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					                    Microfinance: How to fight poverty when
                    you are a commercial bank

                    The BNP Paribas Model

                                              By Alain Lévy




                                                       micro          φ
Santo Domingo,                                   Social finance to fight poverty

9th of July, 2009
                                                                        Introduction




                           « The poor stay poor not because they are lazy
                           but because they have no access to capital »

                           Milton Friedman
                           Nobel Prize for economics




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                                                                          Plan of the Presentation

                           1   Brief Presentation of BNP Paribas

                           2   How and why BNP Paribas is involved in Microfinance
                                  A pioneer in microfinance in France
                                  An increasing involvement in the world since the years 2000s
                                  The stakes of BNP Paribas to be in microfinance

                           3   A specific model designed for this mission
                                  In an increasing market with different kinds of MFIs,…
                                  …our business model aims to reach a double bottom line
                                  BNP Paribas is looking for MFIs with criteria meeting our policy
                                  In that purpose, all the departments of the bank are involved.

                           4   Based on our experience, 6 key success factors are
                               necessary for a commercial bank to be active in Microfinance

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                           5   Our results
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                               Conclusion                                                            micro   φ
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                                                             Presentation of BNP Paribas Group

                           A global presence

                           BNP Paribas is present
                           in 88 countries
                           (coloured), including
                           around twenty where
                           microfinance plays an
                           important role (dark
                           blue)



                           Main Figures

                                                      2005       2006         2007      2008 Var 2008/2007
                           Net banking product        21,2        27,9        31,04     27,38   -11,8%
                           Total balance sheet        1258       1440         1694      2076     22,6%
                           Part of the group
                                                       5,9            7,3       7,8        3    -61,5%
                           (net result)
                           Staff                    109780     141 911      161 000   173 200    7,6%
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                                                                          Plan of the Presentation

                           1   Brief Presentation of BNP Paribas

                           2   How and why BNP Paribas is involved in Microfinance
                                  A pioneer in microfinance in France
                                  An increasing involvement in the world since the years 2000s
                                  The stakes of BNP Paribas to be in microfinance

                           3   A specific model designed for this mission
                                  In an increasing market with different kinds of MFIs,…
                                  …our business model aims to reach a double bottom line
                                  BNP Paribas is looking for MFIs with criteria meeting our policy
                                  In that purpose, all the departments of the bank are involved.

                           4   Based on our experience, 6 key success factors are
                               necessary for a commercial bank to be active in Microfinance

  Service ou direction
                           5   Our results
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                               Conclusion                                                            micro   φ
9th of July, 2009                                                5
                                          How and why BNP Paribas is involved in Microfinance

                               A pioneer in Microfinance in France
                                 1. A pioneer in France…
                           Since 1993, partnership between                            In 2009, Projet Banlieue (project for
                            BDDF (FRB – French Retail Banking)                          underpriviledged areas) coordinated by
                            and Adie (Association pour le Droit à                       the BNP Paribas Foundation supports
                            l’Initiative Economique):                                   job creation via microcredit, in
                            EUR 300 000 a year                                          partnership with Adie:
                                                                                           650 000 euros/year grant over 3
                                                                                           years
                           In 2006, 1400 projects were                                     Support for the creation of 6 new
                            financed by BNPP through                                       microcredit branches in problem
                            Adie for a total of EUR 5                                      urban areas
                            million                                                         Coaching of 700
                                                                                           microentrepreneurs
                               Other initiatives in France
                             Obli Etheis: mutual fund part of the Retail Banking range of product for private individuals
                              including a 5-10% microfinance pocket, since 2008

  Service ou direction       JACADIE Project – Voluntary Work (J’Accompagne les Créateurs de l’Adie)
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  affichage/masque/diapo      Involvement of active and/or retired Group staff members in France to help Adie
                              microentrepreneurs: 66 persons involved since 2005                              micro          φ
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                                        How and why BNP Paribas is involved in Microfinance
                            An increasing involvement in the World since the years 2000s
                            Positive experience in refinancing MFI since 2001 through
                           International Retail Banking Network in Africa (Morrco,
                           Guinea, Egypt, Madagascar) in developing countries
                           Target countries (* already active in microfinance)
                              Africa: Mauritania*, Morocco*, Algeria, Tunisia*, Egypt*,
                               Senegal*, Guinea*, Mali*, Burkina*, Madagascar*
                              Asia: India*, Vietnam, Philippines*, Indonesia, China
                              Latin America: Mexico*, Argentina*, Brazil, the Caribbean,
                              Colombia, Perou;

