1. IFC: HELPING MFIs UPSCALE VSE/SME WORKSHOP Prague November 5, 2015 MFIs UPSCALING

2. Average Credit Gap, $ Number of VSEs Potential VSE market ≈ $65 Billion IFC-McKinsey study (2011) MARKET POTENTIAL # of VSEs in region: 2m # of VSEs un- or under-served: 56%

3. CHALLENGES TO UPSCALING MFIs Lack of market intelligence and experience serving VSEs MFIs are reluctant to increase loan size or enter VSE space 2 Unfamiliar with the different credit and risk assessment methods No formalized strategy for reaching the VSEs segment Employees don’t have the training or experience to serve VSEs Unfamiliar with collecting/registering different kind of collaterals Some resistance to deviating from social mission

4. 1. VSE Assessment / Diagnostic 3. Product Design 4. Organization of VSE 5. Pilot Test, Review & Roll Out Senior Debt Equity Risk Sharing Credit Lines Credit Insurance 3 Advisory Investment OVERVIEW OF IFC OFFERING IN VSE 2.VSE Market Study STRATEGY

5. VSE PROJECT LIFE CYCLE 4.Organization Of VSE IDENTIFY BUILD AND LAUNCH EVALUATE 5.VSE Pilot Launch Pilot-test Plan & KPIs Coaching and Support Pilot Review Refinement 1.VSE Diagnostic (Assess MFI capability) Select/Hire VSE Officers 3. Product Design Branch Selection Training of Staff 4 4 Prepare for Roll out 2.VSE Market Assessment (Understanding of Segments) 18-24 Months 1.5 month2-3 month 2 month 12 month 2 month ROLL OUT 2 month

6. IFC’s RECENT WORK ON VSE IN THE MENA REGION Algeria Libya Egypt UAE Saudi Arabia Iran Kuwait Iraq Lebanon Yemen Bahrain Qatar Oman Afghanistan Pakistan Morocco Tunisia Jordan Syria 3. Attawfiq Full VSE product development ENDA VSE Assessment, loan files, mrktg,training Tamweelcom VSE Assessment only 1. Al Kuraimi, 2. Al Amal Full VSE product development Palestine 3 full-scale engagements (VSE product development) and 2 VSE assessments

7. EXAMPLE: AL KURAIMI MF BANK (Yemen) Timeline: September 2013- December 2014 Results to Date (March 31*): 225 approved loans / 207 disbursed $3.3 million disbursed, $2 million outstanding Average loan size = $14,600 USD Loan size range: $4,650 – 180,000 USD * SME activity stopped after onset of war in March 2015 Ratio of SME to Active Portfolio: 21% SME financings per officer: 17 Amt of SME financing per officer: $168k

8. EARLY LESSONS LEARNED THUS FAR VSE PILOT TEST 1.Selecting right staffing (internal vs. external) and ensuring proper incentives in place 2.Importance of introducing new SME financing ‘technology’; Training (and retraining) staff on it is key! 3.Pilot-test: Start slow with modest targets to test & improve methodology 4.At beginning, centralization / tight oversight from HQ 5.Selecting right forms of collateral and clear processes on what to collect, how to register, valuate, etc 6.Careful roll-out to new branches:leveraging stronger staff from first generation to lead 7.Give prestige and privacy to VSE clients via dedicated spaces in branches 7