IFC BANK ADVISORY SERVICES – MIDDLE EAST & NORTH AFRICATRANSFORMATIONAL ROADMAP FOR JLGC

Hermann Bender

November 25, 2014

World Bank Group commitment to Jordan

Enabling Environment

Advisory Services to Financial

Institutions

Support and Training to

MSMEs

Assistance to JEDCO on the proposed “MSME Strategy for Jordan” $3M Transition Fund for enhancing governance and

strengthening the regulatory and institutional framework for MSMEs in Jordan.

Technical partner of private credit bureau selected (IFC) Secured lending law for the establishment of a collateral registry

(IFC) Technical assistance to JLGC on strengthening its risk framework and outreach in addition to up scaling its SME Business.

Technical assistance to Bank al Etihad on strengthening its SME operations

Series of trainings for Ejara Leasing Company on Sustainable Energy Finance

Support to MFI: Tamweelcom on risk management and new products Supporting Jordan Institute of Directors on building its capacity to advocate improved Corporate Governance standards and rolling out training programs

In depth advice to two firms by assessing their corporate governance practices

Investment Activities

GTFP lines for four commercial banks Loans to three Microfinance institutions Equity and Subordinated Debt Exposures to a commercial bank

JLGC share in country MSME financing < 2% - however there is still an estimated $ 2B financing gap

SOURCE: Union of Arab Banks/World Bank Financial Flagship Report 2011; McKinsey-IFC MSME Database 2011

JLGC schemes outreach is lower than most MENA countries programs

33

SOURCE: World Bank-A review of Credit Guarantee Schemes in MENA region

Outreach of Guarantee schemes in benchmark countries

  Number of guaranteesissued in 2009

Outstanding guarantees in 2009Average value of guarantees issued in

2009 

Number Per million peopleAmount

in US$ Million% GDP

Amountin US$

Scaled by GDP per capita

Chile 60,000 1,800 1,000 0.6 10,000 1.0

Colombia 200,000 4,440 1,380 0.6 13,000 2.4

Hungary 31,000 3100 2,680 1.9 76,500 5.5

India 100,000 100 1300 0.1 10,000 10

Korea 200,00 5,000 50,000 5.0 125,000 7.0

Malaysia 14,000 400 2,000 1.0 66,000 9.4

Romania 6,600 285 700 0.4 80,000 10

Taiwan 220,000 8,000 12,000 3.5 50,000 3.0

Jordan 245 33 16 0.07 37,700 10

Average 1,082 80 142 0.32 75,000

SOURCE: World Bank – MENA Flagship Credit Guarantee Schemes

Key messages: JLGC Diagnostic

Background: IFC conducted a diagnostic mission followed by submission of detailed recommendations during Q4 2012, identifying a number of areas for potential collaboration

Technical Assistance: A detailed technical assistance road-map & project design was submitted and scope agreement was obtained during Q1, 2013. Project kick-off awaits formalization of financing mechanism & legal agreements

Current State: JLGC‘s contribution to market SME lending is currently low; multiple areas of deficiencies were identified and benchmarking with best practice schemes was performed

Competencies enhancement: Proficiency in 6 key areas of core competencies is required to achieve scale, sustainability and efficiency

Organizational implications: The recommendations proposed by IFC require commencement of a “transformation” agenda to achieve desired outcomes

JLGC would need to build strengths in six main areas.......

Organization & HR

Analytics & Systems

Payment Rules Risk Management

Delivery Model

Segmentation

STRENGHTS

Prioritized Areas for Development

Module One:SME Market Demand

Research

Module Two:Product Development

(Segmentation & Delivery)

Module Three:Risk Management

Module Four: Marketing & Outreach

(Delivery Model Enhancement)

Module 5: Implementation Support

PHASE ONE: CURRENT SCOPE

PHASE TWO

Transformation quick wins that would facilitate achieving the key areas’ respective

objectives within a limited timeframe as shown in the project roadmap section

Will be discussed & scoped after phase I delivery and finalization whilst providing

adequate assurance that set key objectives are materialized and impact is being adequately assessed throughout the

organization and with relevant stakeholders.

Module Six:Payment Rules

Module Seven:Systems &Analytics

Module Eight: Organization &

HR

Objective

Objective

Project Status

OngoingCompleted

IFC support

IFC deliverables

Timeline

The following has been delivered and pending approval:

► SME Risk management framework package

► SME Banking Product Program based credit manual

► Risk Scoring Model

The following has been delivered and approved:

► Documented Marketing Strategy

► Market outreach plan

Executive Summary of Opportunities and Findings as a key input to Module 2. (Delivered and approved by Steering Committee)

Product Proposition Report. (Draft Report has been submitted to JLGC for review on March 11, 2014)

Existing Services Development/Enhancement criteria (Proposed DLP)

Market Research

1

► Meetings with JLGC team to learn about the current state of operations and to identify opportunities for product development.

► Meetings with 11 partner banks to understand the lenders’ issues and the variety of business models used by the participating lenders.

► SME Focus groups to be conducted by market research firm to identify segmentation approach for JLGC and banks. To be completed by early May.

► Review of existing JLGC products

► Reference to global guarantee schemes

► Revise characteristics of current guarantee programs

► Enhance the quality of JLGC services

► Advise on current scheme/new products

► Stay abreast of market development

► Standardize and automate the credit guarantee application

► Establish a risk management framework

► Development of a risk inclusive culture

► Expert based scorecard for SMEs

► Based on Module 1 recommendations and outcome from market study. More focus will be on the desired outreach segments (customers, sector, geographies, etc.)

► Review progress against plan and provide ad hoc consultancy support as needed on site

► Support the resolution of implementation challenges as required

► Monitoring & evaluation

Nov 2013

Feb 2014

May 2014

July 2014

One year post

delivery

Product Development

2

Risk Management

3

Marketing Strategy & Outreach Plan

4

Implementation

5

► Status update, findings and recommendations summary report for each visit

Portfolio Performance

Description FY11 FY13

No. Vol. (In JD) No. Vol. (In JD)

*Guaranteed loans during the year 447 8.1M 719 17M

*Outstanding Portfolio 819 14M 1,362 28M

Claims paid 16 649,921 7 169,340

* Excluding Real Estate and Personal Loans

THANK YOU FOR YOUR ATTENTION

Hermann Bender

November 25, 2014