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Corporate Responsibility

Programme2009 / 2010

Provident Pénzügyi Zrt.

Contact: Mr. Csongor HAJNA, CR managercsongor.hajna@provident.hu, +36-20-339-0549

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Who are we?

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IPF and Provident Pénzügyi Zrt.

IPF: a multinational finance company

listed on the London Stock Exchange

as International Personal Finance (IPF)

British origins, 125 years of history

2,100,000+ customers worldwide

(UK), Mexico, Poland, Czech Republic, Slovakia, Hungary, Romania

Hungarian affiliate: Provident Pénzügyi Zrt.

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Provident Pénzügyi Zrt. Hungarian affiliate of IPF

founded in 2001

offers small fast cash loans

• to individuals

• with (optional) home service

230,000 customers

120 facilities

3,500 employees

• a major employer in Hungary

Provident Pénzügyi Zrt.

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Fast loans with (optional) home service: in 48 hours if credit assessment is positive

Amount between 30,000 and 220,000 HUF

Short term, 30/45/60 weeks

No limitations in use

Bank transfer (with optional unique home service based on customer decision)

Non-secured

The Provident service in Hungary

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92 % satisfied with efficiency and speed of service 90 % finds loan agreement easy to understand 93 % satisfied with the work of our agents 90 % satisfied with home service above KPIs increased year by year so far

Our experience says …Provident customers are well satisfied; they recommend our services to acquaintances. 20 % of our customers contact us based on recommendations from our present customers. This is an important ingredient of our success.

Customer satisfaction*

* ‘Usage & Attitude Survey‘ by external marketing research supplier, 2009

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Low financial education level in Hungary

business model virtually unknown issues• extra services higher price (home service)

• short term high APR

decision makers and the media needs education• e.g.: APR confused with interest or profit (!)

Special economic and political environment

financial crisis sensitive public

continuous „election campaign” criticism motivated by politics

Challenges

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Recent study conducted by Corvinus University• 170 Hungarian students (14-19) from 15 schools nationwide, 100 questions,

qualitative research, sponsored by Family Treasure Programme (see later)

16% of students gave correct answers to very basic financial questions

8% understands what the bank system’s role in the economy is

11% explained APR adequately

34% agrees completely that paying taxes is

a common interest

2% agrees completely that taking loans

is a good idea

30% supports fully the idea of retirement savings

Financial illiteracy

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Approach andFramework

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CR aspects we find important

responsible lending

responsible marketing

governance and transparency

responsible management of resources

(environment, RSCM, …)

employee relations

community relations

inform regulators and legislation (‘PA’)

(not just financial) sustainability

equal opportunities

reputation management

compliance

reporting (investor relations)

…

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Policies, programmes, resources

Policies & programmes Responsible lending (FSA TCF)

Community investment (financial literacy)

Environment

Responsible supply chain management

Bribery & corruption, political donations, lobbying

Whistleblowing

Human rights, …

Effectiveness measures Dedicated resource in-country

Incentives & job descriptions

Wider targets and objectives

Training

Monitoring and auditing, …

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Organizational framework of CR

IPF board

IPF CR Steering Committee(intl. CEO)

Provident HUN CR Steering Committee(country mgr., comms dir.)

IPF CR Working Group(intl. CR officer)

Provident HUN CR Working Group(country CR officer)

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BusinessPerformance 2009*

*2010 financial results not available yet

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IPF share price and FTSE 250

[ global financial crisis ]

[ recovery from the crisis ]

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Profitability in 2009

IPF

global profit of IPF in 2009 + 5.9%

Hungary

GDP drop of Hungarian economy - 6.3% profit margin of Provident Hungary - 6.3%

Background Global financial crisis hit Hungary harder than most countries

some customers were indebted to banks in foreign currency (Provident lends in HUF only)

deteriorating HUF rates rattled household budgets

Provident loans are unsecured lower priority for settling debt

For more info about performance, see the Annual Report of IPF:

http://www.ipfinannualreport.co.uk/

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Customer portfolio

Hungary 2009 number of customers 227,000 credit issued / customer 107,000 HUF lead to loan conversion (% of approved loans) ND 38% (!)

Overall IPF 2009 lead to loan conversion 44%

Background Hungary applied a very strict lending policy in 2009

this kept bad debt and costs in check, but also …

… customer numbers fell by 30% vs. 2008

Profitability is gradually restored as the crisis wears off

17-15,00%

-10,00%

-5,00%

0,00%

5,00%

10,00%

15,00%

2002 2003 2004 2005 2006 2007 2008 2009

globalfinancial

crisis recovery

[ 2010 full year data not

available yet ]

?

