ПРОГРАММА МАЛОГО БИЗНЕСА КАЗАХСТАНА Kazakhstan Small Business Programme KSBP- Microfinance in Kazakhstan Lorenz Gessner Almaty, 10 November 2005 KSBP- Microfinance in Kazakhstan Lorenz Gessner Almaty, 10 November 2005

Summary History and results Sustainability Lessons learned

Yesterday – the situation in 1998 MSE CLIENTS: MSE clients had very limited access to credit resources Money was borrowed on the black market at high interest rates Slow development of the MSE sector KAZAKH COMMERCIAL BANKS: Disbursed loans only to very large companies and state-owned enterprises Lack of an approach to lending to microenterprises (sole proprietorships and very small firms) Lack of trained staff who could analyze MSE clients Little interest in disbursing loans to MSEs (poor reputation)

KSBP - organisation of processes

IPC GmbH (Internationale Projekt Consult GmbH) Consulting firm with 25 years’ experience in microfinance IPC’s range of services comprises three components: Consultancy services Project management Bank management services IPC developed a credit technology precisely tailored to the special conditions prevailing in transition economies Similar projects in Russia (RSBF), Kyrgyzstan (MSFF), Ukraine (UMLP), Armenia (GAF) Best practice banks (ProCredit Banks) in Serbia, Bulgaria, Ukraine, Romania, Albania, Russia, Macedonia, Moldova, and also in Africa and South America

KSBP portfolio as a share of partner banks´ total loan portfolio (end-June 2005) Banks Assets (USD billion) Loan portfolio (USD billion) KSBP share (%) Branches/ Outlets Employees /633, /1882, /5348, /111, /1041,828

Kazakhstan Small Business Programme Results

Kazakhstan Small Business Programme Results

KSBP regional expansion with partner banks (in 47 cities and over 210 branches)

KSBP portfolio at risk (as of end-October 2005)

Outstanding loan portfolio volume: Breakdown by loan size (as of end-October 2005) - Express - Micro - Small

Breakdown by maturity (as of end-October 2005)

Sustainability - key factors Adapted to target group, competitiveTerms and conditions MSE credit department at head office, people, workflow Organisational structures High quality, regularity, trainingAudit Strict, but with flexible elementsLending technology Complete and clear description of procedures Documentation Continuous monitoring of profitability of MSE lending Profitability High quality, regularityTraining of loan officers Easy to obtain, accessibility, serviceProducts PRIORITIESFACTORS

Easy to obtain EXPRESS LOANS - target group: sole proprietorships Loans up to USD 5,000 Disbursement within 2 days Minimum collateral - 100% current assets (stocks) MICRO LOANS - target group: sole proprietorships, micro companies Loans up to USD 10,000 Disbursement within 4 days Minimum collateral - current assets, movable assets (cars, personal goods, stocks) SMALL LOANS - target groups: legal entities, companies, sole proprietorships Loans up to USD 200,000 Disbursement within 5 days Collateral - fixed assets (real estate, vehicles), current assets AGRICULTURAL LOANS - target group: sole proprietorships and legal entities in the agricultural sector Loans up to USD 200,000

Maturities: initially up to 1 year, now up to 7 years Collateral: more flexible approach Repayments: initially strict equal instalments, now grace periods or varying instalments possible New businesses: initially only existing businesses, now also new businesses set up by existing clients Adapted to the target group

High quality Training comprises 5 different types of seminars and intensive practical instruction – Micro – Express – Small seminars – Senior – Back Office Training of bank auditors

Number of loan officers trained – 2,647 Number of seminars conducted- 135 Regularity

Credit procedures Job specifications for employees Documents on loan officer training, selection and career opportunities Incentive systems Code of conduct Complete and clear descriptions

Client acquisition Financial analysis Internal credit committee Credit committee Loan disbursement CREDIT CYCLE Monitoring Arrears Repayment of loan Strict, but with flexible elements

Methodology Training MSE credit departments at head office Example of a structure of MSE lending co-ordination at head office of a partner bank Head of Co-ordination Head of Co-ordination Regional Manager Regional Manager Regional Co-ordination Unit Methodology and Training Unit Methodology and Training Unit 2 Auditors for MSE lending Regional Manager Regional Manager Regional Manager Regional Manager Regional Manager Regional Manager Head of Department Head of Department

Contribution to overheads and profit before tax for 2004 Total: USD 20 million KKB USD 4.0 million BTAUSD 4.7 million HSBKUSD 6.1 million BCCUSD 2.3 million ATFUSD 2.9 million Continuous monitoring of profitability

Percentage of KSBP partner banks´ total loan portfolios financed with own funds (end-October 2005) Banks Outstanding volume of KSBP loans (USD million) Outstanding volume financed with EBRD funds (USD million) Share financed with own funds (%)

Analysis of business growth based on KSBP lending

Number of loans Growth of equity Growth of number of employees 251%9% 353%15% 449%16% 549%14% 644%17% Average51%12%

Analysis of business growth based on KSBP lending

Competition in financial sector Adaptation of products and procedures to clients’ needs Contribution to TA from partner banks enhances project success Banks have to be engaged as early as possible (transfer of responsibilities) Long-term interest in MSE lending depends on institution building and the ownership of the bank KSBP - Lessons learned

New programme since Nov EBRD-credit line of USD 100 million Participants: Commercial banks and a non-bank microfinance organisation Targeting on the regional outreach- access for farmers and micro-businesses in the regions KSBP III- agricultural and rural lending