand. It compares these countries with Kenya and Japan, which have successfully developed mobile money operations, and with the United States. The study also offers a framework for a quick market study of a country to determine whether or what type of mobile money services might be developed commercially.

Mobile Money Toolkit

SHARING KNOWLEDGE

Risk Assessment Framework

Secured Transactions Toolkit

IFC’s Risk Assessment Framework is a tool used to support capacity building work with financial institutions in emerging markets. Divided into four phases, the tool is applied to assess the stage of development of a financial institution’s risk management capabilities across the key risk areas. The tool is used to not only appraise a specific institution based on its existing capabilities, but also compare it against internationally accepted best practices and similar institutions across the globe. The Risk Assessment Framework produces a comprehensive report which outlines IFC’s observations, recommendations, and the various areas where IFC can be of assistance.

This toolkit provides technical advice and guidance to World Bank Group staff, donor institutions, government officials, and other practitioners on the implementation of secured-transactions law and institutional reforms in emerging markets. The content of the toolkit guides the reader through the various stages of the project cycle (identification, diagnostic, solution design, implementation, and monitoring and evaluation) involved in the introduction of securedtransactions reforms. The recommendations presented in the toolkit are based on IFC’s experience in secured transactions, the contributions of a number of experts in this field, existing literature, and reform experience in a number of emerging markets as well as existing best practices in jurisdictions with advanced secured-transactions systems. The toolkit addresses the most important elements of reform. www.ifc.org/accesstofinance/publications

Risk Management Balancing Act Report This report presents the findings from the 2010 IFC Risk Management and Nonperforming Loan Quick Survey and outlines global trends and benchmarks in risk management. It aims to help our client financial institutions better understand the current state of their risk management capabilities, compare their current risk management capabilities with peers in emerging and developed markets, and identify priority areas of improvement. www.ifc.org/accesstofinance/publications

Scaling up Access to Finance for Agricultural SMEs: Policy Review and Recommendations The development of SME Finance in the agricultural sector was identified as an important issue to bring forward food security and to reach the Millennium Development Goals. IFC conducted analytical work with the objective of identifying appropriate approaches to calculate or reduce the main risks and costs that inhibit access to financial services in the agricultural sector in developing countries. A stocktaking exercise was conducted on approximately 60 case studies and an outreach process was initiated, especially with African partner countries, supported by the Partnership “Making Finance Work for Africa”. This effort led to a report presenting several guidelines for policy and regulatory frameworks conducive to agricultural finance. www.gpfi.org

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SME Banking Knowledge Guide IFC’s Global SME Banking Program publishes its SME Banking Knowledge Guide, which outlines leading practices, market trends, opportunities and challenges, and success factors for profitable SME Banking operations. The guide draws widely from existing research and literature and from numerous primary interviews with SME banking experts and practitioners worldwide. It is primarily a technical publication intended for bank directors, managers, and staff in developing economies who are searching for the best way to approach untapped opportunity in the SME segment in their local markets. It is also a useful guide for policy makers and other financial sector stakeholders to better understand the essentials of SME finance. www.ifc.org/ accesstofinance/publications

SME Finance Forum The SME Finance Forum is a collaborative knowledge-sharing platform for data, research, and best practices for financing of small and medium enterprises. It promotes the dissemination of good practice guidance to agencies, donors, and regional networks to improve the effectiveness of the industry. The forum also seeks to facilitate global access to a network of peer institutions and increase collaboration among key stakeholders, including financial institutions, development agencies, policy makers, central banks, regulators, other relevant private sector entities, and think tanks.

The initiative is part of the Global Partnership for Financial Inclusion of the G-20—an inclusive platform for all G-20 member countries, interested non-G-20 members, and other relevant stakeholders to advance the financialinclusion agenda. The Forum is managed by IFC. www. smefinanceforum.org

SME Finance Policy Guide Refining the recommendations to the G-20 made in the 2010 stocktaking report, IFC developed a comprehensive SME Finance Policy Guide intended as a reference point for governments and regulators to underpin the development of Financial Inclusion Strategies and SME Finance Action Plans. The guide aims at covering all the focal areas of the sub-group (women-owned SMEs, SMEs in the agricultural sector, SMEs in LDCs); fed by a wide consultation process, it set out models and presented good practice for policy and legal reforms, financial infrastructure, and public interventions, thereby providing a roadmap for planning, assessing and implementing policy and legal measures to support SME access to finance and laying the groundwork for future country level engagement. www.gpfi.org

Strengthening Access to Finance for Women-Owned SMEs in Developing Countries In line with our corporate priorities on the need to devote special attention to the issue of women entrepreneurship, IFC produced a report focusing on the issues impeding access to finance as well as non-financial barriers for women entrepreneurs, highlighting key trends and challenges, and scrutinizing opportunities for increased access. The report identifies scalable approaches to increase access to finance for women entrepreneurs in developing countries and provides policy recommendations on empowering women entrepreneurs to pursue economic opportunities, invest additional capital, and hire more employees. www.gpfi.org

Toward Universal Access: Addressing the Global Challenge of Financial Inclusion Toward Universal Access highlights key trends, challenges, and opportunities for accelerating progress in financial inclusion and proposes major high-level policy recommendations for consideration by G-20 policy makers to benefit a wider range of developing countries, including non G-20 member countries. It takes a closer look at microfinance industry to analyze successes, innovations and lessons learned, which are critical for broader discussion on financial inclusion.

