Capturing Our Impact: Closing Gaps in Access to Finance

Capturing Our impaCt

Closing the G

aps in Access to Finance

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Oman The Seeds of Growth

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RWanDaA Cow Lease

Supports a Family

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KyRgyz RepublicSmall Lease, Big Results

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china Ducks, Rice

Paddies, and Fish

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2 | Capturing Our impaCt

OuR impactTelling Their Stories

We are pleased to bring you this publication, which describes the transformative effect of giving the poor and small businesses access to financial services that previously were out of reach. These are the stories from around the world of 20 people whose lives have changed and small business owners who have profited.

For more than 40 years, IFC has worked with the financial sector to make financial services afford-able, accessible, and transparent for people and businesses that need them. Using investment money and advice, we work with financial intermediaries—including banks, nonbank financial institutions, and microfinance institutions—to strengthen their ability to deliver these services.

At the household level, access to reliable financial services helps families to build assets, manage risks, and have a consistent supply of income. When appropriate services are matched with the needs of a poor family, the services can result in increased income and improved health, allowing children to spend more days in school and the entire family to eat more regular meals.

For small and medium businesses, access to capital and financial services allows them to make needed investments in fixed assets, grow their turn-over, and employ more people. Savings, insurance, and payment services are needed for these businesses to better manage risks and to be confident in mak-ing new investments.

Our client financial institutions had portfolios of

more than 3.2 million loans to small and medium businesses worth $181.2 billion, and more than 19 million microloans worth $19.7 billion, in 2011.

Here are the stories behind those numbers. They are stories of why access to financial services

can make a sustainable difference in the lives of people around the world. These people include an unemployed Chinese factory worker who built an eco-friendly farm, a Rwandan genocide survivor who leased a cow to provide for her children, and a Colombian farmer trying to survive after devastating floods. We hope you enjoy their stories, and learn from them.

IFC is committed to increasing access to financial services worldwide. Despite our efforts, more than 75 percent of the world’s poor do not have bank accounts and more than half the 400 million busi-nesses in emerging markets lack the credit they need. We have much more to do.

Working together with our clients and partners, we can do it. We can help people, and help the small businesses that are the one of the most powerful economic forces in the developing world.

—Peer Stein and James Scriven

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Why aRe peOple unbanKeD? The World Bank’s Global Findex shows that three quarters of the world’s poor do not have a bank account.

Don’t have an account at a financial institution:

aDults in DevelOping ecOnOmies

aDults eaRning less than $2 a Day

aDults in high-incOme ecOnOmies

In all regions, with the exception of high-income economies, borrowing from friends and family is the most commonly reported source of credit for current loans.

bORROWeRs in DevelOping ecOnOmies WhO use Only infORmal sOuRces Of cReDit

59%

77%

11%

55%

On the cOveR In India and elsewhere,

microfinance is a powerful tool in the fight against poverty. IFC’s goal is to scale up access to a range of microfinance services—including loans, savings, and money transfers—for underserved populations.

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glObal gaps2.5 Billion ‘Unbanked’ People and Millions of Underfinanced Businesses

These numbers matter because financial services such as savings accounts, loans, and money transfers are a powerful instrument for reducing poverty. They allow low-income households to reduce their vulnerability to economic shocks by increasing their incomes and building assets, so they can improve their nutrition, the health and education of their children, and their living standards in general.

We should care about the credit gap for businesses because small and medium enterprises account for about 90 percent of businesses and more than 50 percent of employment worldwide. They are critical engines for creating jobs and stimulating economic growth in developing countries, particularly after the recent global financial crisis.

However, banks are lending smaller amounts than before the crisis, and small and medium enterprises in many emerging markets still have severely constrained access to financing.

Financial inclusion has emerged as a prominent topic on the international development agenda.

Financial inclusion means that a diverse group of sound and sustainable institutions provide a range of financial products and services for everyone needing them in a fair, transparent, and cost-effective manner.

Micro loans are a particularly potent tool to help entrepreneurs, especially women. Yet despite microfinance’s rapid growth over the past 15 years, it still reaches less than 20 percent of its potential market among the world’s 3 billion or more poor.

IFC uses both investments and advice to encourage banks and other financial intermediaries, including microfinance institutions, to improve financial services to households, and to lend to small and medium businesses.

The barriers to having a bank account include the cost, travel distance, and amount of paperwork involved in opening one. Women are particularly disadvantaged. Only 37 percent of women in developing countries have an account, whereas 46 percent of men do.

Almost 2.5 billion people in developing countries have no bank accounts or other access to formal financial services. At the same time, more than half the 400 million businesses in emerging markets have unmet credit needs, with the gap estimated at more than $2 trillion—an amount equal to the gross domestic product of some of the world’s wealthiest countries.

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WhO aRe the unbanKeD?The World Bank’s Global Findex shows gaps in financial inclusion across demographic groups.

genDeR Have an account at a formal financial institution, worldwide:

men

WOmen

age Those aged 15–24 are 33% less likely to have an account, and 40% less likely to have saved formally (compared to those aged 25-64).

eDucatiOn In developing economies, adults with a tertiary education are more than twice as likely to have a formal account as those with a primary education or less.

incOme In developing economies, the richest 20% of adults in a country are more than three times as likely to save in a formal financial institution as the poorest 20% of adults.

ResiDence Have a formal account, in low-income economies:

uRban ResiDents

RuRal ResiDents

55%

35%

22%

47%

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iFC, a member of the world Bank group, is the largest global development institution focused

exclusively on the private sector. we help developing countries achieve sustainable growth by

financing investment, mobilizing capital in international financial markets, and providing advisory

services to businesses and governments. in FY12, our investments reached an all-time high of more

than $20 billion, leveraging the power of the private sector to create jobs, spark innovation, and

tackle the world’s most pressing development challenges. For more information, visit www.ifc.org.

abOut ifc

To improve access to finance for small and medium businesses, IFC works to increase the depth and breadth of local financial markets and to boost the competitiveness of the private financial sector. IFC also advises and invests in financial intermediaries.

Worldwide, IFC investee banks had more than 3.2 million loans outstanding to small and medium enterprises, totaling $181.2 billion, as of December 2011. IFC had committed $10 billion to financial intermediaries for them to loan to small and medium enterprises as of June 2012. Furthermore, IFC gave advice on small-business banking to 42 clients in 33 countries in 2012.

