CENTRAL ASIA MICRO FINANCE ALLIANCE

CENTRAL ASIA MICRO FINANCE ALLIANCE

December, 2006

CENTRAL ASIA MICRO FINANCE ALLIANCEUSAID funded 3-year project, continuation of CAMFA I project. Objective: To increase the range and enhance the outreach of financial services to micro and small businesses, especially in rural and isolated regions of Kyrgyzstan.

CAMFA II: 3 COMPONENTSI: Continue support the development of 4 Microfinance Associations in Central Asia region

II: Continue support of Frontiers, a wholesale lender for small and very small financial institutions in Central Asia

III: Promote Agricultural Finance in Kyrgyzstan

COMPONENT ITo increase the capacity and sustainability of national Microfinance Associations (MFAs).

COMPONENT IMFA Capacity buildingImprove the policy and regulatory environment for microfinanceIncrease availability of microfinance training and specialized technical assistanceSupport standards development and increased financial transparency

COMPONENT IPARTNERS:AMFOK Kazakhstan (May 2004)AMFOT Tajikistan (Feb 2005)MTA Uzbekistan (July 2005)AMFI Kyrgyzstan (Dec 2005)Regional Network (July 2006)

COMPONENT ISUPPORT TO MFAS FOR: Lobby governmentGain access to new technical approachesBest practice information in RussianHands-on experience at best practice MFIsNew information technologies and supportNetworking and sharing regional experiences Reporting to the MixMarketSocial impact tools and researchCommercial financing options

COMPONENT IMFA CAPACITY BUILDINGImproving GovernanceStrategic planning / Operations Membership driven service deliveryIncreased MFA Financial SustainabilityHuman Resource DevelopmentEnhanced External Relations

COMPONENT ICOUNTRY SPECIFIC ACTIVITIES

Credit Bureau in Tajikistan

Legal assistance to MFI in Uzbekistan

COMPONENT IACHIEVEMENTS:MF law in Uzbekistan (Sept06)Tax benefits for MFIs in Uzbekistan (Jan06)Loan size cap for MFIs in Kazakhstan (Nov06)MFI Reporting to NBT in Tajikistan (Apr06)MF midterm strategy participation in Kyrgyzstan

COMPONENT IREGIONAL NETWORK

Regional MOU between the 4 MFAs in May 2006AMFOT in 2007 will take the responsibility for regional coordination hub

COMPONENT IREGIONAL NETWORK

Coordination of activitiesInformation sharingTrainingsDonor/ commercial funding

COMPONENT IIFRONTIERS SUPPORT

To increase MFI access to wholesale lending

COMPONENT IIInstitutional development of FrontiersFacilitate expansion of Frontiers loan portfolio and outreach to MFIs in Central Asia region.Continue diversification of Frontierss sources of funds through increased leveraging of its capital.

COMPONENT IIIExpanding Ag Financial Services:TA and mini-grants to MFI, CU, Ag Coop. and commercial banks for innovative products and new lending methodologiesRural Finance window at Frontiers (on-lending fund)

OBJECTIVE: Improving access to demand driven and sustainable rural and agricultural financial services

COMPONENT IIITwo main motivationsAgriculture sector remains a leading economic sector for Kyrgyzstan; main exporter and major employerImproved financial markets can accelerate agricultural and rural growth, increasing food security, poverty reduction and conflict resolution

COMPONENT IIISpecialized technical assistance services Small grants programDisseminate best practices in rural financeAccess to credit through FrontiersSupport pilot activities for innovative financial services

COMPONENT IIILending for agricultural production Lending for animal husbandryLending for agro-processing, that operate in rural areasFixed Asset purchases for farm equipment and agricultural processing (including leasing)Loans that support improved technologies for handling, storage and marketing of agricultural productsLoans that support rural enterprises for competitive packaging and labeling and branding of products

COMPONENT IIIChallenges and Opportunities in Rural Financial Market High transactions costs for lenders and borrowersHigh risks faced by borrowers and savers due to natural disasters and limited tools to manage risksLack of reliable informationLack of adequate collateralInhospitable legal and regulatory framework