Profit in % of interest receivedProvident Hungary, according to Hungarian accounting standards

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Profit before taxation, first half of the year(Provident Hungary, LSE reporting standards, in GBP)

-8 000 000 GBP

-6 000 000 GBP

-4 000 000 GBP

-2 000 000 GBP

0 GBP

2 000 000 GBP

4 000 000 GBP

6 000 000 GBP

2008 2009 2010

globalfinancial

crisis recovery

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Credit control measures

Self imposed limitations in issuing loans (list not full)

weekly installment per customer must not exceed HUF 9.000

one customer can’t take more than 3 loans

total amount issued to one customer is limited in HUF 500.000

above HUF 180.000 employment certificate is required

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Responsibility and profitability

Responsible lending helped

Provident minimize losses strict lending policies improved

customer portfolio

Provident has started tightening

lending criteria BEFORE the crisis

IPF is committed to maintain

operations in Hungary

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ResponsibleCorporateManagement

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Governance

Safeguarding mechanisms

yearly independent audits, internal

inspectorate reporting to intl. board, whistle blowing, …

Base documents

corporate policies for each functional area to comply with

practical best practice guides for each business unit

Evidence based yearly compliance check

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Sample BPG testing sheet (excerpt)

Each of our business units regularly test themselves against best practice guides. Provident markets check each other’s performance for more accountability and dissemination of knowledge.

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RSCM (Responsible Supply Chain Management)

RSCM aims to eliminate CR risks involved

with suppliers

societal, ethical, environmental, …

Feeds into the purchasing system

enforces evaluation of key suppliers based

on CR criteria as well

contains clear policies about how to deal

with suppliers

• exerts counter-corruption effect

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RSCM (Responsible Supply Chain Management)

RSCM questionnaire is part of tendering materials Clearly communicates principles to suppliers

Linked to the Environmental Programme environmental risk assessment of

all major suppliers

• cars, cell phones, paper, fuel,

cleaning, stationery, …

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Code of Conduct

Provident has voluntarily signed the Code of Conduct for Hungarian banks and financial institutions on 13th October, 2009

Aim of the Code is to strengthen the confidence indispensable in the relationship between retail borrowers and creditors

„Creditor institutions commit themselves to responsible and

transparent lending to their retail customers, in their

proceedings during the period preceding the lending

transaction and the entire term of the credit granted alike, as

well as upon the occurrence of payment difficulties”

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TreatingCustomersFairly

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Treating Customers Fairly (TCF)

A complex consumer protection initiative Started by the UK Financial Supervisory Authority

• UK equivalent of „PSZÁF”

FSA co-operates with companies in reaching TCF standards

• responsible marketing, best practice guides for operation, informing

customers properly, no-barrier early settlement procedures, etc.

• For more info follow << this >> link to the FSA's TCF website

IPF joined TCF in 2008 all Provident affiliates (including Hungary) participate

top management commitments, high priority

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Treating Customers Fairly (TCF)

Our participation is voluntary IPF is not a bank technically we were not required to join

FSA regulations do not bind in Hungary

In some areas TCF standards are stricter

than Hungarian regulations

Still, we believe that … … sustainable growth stems from

responsible lending

… responsible lending is a

competitive advantage

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Treating Customers Fairly (TCF)

Provide customers with clear and sufficient information about loan products

Center your service around customer needs and satisfaction

Offer customers a variety of choices (flexible products)

Make sure your agents and customers know their rights and obligations

Enhance Best Practice Guides (esp. for operations) and stick to them

Make sure all complaints are properly dealt with

Observe responsible lending KPIs (‘TCF MI’) while making decisions

etc, etc …

Several requirements by TCF:

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costs structure efficiency benefits clarity delegation

delivery confidence product efficiency customer data staff profiles staff satisfaction policy committee

customer satisfaction competitiveness proposition design proposition MI people MI policy awareness staff attitude

development process customer testing risk awareness proposition

strategy strategic policy staffing levels remuneration

early warnings contact encouragement customer agents process principles program design comms MI style

action prompts intermediary role complaints resolution delivery MI program coverage consistent

explanationseffectiveness

monitoring

access complaints policy external delegation comms policy function

representation purpose

claims treatment status reports response speed method neutrality

well below occasionally below at the level generally above well above

PropositionProposition Human resourcesHuman resources

CommunicationsCommunicationsService and deliveryService and delivery

Initial TCF BaseBoardTM of Provident (2008)

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Responsible marketingThe ‘60/30/10’ concept

60% product marketing with new, human focused approach

30% education

10% image building

„Get cash, now!” „In case you fell a bit short.”