IFC is the World Bank Group’s lead investor in microfinance, and it is one of the top multilateral investors in terms of outreach to microfinance institutions, working with more than 150

institutions in more than 60 countries. IFC’s investee clients had an outstanding portfolio of more than 19 million microloans, worth $19.7 billion, as of December 2011. IFC had committed $2.2 billion to institutions for them to loan to micro entrepreneurs as of June 2012.

Since 2009, IFC has worked closely with the Group of Twenty major economies, known as the G-20, in scaling up access to financial services through various efforts including by co-leading the Global Partnership for Financial Inclusion, serving as a technical advisor on the G-20’s agenda for boosting access to finance for small and medium enterprises (SMEs) , and launching the SME Finance Forum—a new knowledge-sharing initiative to strengthen small businesses’ role in economic growth, employment, and poverty reduction.

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cOntents

east asia & the pacific12 Philippines

From microentrepreneur to Small BusinessMicrofinance

14 Papua New GuineaCreating a Savings CultureMobile Banking

16 ChinaDucks, rice paddies, and FishMicrofinance

euROpe & centRal asia20 Kyrgyz Republic

Small Lease, Big resultsMicrofinance

22 TajikistanEmpowering women EntrepreneursMicrofinance

24 Bosnia and Herzegovinaa tool for rebuildingMicrofinance

26 Russian FederationHot water for a Cold winterSustainable Energy Finance

28 Ukrainemitigating weather risksInsurance

latin ameRica & caRibbean32 Honduras

Strengthening Banks, Strengthening FamiliesHousing Finance

34 Colombiameeting an urgent needMicrofinance

36 HaitiHelping Haiti rebuildSmall and Medium Enterprise Banking

miDDle east & nORth afRica40 Oman

the Seeds of growthSmall and Medium Enterprise Banking

42 Pakistangiving Customers what they wantSmall and Medium Enterprise Banking

44 AfghanistanLess than $100 a monthHousing Finance

sOuth asia48 Bangladesh

a Stairway to their DreamsSmall and Medium Enterprise Banking

50 IndiaFrom Street Vendor to Shop OwnerMicrofinance

52 IndiaHomes for the poorestHousing Finance

sub-sahaRan afRica56 Rwanda

a Cow Lease Supports a FamilyLeasing

58 Sub-Saharan Africaa Big Boost for BusinessLeasing

60 Kenyainsuring against the ravages of weatherInsurance

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latin ameriCa& CaribbeanPage 30

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sOuth asiaPage 46

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east asia & the paCifiC

percentage of people who have saved at a formal financial institution in the past 12 months:

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Rest Of the DevelOping WORlD

28%

10%

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ChinaPage 16

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A micro loan gives

family business

the second

chance it needs

Leaving their blue-collar jobs in 1984 to start a business of their own was a risky decision for Nolie and her husband Rogelio Estocado. The risky move paid off when after only seven years in busi-ness, the small manufacturing enterprise for Christmas decorations, lights and lamps was thriving. In 1991 however, the business collapsed when a big client failed to pay for a P3,000,000 ($75,000) order. Estocados had to close the doors of their family business.

As years passed and the needs of fam-ily kept growing, the couple decided to give the business another try.

In 2004, Nolie approached The Center for Agriculture and Rural Development Inc. (CARD)—an organization that extended microfinance assistance to small-scale entrepreneurs. The initial loan of P4,000 ($100) was extended to Estocados without collateral but after several inten-sive weeks of training on running a small business. What amazed the entrepre-neurial couple was that CARD not only provided the financial assistance but also taught them to become better managers.

Thanks to their spotless credit, Estoca-dos were able to obtain bigger loans from CARD soon after and consequently, take bigger orders and hire more people. Even-tually, they secured a loan of P250,000 ($6,250), under the program for small and medium enterprises, which enabled them

to source better quality materials and build a small factory and a showroom.

In 2008, IFC began working with CARD to help them launch a new small and medium banking business to help graduate microfinance clients, offering a wider range of financing and savings products – fit to the more sophisticated needs of their growing businesses, and to reach non-CARD small businesses in the Philippines who are deemed too small and not serviced by commercial banks.

Nolie says now is the golden age of her business. Both she and her husband are completely dedicated to it, and so is their second child – a computer science graduate who has chosen to stay involved in the family business.

The small enterprise employs as many as 60, many of whom are women, have physical disabilities, or are senior citizens. To encourage productivity, salaries are determined by individual output.

Before the expansion of their company, the Estocados had to go out and peddle their products. Now, in their modest showroom, the inflow of customers looking at merchandise is constant. The majority of the orders come from overseas through traders who work with Nolie.

Since 2010, CARD’s small business services had disbursed about 2,400 loans valued at more than $6 million dollars and they hope to reach 500,000 in five years.

micROentRepeneuR tO small businessMicrofinance

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Nolie Estocado built a small enterprise that now employs as many as 60 people, many of whom are women, havephysical disabilities, or are senior citizens, using an initial $100 microloan from The Center for Agriculture and Rural Development Inc. (CARD).


Farmers introduced

to mobile banking

compete to save

the most money

cReating a savings cultuReMobile Banking

For farmers in Papua New Guinea’s island province of East New Britain, harvest can be a time of plenitude—and peril. The growers deliver hessian bags brim-ming with cocoa or coconut to the local commodity buyer’s warehouse, where the products are weighed and paid for.

Until recently, farmers then would travel far on unpaved roads to cash checks or deposit cash in town, since there are no banks among the trading posts, market vendors, and handicraft stalls in these rural areas. That system made them easy targets for robbers.

A new mobile banking service has lowered that risk. The service, piloted by Bank South Pacific’s subsidiary, BSP Rural, in late 2011, allows buyers to trans-fer payments to growers’ bank accounts via text messages. In a country where a mere 10 percent of the people have access to banking services, more than 3,000 farmers have opened accounts.

Mobile banking hasn’t only made payments faster and more secure, it also has stimulated a saving culture among farmers.

Margaret Kowono, a single mother of six and a cocoa grower for 20 years, says that before, it was easy to spend her cash earnings or share it with her family. Now she plans to use her savings to start poultry and piggery businesses.

“Before this rural banking came in,

I got this money and I never thought of saving it,” Kowono says.

Commodity buyer Otto Kuemba says that farmers using mobile banking are eager to save money and are using their savings to reinvest in their businesses.

“Now they’re competitive trying to save their money, challenging each other over who’s going to save more,” Kuemba says.