                            Distribution of Microfinance funds embedding international MFIs
                             ResponsAbility Fund / Planet Finance
                              distributed by BNP Paribas international private banking since 2005
                             Dexia Blue Orchard Fund
                              distributed by Banque Privée Anjou

                            Voluntary Work through MFSF Initiative (Microfinance Sans Frontières)
  Service ou direction      Employees and retired staff members bring their skills to MFI: 10 projects supported
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  affichage/masque/diapo    since 2007.
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                                       How and why BNP Paribas is involved in Microfinance
                                                         A social responsibility stake
                                                   Microfinance is a natural field for bank social
                                                    responsibility
                                                    Poor people inclusion in financial system
                           An innovation and social                                              Implementation of
                            entrepreneurship stake                                              Microfinance Group
                           100% business (costs
                           and risks coverage)                                               June 2006 : Agreement
                           100% social in its                                                in principle of the
                           objectives (maximising                                             Group Executive
                           the social impact)                                                 Committee
                                                                                             November 2006 :
                                                                                              analysis of the risk
                                                                                              model
                                             A Human Resources stake                         December 2006:
                               According to Global People Survey, social responsibility is   Operational Launch
                               the strongest leverage for collaborators motivation           May 2007 : Allocation of
                                                                                              a €100 Millions
                               Particular impact on young employees who want to match
                                                                                              envelope for risks
  Service ou direction         professional life with social commitment
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                                                                          Plan of the Presentation

                           1   Brief Presentation of BNP Paribas

                           2   How and why BNP Paribas is involved in Microfinance
                                  A pioneer in microfinance in France
                                  An increasing involvement in the world since the years 2000s
                                  The stakes of BNP Paribas to be in microfinance

                           3   A specific model designed for this mission
                                  In an increasing market with different kinds of MFIs,…
                                  …our business model aims to reach a double bottom line
                                  BNP Paribas is looking for MFIs with criteria meeting our policy
                                  In that purpose, all the departments of the bank are involved.

                           4   Based on our experience, 6 key success factors are
                               necessary for a commercial bank to be active in Microfinance

  Service ou direction
                           5   Our results
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  affichage/masque/diapo
                               Conclusion                                                            micro   φ
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                                                          A specific model designed for this mission

                             In an MFIs we target
                             1. The increasing Market                 with different kinds of MFIs
                           According to the Deutsche Bank
                           survey “ Microfinance: An emerging
                           Investment Opportunity” (December
                           2007)                                                           2%                 Targets for
                                                                                       Regulated              refinancing
                                                                                          MFIs                  activity
                           Unit (Bn USD)          2006        2015
                                                                                           8%
                           Market Volume            25         250                  Sustainable and
                           Microfinance                                               profitable
                                                      2         20                       MFIs
                           funds                                                     Future banks                  Targets for
                           International                                                  20%
                                                                                                                    Technical
                           Financial                2,4          5              Almost sustainable MFIs            assistance
                           Institutions                                            ( lack of funding,
                                                                                  managerial skills…)


                                                                                          70%
                            100 million              1’000 million
                                                                                       Local MFIs
                                 of                  of expected
                            customers                 customers
                              in 2006                   in 2015
                                                                            Based on a sample of 3 000 MFIs

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                                   Current penetration rate
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                                            10%                                                           micro     φ
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                                               A specific model designed for this mission
                           Our business model aims to reach a double bottom line
                                          Microfinance includes every element of the banking process
                             A banking    (business relationships, risk analysis) but will never be an
                             business     ordinary banking business because of its extraordinary social
                                          impact
                                 +
                                          Maximise the number of poor people assisted
                                          Help to promote women’s condition (3/4 of the borrowers)
                              A social    A micro loan in a developing country: from 20€ to 200€
                              impact
                                                                                                   Big impact
                           Small money

                                  =

                              Double             Seek community impact
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                            Bottom Line          Seek a fair return (i.e. covering the costs)
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                                                             A specific model designed for this mission

                              BNP Paribas is looking for MFIs with criteria meeting our policy

                                                                                             Country
                                   Local (or regional) presence                               Risk
                                          of BNP Paribas
                                                                              Social
                                                                                                           Regulation
                                                                             Outreach
                                    Funding in local currency
                                    (local capacity, guarantee
                      Our Policy




                                                                                                                               Our Critera
                                             swap…)                                            The
                                                                         Equity &             Ideal             Management
                                     Our financial target: to            Funding               MFI
                                     cover our costs at least