What is APR?

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Agent charter a document given to all Provident representatives

• booklet, part of starter kit

aims for mutual understanding

• clearly explains rights and obligations

of Provident representatives

• includes notions about required service

level, safety, responsible lending, etc.

• informs about feedback channels

Examples for TCF tools

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Customer Charter

a document sent to all customers

• included into the welcome letter

clearly explains

• what we offer

• fast, comfortable, honest service

• what we expect

• taking loans responsibly, timely repayments, respect

Examples for TCF tools

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TCFManagementInformation

(TCF MI)

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TCF Management Information

Purpose MEASURE responsible lending

• 35 (!) different factors, monthly

USE DATA while making decisions SAFEGUARD interests of customers

Model

collect data from internal data owners compare data to required levels refine operations based on results start again (monthly)

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TCF MI sample KPIs

Product – relevant? customer satisfaction % customer retention

Customer care – high quality? perception of service complaints (module under discussion, not yet implemented) call centre response time and %

Agents – available? training level retention and turnover

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Lending – responsible?

compliance with policies

• lending, admin, comms, …

• checked by independent agency

exceptions % vs. RISK standards

• block manual override of policies

• benchmark: 0%

meaningful indicators

• acceptance rates (lead to loan conversion)

• loans cancelled within 15 days

• arrears (under discussion, not yet implemented)

TCF MI sample KPIs

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ProvidentCommunityProgramme

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Provident community grants

Support local community initiatives or good causes through recommendations from colleagues

Dedicated application form & guide available through intranet and managers

Strict evaluation criteria benefits for the cause AND the company

earmarked funds assigned in advance

projects compete for resources

proven model with 4 years’ history

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Community projects

Evaluation criteria

Provident Community Grant Scoring Model Weighed, percentage based evaluation of eligibility factors

Grants depend on score ranking and available budget

Alignment to CR strategy

Impact / investment (efficiency)

Adequacy to community needs

Professional background of applicants

Employee involvement

Comms and public affairs value

• for the supported cause and for us

Long term opportunities

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Community investments (LBG KPIs)

2009 15.35M HUF community investment

excluding management costs

55 community projects

incl. financial literacy and environment

2,169 volunteers

both company and free time

1.4M HUF in-kind donations

used computers donated to charities

45.23M leverage

incl. partnerships, employee gifts vocational

training, etc.

Ranked 17th on the Hungarian Donors Forum’s

„2009 Corporate Donor of the Year” TOP 20 list

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Guardian Angel Programme

Toy collection volunteer campaign for disadvantaged kids, countrywide

• Provident employees collect used or new toys

children’s wards, nurseries, school for handicapped, …• 5,000 toys, 1,000 donors, 25 partners

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Flood relief 2010

8M HUF aid to communities hit by the flood distributed by the Hungarian Interchurch Aid

40 contributed with their own individual cash donations

Edelény – financial crisis management training for local

social workers and professionals on request of the local community, involving a social psychologist

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A sample community project

Handicapped Children’s Day, Eger (June 2010)

organized by the Heves County Home for Disabled Children

children, conductors and parents prepare for the celebrations together

Provident supports the cause since 2005

colleagues regularly help the institution with volunteer work as well

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A sample community project

HBLF Wheelchair Basketball Cup

corporate teams compete each other, helped by handicapped sportsmen

Provident participates and sponsors the Cup since 2005

the project facilitates re-integration of disabled people

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Reporting, KPIsIPF Community Report

Follow << this >> link to the

2009 CR report of IPF Provident Hungary reports its „official”

(=audited) CR performance through IPF

Report is based on GRI

(Global Reporting Initiative)

data compiled from IPF members

through standardized reporting system

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EnvironmentalManagementSystem

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Environmental Programme

Goals

keep eco footprint of the company low give people an opportunity to get involved (volunteerism) shape the opinion of 3.400 people ( community impact)

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Reporting is based on ISO 14001 environmental management standards*

Yearly audit and trainings by SEQM Ltd. in each country controls, management KPIs achievements vs. targets