IFC, in partnership with the Austra-lian government, backed the innovative pilot service by providing technical advice and a performance-based grant.

IFC’s vision is eventually to leverage mobile banking to bring people without banking accounts into the system and then expand the services offered to them.

In East New Britain, cocoa and coconut growers can now withdraw their money using a bank card at electronic funds trans-fer machines, ATMs, bank branches, or more than a dozen local shops that operate as agents for BSP Rural.

The time and money saved by using mobile banking allows the farmers to focus on tending their land, potentially raising their productivity.

Cocoa grower Augustine Buava, who also runs a small shop that sells gasoline, uses mobile banking every day.

“It saves my time going down to Kokopo town, where I spend half a day or the whole day just standing in the queue, he says. “Mobile banking is easier for me.”ea

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Mobile banking has made payments from buyers faster and more secure for cocoa and coconut farmers in the island province of East New Britain. Growers also can withdraw their money using a bank card at electronic funds transfer machines, ATMs, bank branches, or more than a dozen local shops.


A micro loan

transforms an

unemployed factory

worker into an

eco-entrepreneur

DucKs, Rice paDDies, anD fishMicrofinance

Microfinance, now acknowledged as a critical tool in the fight against poverty, has entered the financial mainstream. But despite the industry’s rapid growth over the past 15 years, it still reaches less than 20 percent of its potential market among the world’s 3 billion or more poor.

IFC’s advice helped to develop and expand seven microfinance institutions that lend in China’s rural areas, where access to financial services is an urgent need. IFC also has invested $27 million in nine microfinance institutions in China.

One of the microfinance lenders that IFC invested in, MicroCred Nanchong, has made all the difference for an employed factory worker who struggled to start his own business.

Mr. Ding Gang was laid off from his job when export orders fell during the global financial crisis that began in 2008. He returned to his hometown of Long Men Township in Nanchong Prefecture of Sichuan Province and used his savings to buy ducks to raise and sell at the local market.

The income wasn’t enough to sus-tain Ding’s family. His savings were exhausted, but Ding received marketing brochures from MicroCred Nanchong and wanted to try again.

A MicroCred Nanchong Loan Officer suggested that he try selling duck eggs

and gave him a loan of RMB 15,000 ($2,376) in 2009.

The egg sales generated more regular cash flow, so Ding expanded his busi-ness. He began to raise ducks and fish in flooded rice paddies, where the ducks fertilize the rice and the fish live on nutrients from other plants.

“Not only does this practice increase my income, but it is also environmentally friendly,” Ding says. “Many farmers in the surrounding areas have now been encouraged to take up this farming method.”

Furthermore, Ding’s success persuaded others in Long Men Township to take out MicroCred Nanchong loans. There are now about 170 local borrowers in that area.

Ding’s farm employs two or three local people during harvest. He is creating new rice paddies and planting organic vegeta-bles, aiming to attract tourists from the city who want to experience country life. The RMB 300,000 ($47,512) investment is funded by his profits and loans.

“Now my business is large enough that I could borrow from traditional banks if I wanted to,” Ding says. “But MicroCred Nanchong has supported me from the beginning so I would prefer to stay with them.”

In mid-2012, MicroCred Nanchong had about 8300 active loans.

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Ding Gang has begun to cultivate organic vegetables, in addition to raising ducks and fish in flooded rice paddies. The former factory worker started his environmentally friendly farm in Sichuan Province with a micro loan of about $2,300.

eurOpe &Central asia

percentage of bank account holders who use their accounts to receive wages:

euROpe &centRal asia


61%

32%

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A micro-lease

is a lifeline for

a fish farm

small lease, big ResultsMicrofinance

In Central Asia, where micro enterprises comprise a large share of businesses, IFC launched an ambitious microfinance initiative in 2008. Its aim was to support micro lenders in the region, in order to increase the range of financial ser-vices they offered and to boost access to finance for micro entrepreneurs.

The economic ripples spread through the region, reaching a fish farm in the Kyrgyz city of Karakol at the southern end of Issyk Kul, the second largest alpine lake in the world.

After the Soviet Union’s collapse, many local fish farms and factories were closed down because of outdated equipment and lack of financing. In the meantime, years of overfishing had decimated the lake’s supply.

Esen Alamanov, founder of the Kara-kol Fish Farm, had cultivated and reared whitefish, trout, pellets, and carp in cages in the lake’s azure waters area and in reservoirs since 2000. But for sustainable development, Alamanov needed more equipment.

In 2008, Alamanov secured a $3,500 long-term micro-leasing contract on favorable terms from Bai-Tushum & Partners Microfinance Company, one of the lenders participating in IFC’s Central

Asia Microfinance Transformation Support Project.

With the financing, Alamanov bought 10 pools for young fish and five incubation units. The additional work at the farm generated 16 jobs and boosted profits.

“Over time, the numbers turned posi-tive,” says Alamanov. “The two largest seafood retailers in the region found that the quality of our products satisfied all the environmental standards and one of them signed a contract to buy 2 to 3 tons of fish per year.”

He was one of many customers who benefited.

IFC had given Bai-Tushum loans of $1.2 million in 2005 and $4 million in 2009. Like it did with other microfinance institutions in Central Asia, IFC also helped transform Bai-Tushum into a deposit-taking institution, to create a stronger funding base for it, and worked to improve the regulatory framework for microfinance in the region.

Bai-Tushum had disbursed more than $200 million in loans to 120,000 micro and small entrepreneurs as of December 2011. In addition, in July 2011, it became the first microfinance institution in the Kyrgyz Republic to obtain a deposit-taking license.

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Esen Alamanov grew his fish farm on Issyk Kul lake with new equipment he purchased using a $3,500 long-term micro-leasing contract.

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A woman leverages

a $500 loan to bake

her way to success

empOWeRing WOmen entRepReneuRsMicrofinance

Kamila Ismatova’s life as an entrepreneur began abruptly, when she learned that her husband was seriously ill and she must provide for her two children.

Ismatova, of Sugd Province, Tajiki-stan, used rainy-day money to buy ten kilos of flour and baked and sold 30 flatbreads.

“We were saving on everything,” she recalls. “My son and daughter used to get up with me very early in the morning to chop wood and fire the tandyr (oven). My son carried the flatbread by bicycle and sold it at a hospital to regular customers.”

