BANK ING

FOR

THE

MAJORITIES

Financing and its impact on

local/national business

Eduardo Bazoberry Fondo Financiero Prodem

Ottawa, April 2005

Bolivia

Land area: 1.1m km² Population: 8.7 million (2002)GDP: US $7.7billion (2002) Per capita GDP: US $885 (2002)Adult literacy rate(2001): Total 86%Poverty (below national poverty line):

63%Urban population: 63%Official languages: Spanish, Quechua

and Aymara *Source Worldbank www.worldbank.org , Countries at glance

PRODEM FFPSelf-sustained regulated entity76% of the money lent comes from clients with

saving depositsAccounts for 44% of the microfinance sector

savingsLargest number of savings accounts (148,000)Largest network with 79 full fledged branches

and 30 service centers across Bolivia52 smart ATMs throughout urban and rural

areas, and 40 Autonomous Points of Sale (PAV´s)

ROE 2004: 18%Equity: 8,8 Millions $us

WHERE MICRO

ECONOMICS MAKES SENSE!

PRODEM FFP NETWORK

38,946,587

46,162,000

63,818,953

84,379,806

35,000,000

40,000,000

45,000,000

50,000,000

55,000,000

60,000,000

65,000,000

70,000,000

75,000,000

80,000,000

85,000,000

$US

2001 2002 2003 2004

DISBURSEMENTS

Total disbursements:

233.307.346

OUR IMPACT

CLIENTS (By economic sector)

-

5,000

10,000

15,000

20,000

25,000

30,000

DIC 01 DIC 02 DIC 03 DIC 04 FEB 04

1. Cattle & Livestock

2. Production

3. Commerce

4. Services

5. Transportation

Cartera * Clientes Cartera * Clientes Cartera * Clientes Cartera * Clientes1. Cattle & Livestock 4,016,422 4,703 4,884,119 4,060 6,428,420 3,911 8,378,472 4,314 2. Production 5,698,213 3,558 8,013,519 3,561 11,615,704 4,264 14,734,166 7,664 3. Commerce 12,325,647 8,092 15,028,763 6,425 20,665,400 7,167 28,268,505 23,944 4. Services 7,776,101 4,420 10,139,873 4,823 14,284,842 6,285 21,534,701 14,872 5. Transportation 3,811,481 1,761 6,071,942 2,517 9,021,668 3,622 13,579,278 5,824 TOTAL 33,627,864 22,534 44,138,215 21,386 62,016,034 25,249 86,495,123 56,618

DIC 01 DIC 02SECTOR

DIC 03 DIC 04

CLIENTS (By economic sector)

CLIENTS (By gender)

12

,28

8

12

,50

2

15

,45

4

27

,25

9

10

,24

6

8,8

84

9,7

95

29

,35

9

7,000

12,000

17,000

22,000

27,000

32,000

DIC 01 DIC 02 DIC 03 DIC 04

1. MALE

2. FEMALE

GENDER DIC 01 DIC 02 DIC 03 DIC 041. MALE 12,288 12,502 15,454 27,259 2. FEMALE 10,246 8,884 9,795 29,359 TOTAL 22,534 21,386 25,249 56,618

AVERAGE LOAN SIZE

1,492

2,064

2,456

1,528

1,400

1,600

1,800

2,000

2,200

2,400

2,600

$us

DIC 01 DIC 02 DIC 03 DIC 04

ITEM DIC 01 DIC 02 DIC 03 DIC 04LOAN PORTFOLIO 33,627,864 44,138,215 62,016,034 86,495,123 No. CLIENTS 22,534 21,386 25,249 56,618 AVERAGE LOAN 1,492 2,064 2,456 1,528

FINANCIAL SERVICES AVAILABLE TO OUR CLIENTS

MICRO LOANS: US$ 50 TO 7.000MICRO LOANS: US$ 50 TO 7.000

Flash Loans US$ 50 to US$ 300Flash Loans US$ 50 to US$ 300

Micro Credit LineMicro Credit Line

Agricultural – LoansAgricultural – Loans

Seasonal LoansSeasonal Loans

Guarantee: Personal, quasi-mortgage, Guarantee: Personal, quasi-mortgage,

custody ofcustody of

documents, time deposits, savings accounts,documents, time deposits, savings accounts,

solidarity groupsolidarity group

FINANCIAL SERVICES AVAILABLE TO OUR CLIENTS

SMALL SIZE LOANS:SMALL SIZE LOANS:

US$ 7.001 TO 40.000US$ 7.001 TO 40.000

Credit LineCredit Line

Mid-term LoansMid-term Loans

Guarantee: Mortgage, timeGuarantee: Mortgage, time

deposits, saving accountsdeposits, saving accounts

FINANCIAL SERVICES AVAILABLE TO OUR CLIENTS

MEDIUM SIZE LOANS: US$ 41.000 TO 200.000MEDIUM SIZE LOANS: US$ 41.000 TO 200.000

Credit LineCredit Line

Mid-term LoansMid-term Loans

Guarantee: MortgageGuarantee: Mortgage

LOAN PRODUCT PORTFOLIO WELL DIVERSIFIED LOAN PRODUCT PORTFOLIO WELL DIVERSIFIED

IT SATISFIES OUR CLIENTS’ DIFFERENT NEEDSIT SATISFIES OUR CLIENTS’ DIFFERENT NEEDS

FINANCIAL SERVICES AVAILABLE TO OUR CLIENTSSAVINGS PRODUCT PORTFOLIOSAVINGS PRODUCT PORTFOLIO

Savings account with smart card finger print Savings account with smart card finger print

recognition and with saving passportsrecognition and with saving passports

Time depositsTime deposits

Smart automatic teller machines (ATMs)Smart automatic teller machines (ATMs)

Autonomous points of sale (POS)Autonomous points of sale (POS)

INTRODUCING THE SMART CARD WITH FINGER RECOGNITIONINTRODUCING THE SMART CARD WITH FINGER RECOGNITION

ALLOWED PRODEM FFP TO REVOLUTIONIZE SAVINGSALLOWED PRODEM FFP TO REVOLUTIONIZE SAVINGS

IN RURAL AREAS. HIGH TECHNOLOGY THAT GIVESIN RURAL AREAS. HIGH TECHNOLOGY THAT GIVES

SECURITY, VERSATILITY, AND USER FRIENDLYSECURITY, VERSATILITY, AND USER FRIENDLY

ATMs AND POS

FINANCIAL SERVICES AVAILABLE TO OUR CLIENTS

ADDITIONAL PRODUCTSADDITIONAL PRODUCTS

National TransfersNational Transfers

International TransfersInternational Transfers

Life InsuranceLife Insurance

Money ExchangeMoney Exchange

Service PaymentsService Payments

Payroll PaymentPayroll Payment

Cash AdvanceCash Advance

Tax, Police and other Tax, Police and other

services collectionservices collection

Low income people are eager and able to Low income people are eager and able to

progress on their own given proper opportunitiesprogress on their own given proper opportunities

Understanding customers’ needs and financial Understanding customers’ needs and financial

possibilities are essential to create viable possibilities are essential to create viable

products and servicesproducts and services

Low income people, both in rural and urban Low income people, both in rural and urban

areas, must be key players in third world areas, must be key players in third world

economieseconomies

Rural and low-income communities are willing Rural and low-income communities are willing

and able to use technologyand able to use technology

Mass coverage of financial services requires Mass coverage of financial services requires

advanced technologyadvanced technology

CHARACTERISTICS OF OUR CLIENTS

CLIENTS

WHAT WORKED FOR US

Clear role of governmentClear role of government

Laws and RegulationsLaws and Regulations

Political independence of the Political independence of the

Superintendence of BanksSuperintendence of Banks

Floating interest ratesFloating interest rates

Second-tier government BanksSecond-tier government Banks

WHAT WORKED FOR US

DEVELOPMENT AID WELL DIRECTED (HELPED TODEVELOPMENT AID WELL DIRECTED (HELPED TO

BUILD AN INDUSTRY) BUILD AN INDUSTRY)

From ngo’s to regulated microfinance entityFrom ngo’s to regulated microfinance entity

From credit oriented to full financial services:From credit oriented to full financial services:

Saving, transfer remittances, lines of credit, Saving, transfer remittances, lines of credit,

insuranceinsurance

From social investors to local entrepreneur investors:From social investors to local entrepreneur investors:

Good CompetitionGood Competition

InnovationInnovation

OutreachOutreach

EfficiencyEfficiency

WHAT HAS WORK FOR US

LOANSLOANS

According to their needsAccording to their needs

Just-in-timeJust-in-time

Working capital vs. investment capitalWorking capital vs. investment capital

No red tapeNo red tape

Takes into account their track recordTakes into account their track record

SAVINGSSAVINGS

OTHER FINANCIAL SERVICESOTHER FINANCIAL SERVICES

ADDITIONAL VALUE ADDED SERVICES

BUT THEY ALSO DEMAND NON FINANCIAL SERVICESBUT THEY ALSO DEMAND NON FINANCIAL SERVICES

Technical Assistance:Technical Assistance:

How to improve their businesses?How to improve their businesses?

How to sell more?How to sell more?

What to produce? (Change in markets)What to produce? (Change in markets)

Understand norms and regulationsUnderstand norms and regulations

Become an exporterBecome an exporter

““Instrument’s that are their for a globalize economy toInstrument’s that are their for a globalize economy to

work. Not taken into account the local entrepreneurs”work. Not taken into account the local entrepreneurs”

OUR ENVIRONMENT We feel that the Microfinance industry in Bolivia has contributed to the impact We feel that the Microfinance industry in Bolivia has contributed to the impact

of financial intermediation for micro, small and medium size businesses by of financial intermediation for micro, small and medium size businesses by

increasing:increasing:

EfficiencyEfficiency

Stabilizing the systemStabilizing the system

Institutional sustainabilityInstitutional sustainability

OutreachOutreach

“ “Independent of how you measure the impact, Microfinance has contributed to Independent of how you measure the impact, Microfinance has contributed to

the bottom line of our economy”the bottom line of our economy”

OUR ENVIRONMENT

““Microfinance is leading the way on how Microfinance is leading the way on how

our financial system will work in the future”our financial system will work in the future”

WHAT CONCESSIONAL FINANCING NEEDS TO TAKE

INTO ACCOUNT? The level of development of the microfinanceThe level of development of the microfinance

industry in the countryindustry in the country

In Bolivia the major regulated Microfinance In Bolivia the major regulated Microfinance entities don’t need just loans for portfolio entities don’t need just loans for portfolio growth, growth, already already have accesses to savings, have accesses to savings, time deposits and the stock markettime deposits and the stock market

WHAT CONCESSIONAL FINANCE NEEDS TO TAKE INTO

ACCOUNT? Support local entrepreneurs.Support local entrepreneurs.

I quote one of the key principles of microfinance that the CGAP and I quote one of the key principles of microfinance that the CGAP and it’s 28 donors member developed and was further endorsed by the G8 it’s 28 donors member developed and was further endorsed by the G8 leaders leaders

““The key bottleneck is the shortage of strong institutions and The key bottleneck is the shortage of strong institutions and managers”. “Donors should focus their support on building capacity”managers”. “Donors should focus their support on building capacity”

Eradication of poverty through profits Eradication of poverty through profits requires advanced technologyrequires advanced technology

Private businesses are proving more Private businesses are proving more effective in solving the needs of the effective in solving the needs of the majoritiesmajorities

Important investments are needed in MIS Important investments are needed in MIS systems and connectivitysystems and connectivity

Provide financial support to local private Provide financial support to local private investors willing to take risks in investors willing to take risks in technology ventures or in the creation of technology ventures or in the creation of regulated Microfinance Entitiesregulated Microfinance Entities

ConclusionsConclusions

Philanthropy and charity are not Philanthropy and charity are not sustainablesustainable

Private investors’ foresight has driven the Private investors’ foresight has driven the microfinance industry to unexpected levelsmicrofinance industry to unexpected levels

Long term loans for low income housingLong term loans for low income housing Assume exchange riskAssume exchange risk Donors should share the Institution’s Donors should share the Institution’s

visionvision Donors rarely have the appropriate Donors rarely have the appropriate

expertise to provide practical guidelines *expertise to provide practical guidelines *

* * The CGAP Donor guidelines on good practice in microfinance Dic. 2004The CGAP Donor guidelines on good practice in microfinance Dic. 2004

ConclusionsConclusions