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IFC Financing to Micro, Small, and Medium Enterprises Globally Lack of access to financial services is a key barrier to the growth of micro, small, and medium enterprises (MSMEs1). IFC is working to develop solutions to close the MSME financing gap, collaborating with 343 financial institutions (FIs) across 91 countries globally. By partnering with many types of financial intermediaries, including microfinance institutions (MFIs), commercial banks, leasing companies, and private equity funds, IFC reaches many more small and medium enterprises (SMEs) than it could directly.
long-term finance, $2.4 billion for funds supporting MSMEs and $1.8 billion for trade finance. In fiscal year (FY) 2014 alone, IFC MSME commitments globally were $5.8 billion (decrease 3.2 percent from $6.0 billion in FY2013), $2.1 billion of which was attributed to long-term financing. By the end of calendar year (CY) 2013, IFC’s MSME clients had 29.1 million micro loans outstanding globally (up 27.1 percent from 22.9 million in CY2012), totaling $28.0 billion (up 11.6 percent from $25.1 billion in CY2012). Similarly, IFC’s MSME clients had over 5.4 million small and medium loans outstanding by the end of CY2013 (8.3 percent down from 5.8 million in CY2012), totaling $273.6 billion globally (up 12.2 percent from $243.8 billion in CY2012).
IFC offers a wide range of financial products, including loans, equity and risk management solutions, to help FIs scale up and enter the MSME market. As of June 2014, IFC committed a total of $14.5 billion to MSME finance globally2, $10.3 billion for
MSME Financial Intermediary Portfolio, FY 2014 (as of June 2014) IFC Committed Portfolio to MSMEs3 Globally ($ Million)
IFC Total Committed Portfolio to MSMEs (percent of Total Portfolio) 12,000
Growth of Committed Portfolio: $3,723
8,000 6,000
$4,431 $2,165
4,000 2,000 0
FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14
Micro Enterprise
Small Enterprise
East Asia and the Pacific
$2,405 Bln Millions
=> -2.1% drop in FY 2014 YOY => 16.2% CAGR since 2000
Europe and Central Asia
$2,618 Bln
10,000
Latin Amera and the Caribbean
$1,718 Bln
Sub-Saharan Africa
$1,374 Bln
South Asia
$1,138 Bln
Middle East and $907 Bln North Africa $159 Bln
WORLD
25.4%
23.3%
16.6%
13.3%
11.0%
8.8% 1.5%
Medium Enterprise
MSME Loans by Type of IFC Clients Globally, CY2013 MSME Loans by Microfinance Institutions
IFC was able to survey or extrapolate outreach data from 129 MFIs in 57 countries, 44.2 percent of these clients received advisory services from IFC. Outstanding Loan Portfolio Number‘ 000 $
Average Loan Size
Number of Loans to women4
NPL percent5
MSME Loans by SME Financial Institutions
IFC was able to survey or extrapolate outreach data from 214 SME FIs in 80 countries, 41.6 percent of these clients received advisory services from IFC. Outstanding Loan Portfolio Number ‘000 $
Average Loan Size
Number of Loans to women4
NPL percent5
1,267
9.1 %
11%
Micro Loans
19,942,756
16,406,325
823
63.3%
3%
Micro Loans
9,154,381
Small Loans
936,050
14,971,058
15,994
32.5%
3%
Small Loans
3,038,964
65,149,037
21,438
15.3 %
8%
66,373
17,872,249
269,270
6.6%
4%
Medium Loans
1,320,347
175,605,457
133,000
12.7%
7%
Medium Loans
11,599,339
1. MSME firm size definitions: IFC’s Global Financial Markets categorized its clients’ sub-borrowers according to the following definitions: (1) microfinance institution: if loan < $10,000 at origination; (2) small enterprise if loan < $100,000 at origination; (3) medium enterprise: if loan < $1 million at origination ($2 million for more advanced countries). 2. The share of committed long term loans to microfinance institutions in MSME committed portfolio increased from 19.9 percent in FY2013 to 20.9 percent in FY2014; small enterprises accounted for 43.0 percent in FY2014 (48.6 percent in FY2013); medium enterprises accounted for 36.1 percent in FY2014 (31.5 percent in FY2013). 3. The committed portfolio in MSME FIs does not include commitments for commercial banking trade finance and collective investment vehicles (funds). 4. Estimated percentage of outstanding loans to women in each loan size category. Data was reported by 54 MFIs and 35 SME FIs. 5. Nonperforming Loan (NPL) = > 90 days past due loans.