Ismatova’s business grew and she needed financing to buy larger amounts of flour and convert a room in her house into a bakery. In June 2008, she obtained a loan for $500 from Arvand, one of the lenders participating in an IFC effort to increase access to finance for micro entrepreneurs in Central Asia.

Microfinance has played a vital role in helping women finance and build businesses in Tajikistan, Central Asia’s poorest country. A civil war in 1992 killed many men and led others to flee the country to find work, leaving women to support their families.

Ismatova’s loan from Arvand boosted her output to 120 flatbreads a day, and

revenues rose. She used the proceeds to lease two hectares of land to grow grapes.

Four years later, Ismatova has taken six loans from Arvand totaling $2,560. Her flatbread production has increased to 300 to 400 loaves a day, and she and her children harvest grapes and sell them to big stores. Her assets have increased more than seven times and her revenues more than four times.

Ismatova has used her income to renovate her house and buy a taxi van for her son, who works as a driver. Meanwhile, the businesswoman plans to establish an outlet for her products in the local market.

“I am no longer scared of the future and look far ahead by baking bread,” she says.

Since IFC’s microfinance initiative, Central Asia Microfinance Transforma-tion Support Project, began in 2008, Arvand has disbursed almost 19,000 loans totaling more than $17 million and attracted more than 1,000 deposits totaling more than $350,000.

IFC advised Arvand on financial man-agement, establishing cost/profit centers, and developing foreign exchange policy and procedures, allowing the company to provide loans in hard currency.

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Forced to provide for her children when her husband became ill, Kamila Ismatova of Sugd Province began to bake and sell flatbreads. Six micro loans totaling $2,560 have allowed her to boost her production to 300 to 400 loaves a day.

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Small loans help

Bosnians pivot from

conflict to economic

development

a tOOl fOR RebuilDingMicrofinance

The outbreak of war in Bosnia and Herzegovina in 1992 forced farmer Tifa Patkovic to flee her home and live for five months in a forest.

“We had nothing to change into, nothing to clean with, not even a brush to brush our hair,” she recalls. “Twenty years of work was lost in a day.”

After the war ended, the country was left with 37 percent unemployment and without the most basic infrastructure and services. Commercial banks were unable to finance the emerging private sector.

Microfinance institutions stepped in to fulfill this need and the industry grew quickly in Bosnia and Herzegovina in 1996 and 1997. More than 250,000 Bosnian clients were able to get micro loans, according to Aido Soko, country director for PricewaterhouseCoopers.

“Psychologically speaking, they were able to move from thinking about the con-flict,” Soko says. “They were able to start thinking about self-employment, about taking their part in the economic develop-ment and economic life of the country.”

The small loans, on the order of 1,000 Euros ($1,292) each, are very efficient at stimulating employment, says Goran Tinjic, senior operations officer for the World Bank in Sarajevo. Each microfi-nance client employs an average of 2.15 other people.

However, some microfinance institu-tions lent too aggressively in post-war Bosnia and Herzegovina, and some borrowers took on too many loans.

IFC and others established a debt counseling center, and in February brought in an international program under which microfinance institutions that adhere to consumer protection prin-ciples are certified as responsible lenders.

“Debt levels are returning to normal,” says Natasa Goronja, manager of IFC’s Bosnia Microfinance Project.

Patkovic secured a loan of just over $1,000 from Bosnian micro lender MI-BOSPO in 1997, and now has a home again, and a dairy farm. She has taken out 15 additional loans from MI-BOSPO, totaling about $41,000.

“The work that I do makes me happy,” she says. “If I hadn’t made it to this stage, if I didn’t have all this work for myself, I would be two feet underground.”

The World Bank started MI-BOSPO in 1996 as a pilot micro-lending program of the Bosnian non-governmental organi-zation BOSPO, and the program evolved into one that targeted low-income wom-en entrepreneurs. MI-BOSPO has since become an independent organization.

IFC has invested more than $25 million in MI-BOSPO and four other microfi-nance institutions in Bosnia since 1999.

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After the 1992-1995 war, which destroyed a major part of the country’s economy, commercial banks were unable to finance the emerging private sector. Microfinance institutions stepped in to fulfill this need and more than 250,000 Bosnian clients were able to get loans.

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An energy efficiency

program provides

stable supply

of hot water

hOt WateR fOR a cOlD WinteRSustainable Energy Finance

The market for sustainable energy finance in the developing world is estimated at $100 billion a year.

The need is so enormous because devel-oping countries often have limited or unre-liable access to energy, or rely on antiquated equipment, and therefore are particularly susceptible to the effects of climate change. Small and medium-sized companies can find their growth hindered by depleting resources or outdated equipment.

The Russian Federation is a prime example. One of its administrative districts uses twice the amount of energy as all of the Nordic countries combined. High energy consumption levels are particularly common in the industrial sector, whose equipment can be 30 years old or even older.

To meet the need, IFC in 2005 launched the Russia Sustainable Energy Finance Program, which stimulates investments by local financial institutions in energy efficiency projects for small and medium-sized companies.

One result was the replacement of an outdated boiler house in Dubrovka, a town in Russia’s northwestern frontier with harsh winters. The new boiler house provided a stable supply of hot water for the town’s 6,000 people, and saved the town up to $185,000 in energy costs a year.

The boiler house project came about when IFC helped Russia’s Prime Finance bank develop financial products targeted at energy efficiency needs. The bank gave a loan of $513,000 to EnergoStroy, a Russian company that won Dubrovka’s municipal bid.

“The modern boiler house project brought new life to Dubrovka,” says Mikhail Bolotin, CEO of Energostroy. The project inspired town residents to build better housing and further improve their quality of life, he says.

IFC’s Russia Sustainable Energy Finance Program has trained a total of 12 banks, and facilitated $220 million in financing for almost 260 energy efficiency projects. That has produced savings of $37 million a year in energy costs for Russian enterprises, and avoided 470,000 tons of carbon dioxide emissions a year.

Worldwide, IFC did more than $830 million in climate business. Local financial institutions are able to channel IFC funding to smaller clients that IFC cannot reach directly.

IFC’s approach combines financing with targeted advice, and supports the financial institutions’ growth by helping them to enter new market segments and expand their portfolios.

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Dubrovka, a town in Russia’s northwestern frontier, got a new boiler house that provided a stable supply of hot water for 6,000 people, and saved the town up to $185,000 in energy costs a year. The project came about when IFC helped Russia’s Prime Finance bank develop financial products targeted at energy efficiency needs.

