2 nd European Microfinance Conference 2005 WORKSHOP « Transparency: Agreement on basic benchmarks in Europe? » Barcelona 28 October 2005

October 2005 ShoreBank Advisory Services International ShoreBank Advisory Services – International Benchmarking

ShoreBank Corporation Largest development finance institution in U.S. Founded in 1973 to maintain banking services and arrest decline in Chicago community Has grown to $1.7 billion in assets Bank achieves returns equal or superior to banks of comparable size that do not have a community banking focus Managed to “triple bottom line” of development impacts, conservation and profitability Core competencies in Financing residential real estate rehabilitation Small business lending Promoting wealth accumulation for lower-income families 1

SASI disseminates ShoreBank’s unique experience internationally Facilitates access to capital through the private sector Understands the specific requirements of communities with constricted access to capital. Creates relationships with entrepreneurs and businesspeople in developing communities by being part of that community ShoreBank’s International Footprint Led to Creation of SASI Our International consulting business began when Muhammad Yunis of Grameen Bank asked us to go to Bangladesh and work with him on risk management and lending in disadvantaged communities 2

ShoreBank’s International Organization ShoreBank Corp (Holding Company) ShoreBank Advisory Services (Consulting) ShoreBank Advisory Services UK Ltd Shore Overseas Azerbaijan (Non-Bank Finance Co) Technical assistance Investment ShoreCap International (Investment Fund) ShoreCap Exchange (TA Facilitator) 501(c)3 ShoreBank Advisory Services Mexico S.A. de C.V. 3

CGAP Donor Guidelines 1.Outreach – How many clients are being served? 2.Depth of outreach – How poor are the clients? 3.Portfolio quality – How well is the financial institution collecting its loans? 4.Financial sustainability – ability to maintain and expand without continued subsidized donor funds? 5.Efficiency – Is the financial institution providing services at the lowest possible cost to client? 4

Developing vs. Developed Interesting to note difference International Donors (DFID, KfW, FMO, AFD, EBRD) require performance based reporting and link further funding to assessments. The consultants and investors from Europe into developing microfinance do the same (IPC, Bank Akademie, Planet Finance, ShoreCap, Oikocredit) Yet US and UK CDFIs have taken longer to provide similar levels of reporting and benchmarking Donor/Funders in developed countries have taken a gentler approach. NCCA took 20 years to introduce CARS. 5

Road Map to Benchmarking Drawing from CGAP and Developing MFI Lessons: Funder/Donor Requires Reporting Coupled with capacity building, information used by MFI to improve operations After initial experience, becomes tool for fundraising and marketing Becomes a must within sector Benchmarking and relative performance is feasible Funder Driven Reporting Requirement Info used to improve operations Becomes tool for fundraising & marketing Benchmarking feasible Key ratios & Reports a Sector norm 6

Challenges Volunteer Boards Funders/Donors without skills, capacity, interest Inadequate Systems Small and stretched management teams at MFIs Associations lack leverage 7

Questionnaire What indicators do you currently report? Provide definitions for each Who requires these indicators – management, board, stakeholders, donor/funders? How are these indicators used? What challenges do you face in reporting and tracking indicators? 8

Possible Indicators: 9 OutreachNumber of Loans disbursed Number of Active Clients Depth of Outreach Number of clients in target market (deprived, on benefits, ex-offenders, etc) Portfolio Quality PAR > 30 Financial Sustainability Earned Revenues as % of Total Revenues EfficiencyOperating expense ratio No. of Loans disbursed per loan officer Number of active loans per loan officer