Reporting, KPIsEnvironmental Management System

* IPF has not applied for an official ISO 14001 certificatebut follows the model’s standards

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Save energy

Minimize transport related CO2 emission

Reduce reliance on and use of paper

Enhance recycling

Improve measuring and reporting

Motivate and educate people

For 2009, we have set 24 specific goals• 18 were fully achieved

• 4 we have reached at least partially

• only 2 remained uncomplete

Environmental ProgrammeAnnual work plan – main target areas

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Environmental Targets

Task Responsible Deadline Status Evidence

One renewable energy project with external non-profit partner communications 2009 dec complete documentation

Decrease IT servers' energy consumption by server virtualization IT 2009 dec complete consumption data

Assess the feasibility of IT server migration to server farms IT 2009 dec complete research results

Communicate environmentally responsible driving principles communications 2009 dec complete copies

Reduce paper usage by optimizing the direct mailing system marketing quarterly complete kgs of used paper

Utilize scanning capabilities of printers instead of printing legal, communications 2009 dec complete scanned archives

Look for new green paper products for printing marketing materials marketing 2009 june complete desk research report

Install a fax server in the HO in order to decrease paper usage IT 2009 dec complete fax server

Utilize Field Technology pilot to reduce paper usageadmin, IT 2009 dec partially complete

paper consumption

data

Recycle 100% of computer waste to certified supplyers IT 2009 dec complete receipts

Recycle old cellphones with a certified partner supply 2009 dec complete receipts

Extend lifecycle of computers by donating them to charities IT, communications 2009 dec complete contracts

Increase the lifecycle of LCD monitors by prolonging their usage period IT 2009 dec complete stats

Used battery recycling campaign in all branches admin, communications, operation 2009 dec complete documentation

Install a selective plastic recycling module in the HO (pilot) supply, communications 2009 dec complete photo

Check environmental certificates of our cellphone recycling suppliers supply 2009 dec not complete certificates

Inform suppliers about our environmental approach through the CR

Yearbookcommunications 2009 dec not complete recipients list

Volunteer actions in every other branch (12 local actions) in 2009 operations, admin, communications 2009 dec partially complete documentation

Educate and motivate employees through an activist meeting CR mgr + training 2009 march complete documentation

Cover the 'energy' and 'waste' target areas on the Provident Day communications 2009 sept partially complete documentation

Regular coverage of the Env Prg in the company magazine communications 2009 dec complete copies

Update the contents of the branch Environmental Notice Boards communications continuous complete photo

Update the contents of the internal CR website communications continuous complete screenshot

Report on the Env. Prg. through a CR yearbook communications 2009 may partially complete yearbook

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Environmental highlights 2009

11% less car fleet CO2, 63% less flight CO2

75% (!) saved on IT server electricity (virtualization)

24 (=all) branches collect batteries & toners separately

4 branches with plastic bottle shrinking device

26% increase in recycled paper

8 local environmental volunteer projects

60% (!) decrease in marketing paper purchase

57% (!) decrease in printer and fax toner use

23 used computers donated to charities

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Partnerships

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Professional bodies

Membership British Chamber of Commerce in Hungary (BCCH)

American Chamber of Commerce in Hungary (AmCham)

National Union of Financial Enterprises (PVOE)

Co-operation Hungarian Business Leaders Forum (HBLF)

KÖVET Association for Sustainable Economies (CSR Europe HUN)

Hungarian Donors Forum (MAF)

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NGO Partners (sample selection)

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IPF is an active member of CSR Europe

participant in major international CR projects

• CSR MarketPlace, CSR Laboratories, stakeholder dialogue, CSR

Newsbundle, …

continuous, mutual exchange of information and knowledge

• responsible lending, diversity, environment, financial self-sustainability,

financial literacy …

Provident and CSR Europe

Kerstin Born CEO, CSR Europespecial guest in the 2009 IPF corporate responsibility report

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288 clippings about Provident’s CR projects in 6 months (Jan-June 2010)

appx. 70% (!) branded (2007: 50%)

Mediums started to recognize CR

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Financial literacy

FamilyTreasureProgramme

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Financial literacyWhy is it important for us?