COMPONENT IIIKey AssumptionsImproving economic opportunities in rural areas leads to improvement in agricultural productivityThe financial services should be tailored specifically to rural households, rural enterprises and Ag. sector Need to improve the ability of existing financial institutions to deliver appropriate rural and Ag. Financial services

COMPONENT IIIServing clients at a distance - managing high transaction costsManagement loans at a distance - decentralization of loan approval authority Ag lending specific:Seasonality of agricultural productionLoan terms structured around cash flow and crop cyclesLoan application assessments require substantial knowledge of local crops, crop prices, yields and farming methods

COMPONENT IIIDealing with risks in rural financial servicesNeed for non-conventional lending methodologiesAlternative (creative) collateral and term conditions

RURAL FINANCE: Financial services used in rural areas by people of all income levelsAGRICULTURAL FINANCE: Financing of agriculture-related activities, from production to marketMICROFINANCE: Financial services for poor and low-income people Agricultural Financial Services in Rural Areas

COMPONENT IIITA for Financial intermediaries for new product development, cash flow lending, savings, etc.

Building long term capacity by TA and incentives to increase the provision of agricultural finance services

COMPONENT IIITA to selected financial institutions: competitive system based on commitment and potential for increased outreach

Policy and regulatory reforms

Financial Sector ChallengesElevated perceptions of risk, based on past negative experiencesWeak systems of land titling, collateral laws and judiciariesLong time process for accepting innovative loan products and practicesInformation imbalanceNeed for donor effort coordination

Thank you!

ACDI/VOCA KyrgyzstanBishkek, 72001155, Suyunbaeva StreetTel: (996 312) 68-16-08, 68-15-57Fax: (996 312) 68-17-21E-mail: office@camfa.kg Web cite: www.acdivoca.org

II Support of Frontiers, a whole sale lender for small and very small financial institutions in Central Asia; leveraging its donated capital and attracting alternative sources of funds and equity investors.III: Promotion of Agricultural Finance in KyrgyzstanTA and mini-grants to MFI, CU and Ag Coop. for innovative products and new lending methodologiesRural Finance window for Frontiers (on-lending fund)

Note: Further Transparency implies Financial TransparencyNote: Further Transparency implies Financial TransparencyLobby governments for more microfinance-friendly laws and tax regulationsGain access to new technical approaches on issues related to: internal control and risk management, accounting transformations, mergers, human resource management, credit methodologies, and business planningBest practice information in RussianHands-on experience at best practice MFIs (through study tours and internships)New information technologies and supportLegally register within the various country-level MFI legal frameworksNetworking and sharing regional experiences Reporting to the MixMarket to provide statistical data to CGAP and other sources regarding the state of micro finance in Central AsiaSocial impact tools and researchCommercial financing optionsIMPROVING GOVERNANCECAMFA will use its Board seat on each Association to provide strategic guidance and oversight, and facilitate strategic planning.

HR DEVELOPMENTdetailed Human Resource Development Plan for 3 years We will organize one joint study tour for the MFA staff members to enhance staff capacity.WE will also send the Association Directors on several capacity building study tours and regional and international microfinance conferences, CAMFAs staff will also provide regular guidance on overall operations as well as training on leadership, presentation skills, and management techniques. ACDI/VOCA, through its access to volunteer support, will also provide limited technical assistance from four volunteers each year over the life of the project.

FINANCIAL VIABILITYThree-year strategic and operational plan that strives to engage members in all levels of activities. CAMFA will work with each organization to set quantitative goals (e.g., membership targets, operational sustainability targets, etc.) as an integral part of each strategic plan. Annual budgets will be developed that provide for increasing member fees for services and decreasing USAID support. CAMFA staff will also assist the Associations to closely monitor their monthly expenses and variance versus projected budgets to ensure maximum efficiencies are achieved.

2 grant proposals will be submitted each fiscal year; most will solicit funding for technical initiatives (such as the social impact tool development, or the development of a technical training).

To create a Sustainability/Business Plan that includes: (1) plans for increasing membership outreach and due structures (linked to the targets provided USAID); (2) fee-based trainings; (3) developing technical assistance programs relevant to member needs; (4) holding education and awareness sessions with government representatives and donors; and (5) identification of additional donor funding where needed. Business plans will be developed by end of September 2007.

Design two technical trainings on issues relevant to member needs. Technical train