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A modern agri-

insurance system

helps Ukraine

reach its potential

mitigating WeatheR RisKsInsurance

After the Soviet Union’s collapse, farm-ers in fertile but impoverished Ukraine were too poor to do anything but hope that harsh weather wouldn’t destroy their sugar beets, wheat, and other crops.

When foreign investors entered the country in the late 1990s, they began requiring farmers to buy insurance to mitigate weather and other risks.

IFC chose Ukraine for its first Agri-Insurance Development Project for the same reason as the investors—because of the country’s huge untapped potential. Ukraine’s 25 million tons of wheat exports in the 2008/2009 marketing year ranked it third in the world, after the United States and the European Union. But estimates say that Ukraine could produce up to 75 million tons of wheat a year, if farmers had better access to finance, and modern equipment and management practices.

One result of IFC’s project was a new product that insures winter wheat for the entire production cycle, from seeding to harvest.

Agrofirma Imeni Dovzhenko, a sugar beet, grain, and cattle producer in the Poltava Region of Central Ukraine, used the new insurance for the first time in 2010 and was fully compensated for weather-related losses that could have totaled $187,500.

“It is important to understand that seeding is not just putting a seed in soil in a hope that it will germinate anyway,” says the company’s Director General, Viktor Skochko. “Seeds are expensive—specially treated, protected from diseases and pests. Seeding employs sophisticated equipment. Chemical fertilizers are not cheap. To have the highest possible yield we use up-to-date technologies,” Skochko says. “So, we have to insure against all possible risks.”

IFC, in partnership with the Cana-dian International Development Agency, began in 2007 to build a modern agri-insurance system in Ukraine, working with local insurance companies, inter-national re-insurers, and banks. By July 2011, the effort had developed standard insurance products for nine crops, educated both insurers and farmers, and worked with banks and input suppliers so that farmers could use their agri-insurance policies as collateral, making it easier for them to get loans.

A big step came in February 2011 when 15 leading agri-insurance companies, coordinated by the agri-insurance project, created the Ukraine Agri-Insurance Bureau. It will establish a common data management system for its members, develop new insurance products, and conduct education campaigns for farmers.

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IFC developed a new agri-insurance product for Ukraine that covers winter wheat for the entire production cycle. Agrofirma Imeni Dovzhenko, a producer in the Poltava Region, used the new insurance in 2010 and was fully compensated for weather-related losses, Director General Viktor Skochko says.

latin ameriCa& Caribbean

percentage of people who have a credit card:

latin ameRica & caRibbean


19%

5%

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hOndurasPage 32

COlOmbiaPage 34

haitiPage 36

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A mortgage buys

peace of mind for a

soldier and safety

for his family

stRengthening banKs, stRengthening familiesHousing Finance

Housing finance is a potent investment tool that works on two levels. A mortgage allows low- and middle-income families to purchase houses, providing both a shelter and a tangible asset which often is their main vehicle for investment and savings.

At the macro level, housing finance generates economic growth by increasing savings, investment, and employment, and creating a solid capital base.

For these reasons, IFC works with financial intermediaries in emerging markets to increase access to mortgage loans and to finance the construction of affordable housing, which often is in short supply. More than 1 billion people around the globe live in inadequate hous-ing, according to the World Bank.

In Honduras, where two-thirds of the population lives in extreme poverty, IFC has worked since 2008 with Ficohsa, a locally owned bank. Under IFC’s tute-lage, Ficohsa expanded their services to the housing finance market.

Erasmo Norales, a 36-year-old boat worker, in 2010 used a Ficohsa mortage to buy a house for him and his daughter in Choloma, a town in northwestern Hondu-ras where the average house costs $30,000.

Norales is called away to sea for up to eight months at a time.

“When I return home my family and house are safe,” Norales says. “This is a nice area without crime.”

During its three years working with IFC, Ficohsa improved their housing finance operations and reached lower income people. The value of its outstand-ing housing finance loans jumped by 86 percent.

The need for housing finance has increased since the financial crisis that began in 2008, which made investors wary of that type of asset.

To spur banks to give mortgage loans to lower-income people in developing markets such as Honduras, IFC provides a variety of financing, including long-term lines of credit.

As it did with Ficohsa, IFC also works directly with financial institutions to build up their expertise in housing finance. This strengthens the local mort-gage market, which ultimately benefits homeowners. In 2012, IFC was advising more than 15 clients in Africa, Central Asia, Eastern Europe, Latin America, and South Asia.

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In Honduras, where two-thirds of the population lives in extreme poverty, IFC has trained local bank Ficohsa to better serve the housing finance market. The value of Ficohsa’s outstanding housing finance loans jumped by 86 percent in three years.

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Micro loans

provide capital for

a vegetable farmer

and a lumberyard

meeting an uRgent neeDMicrofinance

Micro loans saved the livelihood of a veg-etable farmer in rural Central Colombia, and gave a boost to a small lumberyard in the capital city of Bogota.

Both loans came from Bancamia, a leading microfinance institution in the country with more than 460,000 customers, 65 percent of whom are low income women. Formerly two regional nongovernmental organizations that focused on loans to women, Bancamia was created from the merger of Cor-póracion Mundial de la Mujer Medellin and Corpóracion Mundial de la Mujer Colombia. The two NGOs transformed into a regulated financial institution to improve their sustainability and increase financial services reach to microentrepre-neurs. IFC supported the transformation with investment and advice.

Micro finance is an urgent need in Colombia, where small enterprises account for more than half of all jobs and 95 percent of all businesses, but have difficulty securing access to capital.

Nearly all—98 percent—of Ban-camia’s clients are micro entrepreneurs, says Miguel Achury, the bank’s vice president of planning and development.

A Bancamia loan saved the vegetable farm of Jose Arquimedes Rodriguez in Fusa, in rural central Colombia, after devastating floods nearly wiped him out.

“Thanks to it, I’m here,” says

Rodriguez, whose father also farmed. “Otherwise, I would have to leave because I had nothing left.”

A Bancamia loan also helped a family-owned Bogota lumberyard to expand.

The loan allowed the business to grow from buying 200–250 pieces of wood at a time, to 1,500–1,600 pieces, says Millarlandy Quiroga, who runs the yard with her father and brother. She hopes to get another loan to buy the company’s warehouse and hire some workers.

“I would like to create more jobs, hire people, make it a bigger company,” Quiroga says.

