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					        Private Sector Promotion (SMEDSEP) Program /
        Microinsurance Innovations Program for Social Security (MIPSS)


            Building a Profitable SME Lending Business,
          Delivery of Sustainable Microinsurance Products,
     Enhancing Access of the Poor and SMEs to Financial Services


              52nd RBAP Charter Anniversary Symposium
                             October 9, 2009 – Sofitel Hotel, Manila

                 Theme: “Banking on the base of the pyramid”


    Mr. Dante Oliver Portula, Senior Finance Adviser
         German Technical Cooperation (GTZ)
Dr. Antonis Malagardis, MIPSS Program Manager, GTZ


                                                                       23.06.2011   Seite 1
                           Outline
A. SME cashflow based lending model
1. GTZ Overview
2. PSP SMEDSEP Program Overview
3. Strategies to develop the SME Lending model
   1. Development of training modules
   2. Testing of the Lending model
   3. Capacity building of training providers, pool of trainers,
      coaches
4. Performance of banks and Capacity of Training Providers
B. Microinsurance


                                                       23.06.2011   Page 2
                                                                    Seite 2
                     German Technical Cooperation

GTZ is an international cooperation                          For 30 years, GTZ has been
enterprise of the Federal Republic of                    providing viable, forward looking
Germany for sustainable development                      solutions for political, economic,
                                                        ecological and social development
with worldwide operations.                  GTZ                  in a globalized community
Sustainable Development (SD)             Deutsche
                                       Gesellschaft fÜr
                                        Technische
                                      Zusammenarbeit
                                           GmbH
GTZ`s approach to promote change is                       Joint projects and programs
developing the capacities of partner                 are designed towards socio-economic
organizations and its people. Capacity                   progress in partner countries.
Development (CD)                                        Management for Development
                                                                 Results (M4DR)

                                                                       23.06.2011   Page 3
                                                                                    Seite 3
                      Integration of BIC Models


                       PSP (SMEDSEP) Objective
        Framework conditions for private sector development in
        the Philippines, especially in the Visayas, are improved


                 Local and Regional Economic Development (LRED)

                                Value Chain (VC)

                      Business Development Services (BDS)

  BPLS, NERBAC                               SME Finance

 Business and
  Investment             Access                Access                Productivity
   Enabling            to Markets            to Finance             and Efficiency
 Environment



Philippine National Small and Medium Enterprise Development (SMED) Plan

                                                                   23.06.2011   Page 4
                                                                                Seite 4
                               Lack of Access to Credit persists…




                                                Close to 80% of respondents said Access
                                                to Funding and Working Capital is
                                                insufficient which is an obstacle to SME
                                                competitiveness

Source: UPS Asia Business Monitor, 2009                           23.06.2011
                                                                    23.06.2011   Page 5
                                                                                 Seite 5
For the past 6 years, GTZ SMEDSEP Program
has supported the promotion of an SME
cashflow based lending model that is

Building a Profitable SME Lending Business and
Enhancing SME Access to Credit… (the base of the
pyramid)…


The Strategies:

1. Development of SME Lending training modules.
2. Testing of the cashflow based lending model.
3. Capacity building of Training Service Providers
4. Building a pool of trainers and bank coaches.
                                            23.06.2011   Page 6
                                                         Seite 6
       The process flow of cashflow / risk based lending




              

     Regular loan
     amortization and
     monitoring




The lending technology focuses on assessing viability of business proposal. The capacity
   of business to generate income is the primary factor for decision (collateral is only
   secondary) and in defining its terms/conditions.
                                                                     23.06.2011   Seite 7
             The SME Finance training modules


                  Loan           Middle          Top
    Module
                  Officers     Management     Management
SME Finance                                         1 day
CREDIT
                10 or 6 days   10 or 6 days
Appraisal
Credit Risk                                        3 days
                                3 days
Management
Product
Development                     2 days             2 days
Selling
                                1 day              1 day
Skills



                                              23.06.2011   Page 8
                                                           Seite 8
       Capacity building of TSPs, trainers, coaches

 Training of national experts by international SME
  finance consultants (competitive selection)
 Certification of trainers, building pool of trainers
  and coaches (quality assurance)
 Implementation of SME finance trainings for banks
  by the TSP (quality supervision)
 Support development of new training products and
  lending tools based on market demand
  Incentive for TSP is to develop a sustainable training
   business
                                                  23.06.2011   Page 9
                                                               Seite 9
    Roll out of market-based training programs…


The Training Service   Capacity and Performance
Providers               Fully functional Training Units of TSPs
                       competent to organize and manage the
University of the      training programs.
Philippines –           14 ToT graduates and Certified Trainers
Institute for Small    are actively engaged in the roll out of
Scale Industries       trainings.
(UP-ISSI)
                        Trained around 800 staff from 150 banks
Associated
                       and cooperatives across the country.
Resources for           Participants are drawn from training
Management and         contracts with: LBP, IGLF, Surety Fund,
Development            BSPI, requests for in-house training from
(ARMDev)               large RBs and from open market.


                                                    23.06.2011   Seite 10
training in action…




                      23.06.2011
                        23.06.2011   Page 11
                                     Seite 11
       Proving the SME cashflow based lending…
 FAIRBank (Cebu) and Bank Victorias (Panay) hosted the
institutionalization of the SME Lending technology. Results so far is
above expectations in terms of

     expanding its lending business
     better quality of loan portfolio
     increasing profitability that is long term and more predictable
     compliance to RA 9501 – Magna Carta for MSMEs

 Two large rural banks are now replicating the SME lending
technology with some innovations.