MSME Loans by Region, CY2013 Number of Micro Loans by MFIs 6%
Number of SME Loans by SME Fls
21%
2%
8%
2%
Middle East & North Africa (MENA) South Asia (SA)
25%
Middle East & North Africa (MENA) 17%
9%
South Asia (SA)
39%
Sub-Saharan Africa (SSA)
7%
Sub-Saharan Africa (SSA)
Latin America & the Caribbeans (LAC)
Latin America & the Caribbeans (LAC)
East Asia & the Pacific (EAP)
East Asia & the Pacific (EAP)
Europe & Central Asia (ECA)
Europe & Central Asia (ECA) 32%
32%
MSME Portfolio Composition by Loan Category Globally, CY2013 Loan Portfolio of MFIs
Loan Portfolio of SME FIs
0.3% 4.5%
100%
100%
36.3%
80%
9.8%
80%
60%
22.5% 69.6%
60%
95.2%
30.4%
40%
40%
20%
67.7% 25.8%
20%
33.3%
4.6%
0%
0%
Number of Loans Micro Loans
Number of Loans
Volume of Loans Small Loans
Medium Loans
Micro Loans
Volume of Loans Small Loans
Medium Loans
Historical Portfolio Composition by Loan Category Globally, CY2004-CY2013 MFI Portfolio Composition: Volume of Loans
SME FIs Portfolio Composition: Volume of Loans
100% 90%
100%
80% 70% 60% 50% 40% 30% 20% 10% 0%
2004
2005
2006
Retail
2007 Micro
2008 Small
2009
2010 Medium
2011
2012
Corporate
2013
90% 80% 70% 60% 50% 40% 30% 20% 10% 0%
2004
2005 Retail
2006
2007 Micro
2008 Small
2009
2010 Medium
2011
2012
Corporate
2013
Growth Trends
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The product structure remains consistent: Micro Loans (69 percent of which are generated by MFIs) represent 9.3 percent of dollar portfolio in CY2013 and grew 13 percent since CY2012; SME Loans (81 percent of which were generated by SMEs) represent 90.7 percent of the entire MSME dollar portfolio and demonstrated improvement by 10.9 percent in dollar terms.
l
l
The growth in both Micro and SME loan portfolio is significantly attributed to the growth of the portfolio of existing clients: existing MFI clients increased their micro loan portfolios by 16.3% and existing SME focused clients increased their SME loan portfolios by 27.7%. The new MFI clients that just entered the portfolio and stayed in the following year increased the Micro loan volume by 68.5% in CY2013 comparing to CY2012, while the new SME focused clients increased SME loan portfolio by 58.4% in CY2013 comparing to CY2012.6 SME FIs tend to exit the IFC client portfolio more frequently than MFIs. Volume and Number of Loans by MSME Focused FIs
A total of 215 clients reported in CY2011, CY2012, and CY2013. During this period, the number of MSME loans they provided grew on average by 25 percent and volume increased by 32 percent.
350,000
40,000
300,000
35,000 30,000
250,000
25,000
200,000
20,000
150,000
15,000
100,000
10,000
50,000
5,000
0 Micro SME
2006
2007
47 90
87 108
2008
2009
2010
2011
Number of MSME clients reported 60 68 72 93 155 153 150 175
Volume of Micro Loans by MSME FIs Number of Micro Loans by MSME FIs
2012
2013
113 201
129 214
0
Volume SME Loans by MSME FIs Number of SME Loans by MSME FIs
Volume of SME Loans by SME FIs
Volume of Micro Loans by MFIs 250,000
18,000 16,000
200,000
12,000
Millions
Millions
14,000 10,000 8,000 6,000 4,000
100,000 50,000
2,000 -
150,000
2005
2006
2007
2008
2009
2010
2011
2012
2013
-
2005
2006
2007
2008
2009
2010
2011
Existing Clients
New and Stayed Clients
Existing Clients
New and Stayed Clients
New and Exited Clients
Exited Clients
New and Exited Clients
Exited Clients
2012
2013
6. The graphs below demonstrate the growth composition of IFC MSME client portfolio. The categories are defined as follows: Existed clients (in the portfolio in current year, the year before and the year after), New and stayed companies (enters the portfolio first time in current year and stays for at least one more year), New and exited companies (entered the portfolio first time and only one time in current year), Exited companies (in the portfolio the year before and current year, but not the year after).
Number of Micor Loans, Thousand
l
Volume of the loans grew consistently over time following the growth in number of IFC clients. Number of MFI clients increased by 14.2 percent in CY2013 which added $1.2 billion to the micro loans portfolio since CY2012. The growth of the Micro loan portfolio was mainly driven by the overall increase in the existing portfolio and adding 39 new MFI clients. While number of SME FI clients increased by 6.5 percent, extending SME loan portfolio by $28.1 billion in dollar terms. Overall SME loan portfolio by MSME clients grew by 12.2% in volume terms, which was mainly attributed to the significant increase in the portfolio of two clients in China with joint SME portfolio of $77 billion and adding 47 new SME clients. Although SME portfolio dropped by 8.3% over year mainly due to the exiting of one of the large clients in Colombia.