Globally, the lenders increasingly are no longer specialized nongovernmental organizations, but rather regulated and licensed microfinance institutions such as Bancamia.

IFC’s goal is to scale up access to a range of microfinance services for under-served populations. IFC achieves this goal by both investing in and advising a range of financial intermediaries, which can make loans to more people than IFC could on its own.

As of December 2011, IFC’s investee cli-ents had an outstanding portfolio of more than 19 million microloans, worth $19.7 billion. IFC had committed investments totaling $2.2 billion to microfinance institutions and microfinance intermediar-ies, and was advising 70 clients.

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Advice and investment provided by IFC helped Bancamia, a leading microfinance institution in Colombia. Loans by Bancamia saved the vegetable farm of Jose Arquimedes Rodriguez in rural Central Colombia after devastating floods (above), and helped a family-owned Bogota lumberyard to expand (left).

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A Haiti bank

offers loans to

small businesses

without requiring

cash collateral

The January 2010 earthquake that rav-aged Haiti gave new urgency to a 2-year-old IFC program to stimulate more lending to small and medium enterprises in the Caribbean country.

IFC had started working in 2008 with Sogebank, a leading Haitian bank, to help it develop a regular program of lending to small and medium enter-prises. With advice from IFC, Sogebank trained staff in lending to the new target sector. IFC also invested $4 million in Sogebank.

Immediately after the quake, which leveled the capital city of Port-au-Prince, Sogebank put the new program on hold so it could focus on restoring basic opera-tions. The bank restarted its program of lending to small businesses on a pilot basis seven months later, under new policies that accounted for the higher risk profiles of many borrowers.

One company that benefited was Les Essences Nido, which uses a local wood, bois chandelle, to produce a sweet-smell-ing essential oil that is commonly used in perfumes, cosmetics, and medicine.

Sogebank gave the company a $75,000 line of credit in March 2011, allowing it to finance its operating costs while waiting for payments from international buyers.

“This financing enabled me to ensure production,” says Dominique Jean, owner

and CEO of Les Essences Nido. Unlike other Haitian banks, Sogebank gave him financing without requiring him to put up cash collateral, he says.

The company, which has 18 full-time and 50 part-time employees in Haiti and the neighboring Dominican Republic, exports its Amyris oil to countries includ-ing Germany and the United States. It must wait up to six weeks to receive payments from international customers.

The Sogebank line of credit boosted Les Essences Nido’s growth and in December 2011, Jean was able to buy his factory in Port au Prince, which he had been renting.

Small businesses are expected to play a key role in rebuilding Haiti’s economy, but in order to do so, the enterprises need access to capital. Many of them have difficulty securing financing because they don’t have the collateral required by most banks, or their property rights aren’t sufficiently documented.

Sogebank’s lending program fills that need. It recently completed the pilot effort of lending to small and medium enterprises and is in the early stages of rolling out the program throughout Haiti.

As of April 2012, Sogebank’s new program had disbursed $8.07 million in loans to 827 enterprises and given 114 credit lines totaling $3.53 million.

helping haiti RebuilDSmall and Medium Enterprise Banking

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Small businesses are expected to play a key role in rebuilding Haiti’s economy after the January 2010 earthquake, but many of them have difficulty securing financing. IFC has worked with Haitian bank Sogebank to help it develop a regular program of lending to small and medium enterprises.

middle east & nOrth afriCa

percentage of people who make zero deposits and withdrawals in a typical month:

miDDle east & nORth afRica


17%

10%

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OmanPage 40

paKistanPage 42

afghanistanPage 44

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An entrepreneur

uses a credit line

to build a chain

of coffee cafés

the seeDs Of gROWthSmall and Medium Enterprise Banking

As countries repair the damage to their economies from the recent financial cri-sis, they are focused on developing small and medium enterprises. Worldwide, the enterprises account for more than 50 percent of employment and about 90 percent of businesses.

However, banks are lending smaller amounts than before the crisis, and small and medium enterprises still have limited access to financing. More than 17 million of those formal enterprises in emerging markets have unmet credit needs, with the gap estimated at between $900 bil-lion and $1.1 trillion.

IFC uses both investments and advice to encourage lending by banks and other financial intermediaries to small and medium enterprises.

BankMuscat in Oman, which received both financing and advice from IFC, gave a $7,600 credit line in 2003 to a local businessman who wanted to open an international-style coffee shop in the capital city of Muscat.

Talib Mohammed Shaaban Al Farsi had operated a successful pest control business in Oman for more than a decade but wanted to do something different.

The Mood café was a hit, and by 2010, Al Farsi had received additional credit lines and loans from BankMuscat,

had opened three more outlets, and was employing 14 people. His company was worth more than $500,000 and he planned to expand further.

“The Mood café, it was a small dream that I started,” Al Farsi says. “We are looking forward…to a new plan as soon as possible.”

To encourage BankMuscat to lend to smaller businesses in Oman, which has high unemployment, IFC had given the bank a $100 million loan. IFC also did market research to assess the potential scope for small business banking in Oman and helped the bank develop new products targeted at smaller businesses.

Oman has more than 92,000 micro, small, and medium enterprises in the formal and informal sectors and it is estimated that these smaller businesses have a financing gap of $81 million.

Worldwide, IFC investee banks had more than 3.2 million loans outstand-ing to small and medium enterprises, totaling $181.2 billion, as of December 2011. IFC had committed $10 billion to financial intermediaries for them to loan to small and medium enterprises as of June 2012. Furthermore, IFC gave advice on small-business banking to 42 clients in 33 countries in 2012.

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Talib Mohammed Shaaban Al Farsi opened an international-style coffee shop in Muscat with the help of a $7,600 credit line from BankMuscat. IFC had given the bank advice and investment to encourage it to lend to smaller businesses in Oman.

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Business owners’

feedback

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bank’s approach

giving custOmeRs What they WantSmall and Medium Enterprise Banking

Although small and medium enterprises employ more than 70 percent of non-farm workers in Pakistan, they struggle to access financial services.

HBL, a leading bank in Pakistan, recognized they could serve more SMEs and, in June 2011, IFC stepped in to help HBL design and test a new business model for smaller-business banking. Under IFC’s coaching, HBL held focus groups to get the opinions of existing customers in the city of Lahore, which has one of Pakistan’s largest concentra-tions of smaller businesses.

The customers, who ranged from retailers and wholesalers to various types of manufacturers, talked about their banking needs and how HBL could serve more of their banking needs.

