1 e-MFP European Microfinance Week 2009 Growth and resilience of savings-based MFIs during the global crisis Moderator: Hans Dieter Seibel Luxembourg, 25 November 2009

2 The meltdown… … and the evidence from savings-based MFIs  The meltdown…  “The $32-billion microfinance sector has been pounded by the worst economic slowdown since the Great Depression“ (The American Banker, 1 Sep 2009)  „…microcredit portfolios are stagnant or shrinking” (CGAP, May 2009)  … and the evidence from savings-based MFIs:  PCF Vietnam:1,015 member-owned credit coops  BRI MBU:4,600 commercial microbanking units  CIF West Africa:6 mutualist microfinance networks

3 Growth and resilience of the People’s Credit Funds, Vietnam By Nguyen Thac Tam (Central People’s Credit Fund) Hans Dieter Seibel (KGFE/e-MFP)

4 People‘s Credit Funds (PCF), Vietnam (rural savings and credit cooperatives)  Late 1980s: collapse of command economy incl. 7,200 rural credit cooperatives  Transition to market economy (private agriculture and SMEs)  1990 Financial institutions law, includes SCCs  Government commission examines options for SCCs=>>PCFs  *1983, PCFs initiated by central bank, TA by DID  PCFs are self-financed and self-governed rural MFIs  Prudentially regulated, supervised, trained by SBV, ie central bank  Consolidation , (82 PFs closed by SBV)  *1985, Central fund (CCF):  Liquidity exchange and refinancing of PCFs  Since 2001 retail finance to rural and urban clientsA  PCFs and CCF: savings are the main sources of funds

5 PCFs, (amounts in million US$) No of PCFs No of members1.16m1.35m Total assets Loans outstanding Savings deposits Borrowings from CCF Equity3946 Overdues >1 day ROA Deposits-to-loans ratio80%87%

6 Impact of the global crisis on PCFs in 2008: none Graph 1:  Steady growth of membership Graph 2:  Steady growth of deposits, loans  Decline of domestic borrowings

7 Number of PCFs and members,

8 PCF total assets, loans, deposits, borrowings, equity, (million US$)

9 CCF, (amounts in million US$) Total assets Loans outstanding Savings deposits Borrowings71 Equity1546 Overdues >1 day ROA Deposit-to-loans ratio96%79%

10 Impact of the global crisis on CCF in 2008: moderate (due to urban SME clients) Graph:  Loans outstanding constant  Deposits decline (by urban SMEs)  Borrowings constant  Equity up (due to SBV capital injection)  Overdues up  ROA slightly down

11 CCF total assets, loans, deposits, (in million US$)

12 Conclusion: Impact of the crisis on PCFs (local FIs with a rural clientele) PCFs:  Resilient, continual growth of outreach, loans & deposits  Savings-to-deposit ratio increases from 80% to 87%  Steady earnings (despite SBV interest rate restrictions) PCF members:  Stagnating no of borrowers (doubts about future)  Repayment rate very high, unaffected by crisis

13 Conclusion: Impact of the crisis on CCF (rural wholesale (since 1995) & urban retail services (since 2001): CCF:  Spectacular growth since 2001  2008: standstill of growth, declining deposits  Savings-to-deposit ratio declines from 96% to 79%  Earnings slightly affected (by SBV interest rate restrictions) CCF clients:  (Rural) PCFs deposit more and borrow less  (Urban) clients, reacting to the credit crunch, deposit less and borrow more  Repayment rate moderately affected