1. Juan Buchenau Prof. Richard Meyer March, 2007 International Conference on Rural Finance Research: Moving Results into Policies and Practice 19-21 March 2007

2. Contents of the Presentation Objective of the study Key research questions Methodology Major findings and conclusions: Customers served Relative importance Risk management Profitability

3. Objectives of the Study Assess the performance of ProCredit El Salvador’s rural lending program, which was initiated in 1,992, especially focusing on: Updated documentation of rural lending technology Comparison of mature rural and urban portfolios over a longer period of time Loan officer productivity and performance Management of major external shocks

4. Key Research Questions Which features were adapted to urban microfinance in order to serve rural customers, many of whom live from agriculture What is a rural lending portfolio’s contribution to a mature microfinance institution? Is rural lending much riskier than urban lending? Who is being served? How deep can an individual lending technology reach down to serve low income customers in rural areas?

5. Methodology Evaluation of literature about Banco ProCredit and it’s rural lending program Updating of quantitative information about lending and costs of Banco ProCredit Interviews with relevant officers of Banco ProCredit to discuss the quantitative results and to get updated information about recent changes in qualitative aspects

6. Key findings – Customers Served I SectorNumber of outstanding loans Participation in total number of loans Portfolio balance in US $ Average outstanding loan amount $ Agriculture7,38830%3,472,397470 Livestock3,06112%5,773,4251,886 Trade8,24633%8,802,4531,067 Manufacturing1,7837%2,279,5891,278 Services4,49518%7,891,1541,755 Totals24,973 28,219,018 Source: ProCredit El Salvador Accounts (2006)

7. Key Findings – Customers Served II Item ProCredit clients National average Size of household5.9 Average schooling (up to 18)4.13.7 Age of hh head46.351.0 Women as hh head (%)20.813.0 Percent that work inside the hh75.766.2 Number of hh members that migrated0.70.9 Minutes to bus stop1317 Access to electricity (%)8269 Hectares of land2.61.8 Total number of crops1.61.3 No. of types of animals1.51.3 Ave. per capita income (colones)10,523.55,834.6 Source: Gonzalez-Vega, et al. (2002)

8. Key findings – Loan Officer Performance ItemRural Loan Officers Urban Loan Officers Median number of clients 320289 Median portfolio$362,000$488,000 Median of loan sizes $1,130$1,686 Proportion of women borrowers 27 percent73 percent Source: ProCredit El Salvador Accounts (2006)

9. Key Findings – Relative Importance Source: ProCredit El Salvador Accounts

10. Key Findigs – Risk Management (Write-offs as % of each year’s average portfolio) Source: ProCredit El Salvador Accounts

11. Key Findings – Profitability (annualized data) Urban Branches Rural Branches Average loan size1,8711,431 Income from loans / average loan portfolio 18.7%19.8% Direct operating costs/average loan portfolio 5.8%6.2% Direct personnel costs/average loan portfolio 3.6%3.7% Cost of loan loss provisions / average loan portfolio 2.9%1.3% Source: ProCredit El Salvador Accounts (2006)