Their insights transformed how the bank worked with them and other smaller enterprises.

Here are some of their recommenda-tions, and HBL’s responses:

• “Field staff trained to manage relation-ships and work closely with small and medium enterprises as business advi-sors, will be a key differentiation for the bank in this market." —Mian Saud Hanif, chief executive of Disco Shoes, which manufactures shoes for local and international brands. He has 35 years experience in running businesses,

employs about 60 people and has a checking account with HBL.

HBL created a sales and relationship management team that was trained in selling to and managing relationships with owners of smaller businesses.

• “Marketing material should be in Urdu as most small business owners cannot read or understand English.” —Zahid Munir, owner of Chaudhary Traders, which supplies household and confectionary items to more than 7,000 retailers in Lahore. He employs 15 people and has a checking account with HBL.

HBL unveiled a new Urdu brand name for its dealings with smaller-business customers: HBL Business Faida. The bank also created a brochure that described all its products for small and medium enterprises in both Urdu and English.

• “Banks should offer transaction facili-ties such as debit cards on [lines of credit]. This will add a lot of conve-nience.” —Humayun Khalil, owner of Baby House, a small bicycle store. He employs 5 people has a line of credit from HBL that helps him finance his inventory. He had just received a debit card against his loan.

HBL developed a new debit card for both checking accounts and lines of credit.

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HBL bank asked some of its small business customers in Lahore how it could work more effectively with them. Among those who gave their advice were Humayun Khalil, owner of a bicycle store (top); and Mian Saud Hanif, chief executive of a shoe manufacturer (bottom).

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Micro loans mean

huge improvements

for Afghan houses

less than $100 a mOnthHousing Finance

Micro home loans with monthly pay-ments of less than $100 have allowed hundreds of Afghans to buy or upgrade their houses in the last few years.

The lender, First MicroFinance Bank Afghanistan, began offering the loans in 2008 with financial support and advice from IFC. It has made small housing loans to more than 12,000 people, build-ing a well-performing housing finance portfolio of $9.7 million.

A $2,000 loan was transforming for a couple and their three children in the Mazar-e-Sharif province. Bibi Sediqa Musawi, a tailor, and her husband, who works for the Afghan army, had lived for two years in a cramped house without windows or a kitchen. There was no door, just an open passageway.

Then Bibi Sediqa learned about the home improvement loans. She used the $2,000 to buy steel doors and windows, and to plaster and paint the inside of the house.

“The home improvement loan pro-gram really supports the poor,” she says.

Other borrowers have used First MicroFinance Bank Afghanistan loans to

buy or enlarge their houses, install wells or hand pumps that provide clean water, or install toilets to improve sanitation.

First MicroFinance Bank Afghanistan offers its housing loans in all its urban branches and its new rural improvement loans are offered to rural populations not served yet by the conventional banking system. Seventeen of its 35 branches are in rural areas.

The bank also plans to start advis-ing borrowers on building materials, construction techniques, and innovative methods to improve housing quality, tak-ing into account factors such as energy efficiency, sanitation, proper ventilation, and Afghanistan’s frequent earthquakes.

The bank is owned by the Aga Khan Development Network, which promotes economic development in more than 30 low-income countries.

IFC provided investment and advice to help the Aga Khan Agency for Micro-finance start the First MicroFinance Bank Afghanistan in 2004. The bank has become Afghanistan’s most successful commercial micro lender, with more than 240,000 clients.

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First MicroFinance Bank Afghanistan offers tiny home loans with monthly payments of less than $100 for Afghans to buy or upgrade their houses. These loans have allowed Bibi Sediqa Musawi to buy steel doors and windows for her house (top); and Adul Majid to build an additional room for his house, where 25 members of his family were crowded into five rooms (bottom).

sOuth asia

percentage of people in south asia who have a formal bank account (highest gender gap of any region):

men

WOmen

41%

25%

www.iFC.Org | 47

indiaPages 50 and 52

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A loan program

gives women

entrepreneurs the

lift they need

a staiRWay tO theiR DReamsSmall and Medium Enterprise Banking

Without a loan program targeted at women entrepreneurs in Bangladesh, Nazma Parveen Laizu’s business making healthy snack foods may never have never gotten off the ground.

Parveen’s vision was to make cookies and other foods that were rich in protein but free of pesticides and other contami-nants. She began by making the food with four assistants in a small workshop.

After she obtained a $9,750 loan from Bangladesh’s Eastern Bank in October 2010, Parveen was able to expand. She now employs 60 people in a factory, has a retail shop in the city of Savar, just outside the capital city of Dhaka, and sells her snacks all over Bangladesh.

“The loan has been a great leverage,” Parveen says. “Without it at the right time, perhaps my business never would have seen daylight.”

Eastern Bank started its “Mukti” (independence) Loan product for women-owned small and medium enterprises in 2008, with the coaching of IFC.

Sara Sallauddin, owner of a business that makes clothes and decorated fabrics for sale within Bangladesh, used a Mukti loan of $30,500 in March 2010 to begin

exporting to the United States, Canada, and the United Kingdom.

Sara’s Collections has grown from Sallauddin and five assistants, to more than 70 employees.

“Their Mukti product has been a great contribution in the name of advancement for women entrepreneurs,” Sallauddin says. “It is just like a beautiful stairway to reach our dreams.”

Mukti’s clients have faced numerous challenges, including having to operate out of their homes, and coping with a limited supply of both electricity and gas.

The Mukti loans are designed to satisfy the clients’ needs: they offer low interest rates and don’t require either collateral or six months of bank state-ments, since most Bangladeshi women in business don’t have bank accounts. However, to get a Mukti loan, a borrower must open a bank account.

Eastern Bank is satisfied with its Mukti loan portfolio. Of the 404 loans disbursed, 91 have been repaid. Only 4 percent of the outstanding loans are non-performing.

IFC began advising Eastern Bank in 2005, and gave the bank a $30 million liquidity line in 2011 to help it finance small and medium enterprises.

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Eastern Bank offers “Mukti” (independence) loans for women-owned small and medium enterprises. They are designed to satisfy their clients’ needs by offering low interest rates and not requiring either collateral or six months of bank statements.

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Micro loans give

120,000 women

a better chance

fROm stReet venDOR tO shOp OWneRMicrofinance

Some 120,000 women in rural parts of northern India now have access to small loans and increased credit, thanks to a partnership between IFC and Utkarsh Micro Finance, a start-up based in the low-income state of Uttar Pradesh.