2012 Global Microscope Global Microscope on the Microfinance Business Environment is an annual study that offers in-depth analysis of the enabling environment for microfinance in 55 countries around the world. With updated indicators that reflect the changing environment for microfinance, the 2012 study examines the regulatory environment and non-regulatory operating conditions and practices in microfinance. The study has added new indicators that assess: the regulatory framework for deposit taking; client protection and dispute resolution mechanisms; policy and practices for doing financial transactions through agents; and the role of political shocks that affect the microfinance sector. http://www.ifc.org/microfinance

SHARING KNOWLEDGE

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Peer Stein | Director and Global Business Line Leader | IFC Advisory Services | Access to Finance [email protected]

FINANCIAL INFRASTRUCTURE Tony Lythgoe | Head | [email protected]

Credit Bureaus

GLOBAL PRODUCTS

Shalini Sankaranarayanan | [email protected]

Collateral Registries

MICRO/RETAIL

Jennifer Barsky | [email protected]

Gilles Galludec | Head | [email protected]

Securities Markets

Microfinance

Evans Makini Osano | [email protected]

Makanda Kioko | [email protected]

Retail Payment Institutions

Housing Finance

Margarete Biallas | [email protected]

Friedemann Roy | [email protected]

Responsible Finance

SPECIAL INITIATIVES

Maria Lourdes Camba Opem | [email protected]

SME Finance Forum

Insurance

Matthew Gamser | Head | [email protected]

Vijayasekar Kalavakonda | [email protected]

SMEs and BUSINESSES

STRATEGY, KNOWLEDGE and IMPACT

Panayotis Varangis | Head | [email protected]

Bikki Randhawa | Manager | [email protected]

SME Banking

Strategy

Anushe Khan | [email protected]

Daniel Crabtree | [email protected]

Agrifinance

Portfolio, Monitoring & Evaluation

Davorka Rzehak | [email protected]

Stephen Pirozzi | [email protected]

Trade Finance

Knowledge Management

Gimhani Talwatte | [email protected]

CROSS-CUTTING PRODUCTS Climate Change/Sustainable Energy Finance

Gillette Conner | [email protected]

Communications Sona Panajyan | [email protected]

Learning

Quyen Thuc Nguyen | [email protected]

Wangari Kamau | [email protected]

Environmental and Social Risk Management

DONOR RELATIONS

Atiyah Curmally | [email protected]

Risk Management Suresh Sankaran | [email protected]

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Jacqueline Strasser Higgins | Manager | Partnerships and Advisory Services Operations, IFC | [email protected]

REGIONAL OFFICES

IFC FINANCIAL MARKETS

IFC ADVISORY SERVICES IN EAST ASIA AND THE PACIFIC Tania Lozansky | Regional Head of Advisory Services | Hong Kong SAR, China | [email protected] Rachel Freeman | Manager | Access to Finance, East Asia and the Pacific | Hong Kong SAR, China | [email protected]

James Scriven | Director, Global Industry Financial Markets, IFC | [email protected]

CENTRAL AND EASTERN EUROPE Timothy M. Krause | Senior Regional Industry Manager | [email protected]

EAST ASIA AND THE PACIFIC

IFC ADVISORY SERVICES IN EUROPE AND CENTRAL ASIA

Aliou Maiga | Regional Industry Manager | [email protected]

Jesper Kjaer | Regional Head of Advisory Services | Istanbul, Turkey | [email protected] Rolf Behrndt | Manager | Access to Finance, Europe and Central Asia | Moscow, Russia | [email protected]

EUROPE AND CENTRAL ASIA

IFC ADVISORY SERVICES IN LATIN AMERICA AND THE CARIBBEAN

Giriraj Jadeja | Senior Regional Industry Manager | [email protected]

Mary Porter Peschka | Regional Head of Advisory Services | Lima, Peru | [email protected] Ghada Teima | Manager | Access to Finance, Latin America and the Caribbean | [email protected]

MIDDLE EAST AND NORTH AFRICA

IFC ADVISORY SERVICES IN THE MIDDLE EAST AND NORTH AFRICA

Ayaan Adam | Regional Industry Manager | [email protected]

Luke Haggarty | Regional Head of Advisory Services | Cairo, Egypt | [email protected] Xavier Reille | Manager | Access to Finance, Middle East and North Africa | Cairo, Egypt | [email protected]

Edward B. Strawderman | Associate Regional Director | [email protected]

LATIN AMERICA AND THE CARIBBEAN

James Gohary | Regional Industry Manager | [email protected]

SOUTH ASIA SUB-SAHARAN AFRICA Ian Weetman | Regional Industry Manager | [email protected]

IFC ADVISORY SERVICES IN SOUTH ASIA Anil Sinha | Regional Head of Advisory Services | New Delhi, India | [email protected] Jennifer Isern | Manager, Access to Finance, South Asia, New Delhi, India | [email protected]

IFC ADVISORY SERVICES IN SUB-SAHARAN AFRICA Jan Schwier | Regional Head of Advisory Services | Johannesburg, South Africa | [email protected] David Crush | Manager, Access to Finance, Sub-Saharan Africa | Johannesburg, South Africa | [email protected]

Headquarters Washington, D.C. International Finance Corporation 2121 Pennsylvania Ave., N.W. Washington, D.C. 20433 USA Telephone: 1 (202) 473-3800 IFC has offices in more than 80 countries around the world.

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CREDITS IFC Advisory Services | Access to Finance Annual Review 2012 Project Lead: Sona Panajyan Editor: Katherine Hutt Scott Design: Aichin Lim Jones Photos: IFC Photo Library, ILRI/ Andrew Mude, PhotoDisc, World Bank Photo Library Printing: Professional Graphics Printing Company

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