                                     Conservative approach
                                   (tenor, amount) with a view                Asset
                                                                                                          Sustainibility
                                    of long-term relationships                Quality         Risk
                                                                                           Management
                                   Each Credit file is presented to our Credit Committee.
                                   All those elements are taken into account for the final
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                                   Of course, perfect MFIs do not exist. BNP Paribas is choosing MFIs to fund      micro   φ
9th of July, 2009                  contingents on their strengths and weakenesses with room for improvement.
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                                                   A specific model designed for this mission
                            3. An purpose, all the
                           In thatintra-group activity departments of the banks are involved

                                            AMS / BP
                                                                            JACADIE                   MSF
                                    BNP PAM        BP
                                                                         « J’accompagne        « Microfinance
                                                                           les Créateurs            Sans
                                                                         d’Entreprise de        Frontières »
                                                           FIN
                                        Cellule                               l’ADIE »
                              CIB       micro-


                                      IRS        GRM
                                                                            FRANCE            INTERNATIONAL



                                    Professionals                                  Volunteers
                              50 people involved in the group,            60 retired people from the banqk giving
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                           managed by central team in AMS BP with          technical assistance to IMF or ADIE
  affichage/masque/diapo       correspondent in CIB and IRS
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                                                                          Plan of the Presentation

                           1   Brief Presentation of BNP Paribas

                           2   How and why BNP Paribas is involved in Microfinance
                                  A pioneer in microfinance in France
                                  An increasing involvement in the world since the years 2000s
                                  The stakes of BNP Paribas to be in microfinance

                           3   A specific model designed for this mission
                                  In an increasing market with different kinds of MFIs,…
                                  …our business model aims to reach a double bottom line
                                  BNP Paribas is looking for MFIs with criteria meeting our policy
                                  In that purpose, all the departments of the bank are involved.

                           4   Based on our experience, 6 key success factors are
                               necessary for a commercial bank to be active in Microfinance

  Service ou direction
                           5   Our results
  à modifier dans
  affichage/masque/diapo
                               Conclusion                                                            micro   φ
9th of July, 2009                                                14
                           Based on our experience, 6 key success factors are necessary
                                      for a commercial bank to be active in Microfinance
                           Based on BNP Paribas experience in microfinance, we identified 6 key
                           factors for a commercial bank to launch a microfinance project

                           The Committment          The top management must be convinced
                               of the top           about the social benefits and the
                             Management             seriousness of the economic model


                                                    Local bankers know better the MFI than
                           Local partnership
                                                    people from the Head Office. Moreover local
                              with MFIs             staff is always very proud to contribute to
                                                    such a social responsibility action

                                                    He should be a social entrepreneur, able to
                             Project leader
                                                    move the bank from the inside into
                                 skills             innovative fields
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                           Based on our experience, 6 key success factors are necessary
                                      for a commercial bank to be active in Microfinance

                                               Each case must be examined individually in the
                           Taming the risks    framework of the microfinance policy. A specific
                                               credit has to be defined with the risk
                                               management


                                               We must be able to measure our social impact.
                                               3 simple indicators are: how many people do
                           Social indicators   we finance through our loan? Proportion of
                                               women? What is the average retail loan?


                                               We are proud of what we do in microfinance, we
                           Communicate but     must communicate. But too much
                             not overstate     communication kills communication. Image has
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                                               to perfectly match the reality of the business
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                                                                                                Our results


                            BNPP Microfinance covers its costs
                            EUR 60 Mio in utilisations with 21 partners in 12 countries
                            Social Impact: 438 000 borrowers, representing 2 million impacted people
                            Technical Assistance
                            - MSF (Microfinance Sans Frontières) : 10 projects
                            - JACADIE: 60 people involved
                           Microfix: Specialised funds to hedge foreign currency risk, to be launched in 2009
                            with Fixed Income
                           Health and Life Micro-Insurance, Partnership with SBI in India. 10 Mio of
                            contracts for 2009
                            Equity stake in Planet Guarantee to serve worldwilde the reinsurance demand of
                            MFIs
                           Financités/Planet Finance (France): 1 Mio € is invested in equity in small business
                            units in underpriviledged areas

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                               Conclusion


                              Microfinance is not a magic tool to eradicate poverty
                              Microfinance is not a new market segment to maximize our
                               profits
                              Microfinance should remain a responsible business and not
                               a usual business
                                   Do MFIs really finance the poor?
                                   What is the real interest rate they charge?
                                   What about the risk of overindebtness?
                                   Where are the limits between microfinance and consumer lending?

                              In those conditions, responsible banks will be able to
                               contribute really to financial inclusion and poverty alleviation

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                           Thank you for your attention
                                  -Questions-




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