Vast societal needs overlap with our core business• „A company is as much responsible as its core business”

Financial illiteracy is a major problem in Hungary

• Social workers, researchers, teachers recognized the gap

• We can react faster than the education system

EU priority consumer protection, consumer credit directive, …

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The Family Treasure Programme

Education of families in finances financial self sustainability

Open partnership of organizations Activity + communication Provident: initiator and chief sponsor

Started in 2008 no end date defined

Financial literacyThe programme in a nutshell

www.csaladikassza.hu

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Attitude

think ahead, calculate, save, read

before sign, buy smart, be responsible,

…

Methodology

how to plan ahead, how to save / buy

smart, etc.

Tools

e.g.: family budget calculator

Exchange of knowledge

Financial literacyContents of the programme

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Curriculumdevelopment

Trainingof households

Feedback

Research

Train thetrainers

Find / createlocal projects

1.

Financial literacyLife cycle of Family Treasure

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Financial literacy partners

Corvinus University of Economics Development of training materials

United Way Hungary Project recruitment, training and monitoring

Training project networks Maltese Charity Service, SOS Childrens’ Village,

Association of Foster Homes, …

Family Help Centers local training projects, curriculum development

link to local (or sometimes national) government

Financial literacy

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„Family Treasure” ProgrammeSample project – Family budget training

Home budgeting and financial self-sustainability training course for

underprivileged families in the Hatvan Local Family Help Center (2009 summer)

utilizing the „Family Treasure” curriculum

by local social workers

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Balatonalmádi Training Day * June 9th, 2010 Financial self-sustainability training for regional social experts

• 20+ settlements covered, knowledge disseminated to clients

All self-governmental institutions delegated participants

Event opened by the Chairman of the Social Committee

„Family Treasure” Programme

Training for professionalsSample project

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Youth citizenship and financial educationwith Eötvös University of Sciences Bíbó István College

30. 04. 2009 // Kunfehértó

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„Family Treasure” Programme

Grant programme for local governments

Announcement of grant recipients * April 20th, 2010 5 local governments received resources for launching fin. lit. projects

event combined with conference and training for recipients

„Family Treasure” partners congratulated to the winners

• Corvinus University, Hungarian Maltese Charity Service, United Way

Lajos Győri-Dani, vice president of the Hungarian Maltese Charity Service

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5 local pilots in 2008 Budapest XIII and VIII, Kaposvár, Hernádvécse, Tápiószecső

8 local pilots in 2009 Kistarcsa, Veresegyház, Hatvan, Békéscsaba, Kiskunfélegyháza,

Szombathely, Budapest III, Siklós

5 local projects in 2010 Körmend, Keszthely, Zalaszentgrót, Komárom, Kisvárda

2 regional trainings for social workers Szolnok, Balatonalmádi

Partnerships 3 x ELTE Bibó College, 9 x Maltese Charity Service, 3 x EcoSim

Student Management Championship, 2 x SOS Children’s Village 3 x TAMOP partnerships: BHKE, Sellye, Bonnya

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„Family Treasure” Programme

In numbers

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Website V2.0http://www.csaladikassza.hu

Knowledge base

practical hints for households

Resources to download

Reports on projects, news

Feedback opportunity

Financial literacyThe website

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Downloadable from www.csaladikassza.hu

Smart – incomes, expenditures, stats, …

Easy to use (design based on research)

Freeware

Developed exclusively for the programme

Family Budget CalculatorFinancial literacy

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Downloadable from www.csaladikassza.hu

Printable (*.pdf) tool, tracks and plans family budget 4 different tools (incomes/expenditures, planning, statistics)

developed especially for the programme in co-operation with social workers

Family Budget Notebook v1.0Financial literacy

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Manage risks with (potential) customers taking loans responsibly

proper home budgeting reliable repayments

APR education

Platform for stakeholder dialogue presence within the local communities

contacts with decision makers and opinion leaders

Improved corporate image

What’s in it for us?Financial literacy

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Knowledge competitiveness

• Responsible financial decisions of citizens result

in a more stable and prosperous economy

Self-sustainability or dependence on the state

social care system?

• Rational and pro-active behaviour on the labour

market requires knowledge and responsible

attitude

• Investing in financial literacy and shaping

attitudes may cost less than unemployment

benefits

• A sustainable pension system would require

more savings from the citizens’ side

„Family Treasure” Programme

Links to society at large

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Responsible attitude of citizens better

labour and tax morale Balance of the state budget fairly depends

on attitudes of citizens

Votes politics economy politics

(ultimately) Prudent voters ~ prudent directions

• home budget ~ state budget

Lack of knowledge gives room for populism

„Family Treasure” Programme

Further benefits for decision makers

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Thank you for your attention!