Volume of Micro Loans, $ Millions
l
Change in Deposits Volume CY2010-CY20137 Volume of Small/Medium Loans and Deposits by MFIs Globally ($ Billion)
Volume of Micro Loans and Deposits by MFIs Globally ($ Billion) $6
$5.67
$5.42
$4.88
$5
$5.60
$30 $25
$4
$20
$3
$2.51
$2.12
$1.58
$2
$2.36
$20.41
$15 $10
$25.52
$22.24
$11.76
$10.76
$9.25
$7.70
$26.74
$5
$1 $0
2010
2011
2012
Micro Deposits
Volume of Micro Loans and Deposits by SME FIs Globally ($ Billion)
$20 $15
$16.51
$14.16
$13.14
2013
$-
2010
2011
Micro Loans
$16.90
$80
$71.20
$-
2010
$2.54
$1.97
$1.49 2011
2012
Micro Deposits
2013
$20 $-
$33.08
$30.47
$25.96
$21.62
2010
Micro Loans
$77.07
$55.54
$52.29
$40
$1.10
2013
Small/Medium Loans
Volume of Small/Medium Loans and Deposits by SME FIs Globally ($ Billion) $60
$10 $5
2012
Small/Medium Deposits
2011
2012
Small/Medium Deposits
2013
Small/Medium Loans
Trend Analysis of Compounded Annual Growth Rate (CAGR)8 CAGR Trend – Micro Loans by MFIs in Globally 40%
CAGR Trend – SME Loans by SME FIs Globally
45.6%
50%
50%
34.7%
40%
30%
41.1% 41.9%
30%
20%
9.5%
10%
14.5%
25.3%
20% 10%
0%
-2.6% -2.8%
-10%
2004-2007 Number of Micro Loans
2008-2010
0% 2011-2013
Volume of Micro Loans
1.9% 2004-2007 Number of SME Loans
21.3%
4.8%
2008-2010
2011-2013
Volume of SME Loans
Highlight: IFC and Goldman Sachs Launch Women Entrepreneurs Opportunity Facility (March 2014) In March 2014, IFC and Goldman Sachs Foundation (“GSF”) launched the Women Entrepreneur Opportunity Facility/Fund (“WEOF” or “Facility”) that aims to reach through a joint investment and advisory platform as many as 100,000 women-owned SMEs globally. IFC’s Banking on Women Program and Goldman Sachs’ 10,000 Women Initiative combined expertise and resources to create the $600mn Women Entrepreneurs Opportunity Facility, exclusively dedicated to financing women-owned small and medium businesses in developing countries. IFC has committed an initial investment of $100mn, along with $32mn of concessional funding from Goldman Sachs Foundation. An additional $468mn will be raised from public and private investors. GSF has allocated an additional $11mn for advisory services. This is an important milestone as part of IFC’s effort to develop women SMEs as an asset class and signal the importance of the women entrepreneur market segment globally. The Facility is catalytic and first of its kind. It will make investments in financial institutions in emerging markets globally, with a special focus on investment opportunities for financial institutions that develop and promote financial products targeting the women’s market, especially women-owned SMEs. The financing will be in the form of bank credit lines or risk share facilities, and where necessary complemented by performance incentives. The Facility will also provide advisory services to financial institutions enabling them to target and serve women’s markets including women SMEs. The Facility is actively exploring an innovative fund structure with AMC and Goldman Sachs Asset Management department to mobilize greater investment and participation from private sector commercial and impact investors. 7. The deposits data includes retail, MSME and other commercial portfolio deposits. Micro and Small/Medium deposits classifications were done in accordance with definition of relevant loan size noted in footnote 1. Loan-Deposit analysis are done on the basis of repeated clients, which means that the data used for comparison of Micro/SME loans and deposits are comprised only of those clients that reported each of the last 4 years all 4 data series (Micro deposits, SME deposits, Micro Loans, SME Loans). Globally IFC had 72 such clients, 31 of which are in IDA countries. 8. Compounded annual growth rate (CAGR) from 30 reporting and repeated clients in the 2004-2007 period, 93 reporting and repeated clients in the 2008-2010 period, 181 reporting and repeated clients in the 2011-2013 period, excluding greenfield institutions and FIs that are closing their operations
Martin Hommes |
[email protected] Aksinya Sorokina |
[email protected] 