Success factors:
 Commitment of bank owners
 Investment on human resources / systems development
 Clear vision for business growth
                                                          23.06.2011   Seite 12
       Proving the SME cashflow based lending…
        Number of SME Loans (FAIRBank, Bank Victorias combined)

600

                                                12%▲
500
                           8%▲                                    478
                                                 469
                                       451
400               412       418
       386

300


200


100


 0
      June'07    Dec'07    June'08    Dec'08    June"09       As of Aug'09


                                                       23.06.2011
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                                                                      Seite 13
        Proving the SME cashflow based lending…
        SME Loan Portfolio (in Millions) - FAIRBank, Bank Victorias
                                combined
300.0

                                                     55%▲
250.0
                                                                        253.1
                                                      235.2
200.0                                      218.2

                              60%▲
150.0
                               151.6

100.0               116.2
         94.8

 50.0


  0.0
        June'07    Dec'07     June'08     Dec'08     June"09      As of Aug'09

                                                         23.06.2011
                                                           23.06.2011    Page 14
                                                                         Seite 14
         Proving the SME cashflow based lending…
                  SME Loan Portfolio Quality (PAR 31) –
                   FAIRBank, Bank Victorias combined
12.0%

                           9.8%                  9.6%
10.0%


 8.0%
                                       8.5%                           7.5%
          6.1%
 6.0%

                  5.6%
 4.0%


 2.0%


 0.0%
        June'07   Dec'07   June'08    Dec'08    June"09      As of Aug'09

                                                    23.06.2011
                                                      23.06.2011   Page 15
                                                                   Seite 15
    Are you interested to build a profitable SME Lending
business, and bank on the base of the pyramid (the SMEs)?…

 Contact:
  UP-ISSI (phone: 928-7076 to 79; email: training.issi@up.edu.ph) or
  ARMDev (phone: 924 48 21; email: armdevinc@yahoo.com) or
  Virginio ‘Gini’ Jamon – senior     CREDIT trainer and coach (phone:
   +63 9393984473; email: ginny_jamon@yahoo.com) or
  Ulla Tornroos – Financial Systems Director,
   email: ulla.toernroos@gfa-group.de)




                                                       23.06.2011
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                                                                      Seite 16
The next question is - what could be the link of banking on
      the base of the pyramid to Microinsurance…?


• In terms of managing CREDIT RISKS by way of
  protecting your SME clients to financial risks?
• In terms of ensuring a long term business
  relationship and loyalty of your clients?


   Allow me therefore to introduce another project of
   GTZ on Microinsurance Innovations…




                                              23.06.2011
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                                                             Seite 17
   Microinsurance Innovations Program
       for Social Security (MIPSS)
Program Duration     4 Years (Jan 2009 to Dec 2012)
Goal                 The risk protection and security of poor
                     people in the Philippines is improved.
Target Groups        Poor Households, Micro and Small
                     Enterprises
                     1. Frame conditions for Microinsurance
Program Components   2. Microinsurance Innovations
                     3. Social Protection in case of Illness
Project Area         Nationwide, especially CARAGA, Visayas
Executing Agency     Department of Finance – National Credit
                     Council (DoF-NCC)

                                                  23.06.2011   Page 18
                                                               Seite 18
                                             MIPSS
                     Microinsurance Innovations Program for Social Security


                            Expected Outputs
      Component 1                     Component 2                     Component 3
Enabling Framework for MI             MI Innovations               SP in case of Illness


A national concept (strategy)   Two new MI products are         Two new health insurance
on the role of MI in social     developed in line with new      products are developed in
protection is developed         regulatory framework            line with new regulatory
                                                                framework
A national strategy on
consumer education on MI
is prepared                     Agreements with Microinsurance Providers, Re-insurers
                                (and other MI delivery channels) are set-up and detailed
An RBC system for MI            procedures are in place
providers is prepared
                                 A handbook on strategies for promoting MI awareness and
Training Manuals adapted        financial literacy is developed
to the regulatory/supervision
needs are developed


                                                                        23.06.2011   Page 19
                                                                                     Seite 19
                                 MIPSS
         Microinsurance Innovations Program for Social Security


      Existing initiatives of MIPSS
1. Completed the Microinsurance demand study.
2. Completed the Risk Based Capital (RBC) review.
3. In progress – drafting of National Regulatory
   Framework on Microinsurance.
4. In progress – drafting of National Strategy on
   Microinsurance.
5. In progress – laying the ground for product
   development of weather-index agro insurance
   using Public Private Partnership (PPP) scheme.
6. In progress – study on complementation of
   commercial micro health insurance to social
   health insurance of PhilHealth.
                                                        23.06.2011   Page 20
                                                                     Seite 20
                                  MIPSS
          Microinsurance Innovations Program for Social Security



   What could be the role of Rural Banks?

1. Channel of distribution of Microinsurance
products?

2. Public awareness and education (financial
literacy)?

There are on-going discussions on this concern…




                                                         23.06.2011   Page 21
                                                                      Seite 21
              Maraming salamat po !!

            GTZ, Dante Portula dante.portula@gtz.de
       GTZ, Antonis Malagardis antonis.malagardis@gtz.de




Partners:



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