One of those women, Phool Pati Devi, had struggled for 15 years to earn a living by selling food off a cart that she pushed through her village.

She took her first loan, for a little more than $200, from Utkarsh in 2010 and used the money to open a small grocery store in her house.

The store’s sales have been brisk, allowing Devi to send her children to a better private school and put $50 in the family savings account each month. Now she is planning her next investment: a refrigerated unit for cold drinks.

“I am now able to lead a better life,” Devi says.

The micro loans by Utkarsh, which

means “progress” in the local language, are aimed at allowing women borrowers to start or expand their businesses.

The microfinance institution aims to expand its reach to 500,000 women over the next five years.

IFC has invested $1.7 million in Utkarsh, and with advice has helped the company strengthen its operations and establish a credit- and risk-management system to support expansion to the lower-income states in India. With IFC’s help, the company is instituting practices that avoid overindebtedness, encourage better credit appraisal policies, and promote transparent pricing.

“Very few bankers and private players want to take risks, especially in those markets that have typically not benefited from mainstream growth in the past,” said Govind Singh, Utkarsh’s Managing Director and CEO. “IFC’s support is helping us reach out to women who have not been served traditionally.”

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Street vendor Phool Pati Devi used a $200 micro loan to open a small grocery store in her house in the low-income state of Uttar Pradesh. The store’s sales have allowed her to send her children to a better private school and put $50 in the family savings account each month.

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Small Loans Help

Build a Roof for

India’s Vulnerable

hOmes fOR the pOORestHousing Finance

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Vidya Devi’s wish was to build a house where she could retire and live with her son and his family.

Her pension and her son’s earnings as an electrical technician for the local railway were not enough to cover the $11,000 they needed to buy land for the house, and no bank would loan them such a modest amount.

The solution came from Dewan Hous-ing, India’s first privately-owned housing finance company. A loan from Dewan allowed Devi and her family, who live in India’s low-income state of Uttar Pradesh, to buy land in 2005.

“My dream of basking in the sun knit-ting while watching my grandchildren play in our own courtyard will come true,” Devi says.

Low-cost housing was not yet a catch-phrase when Dewan was founded in 1984.

“It’s been a long journey and not an easy one,” Dewan Managing Director Kapil Wadhawan says.

Dewan is meeting a critical need. In South Asia, which is home to one out

of every four people on the planet, 14 percent of the population has either no home or lives in urban slums and squat-ter settlements, according to the World Bank.

IFC invested about $12.6 million in Dewan in 2003 to support the company’s efforts to provide housing finance to people who couldn’t get it otherwise. IFC also advised the company on improving corporate governance, reporting stan-dards, and compliance.

IFC and Dewan Housing took a further step in 2011 when they created a joint venture, Aadhar, to offer mortgages on a large scale to underserved people. IFC’s investment in Aadhar was more than $4.4 million.

In its first year, Aadhar has extended more than 1,100 home loans to India’s poorest, targeting customers with household incomes of up to about $400 a month. It also has established 15 branches in six states, demonstrating that this demographic can be a profitable segment for mortgages.

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An $11,000 loan was all that Vidya Devi needed to buy land for a house where she could retire and live with her son and his family in the low-income state of Uttar Pradesh. She got the money from Dewan Housing, India’s first privately-owned housing finance company.

sub-saharan afriCa

percentage of people who have used a mobile phone to pay bills or send or receive money in the past 12 months:

sub-sahaRan afRica


16%

3%

www.iFC.Org | 55

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Leasing introduces

micro enterprises to

the financial system

a cOW lease suppORts a familyLeasing

Leasing, an effective way of providing small businesses with financing to invest in equipment, is particularly powerful in emerging economies where financing is in shorter supply.

In Rwanda, the micro lender Vision Finance Co. leases an array of equip-ment suitable for individuals and tiny enterprises: coffee bicycles, motorcycles, village phones, and cows.

Tharcissia Mukagatare, a single mother of four in Rwanda, was able to leverage a cow lease into an income that could support her family.

Mukagatare, who was widowed during the genocide in 1994, had depended for years on donations from extended family and well wishers to feed and educate her children.

The $1,000 cow that she leased through Vision Finance produces about 30 liters of milk a day. Mukagatare sells 20 liters of that to a nearby restaurant, earning about $200 a month. After she has made her monthly lease payment, she keeps a profit of more than half her earnings.

“Now my children can drink milk,” Mukagatare says. “I am also able to earn money to help support my family.”

Micro leasing suits the rural clients

that Vision Finance serves, since many have no collateral or credit history that would qualify them for a regular bank loan. A lease contract requires little or no down payment, and under its terms, the value of the asset being leased acts as collateral.

Once informal businesses have access to lease financing, they begin building a history of financial transactions, which is a critical first step in bringing them into the formal financial system.

Also, when countries develop addi-tional financial tools such as leasing or mortgages, they are able to deepen the activities of their financial sector.

Vision Finance launched its micro leasing program in Rwanda in 2008 under the guidance of IFC.

IFC has been giving advice to players in Rwanda’s financial sector to promote leasing since 2007. For example, it has helped micro lenders develop leasing products targeted at coffee farmers.

For the last 40 years, IFC has used investments and advice to help build the leasing market and financial institutions, investing more than $1.6 billion in 60 countries and advising 94 developing countries on leasing regulations.

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Single mother Tharcissia Mukagatare, who was widowed during the genocide in 1994, leased a cow and sold the milk, using the proceeds to support her four children.

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Leasing can

encourage growth

in key economic

sectors

a big bOOst fOR businessLeasing

When Ghana’s Odart Stevedoring switched from renting expensive machines that load containers onto ships, to leasing the equipment, the impact was immediate.

“Business boomed up, we engaged more people, trained more people,” says Kojo Arthur, Odart’s director.

That type of result is the goal of an IFC effort to expand the leasing sector in Sub-Saharan Africa by providing advice and finance to banks and other financial institutions. Leasing, which gives small business access to capital, encourages growth in key African sectors such as oil, gas, mining, agriculture, tourism, and construction.

Before IFC’s program started in 2005, the penetration of leasing in Sub-Saharan Africa was only 1 percent, compared to a worldwide average of 20 percent.

The result of IFC’s efforts was dra-matic growth of 400 percent or more in leasing portfolios between 2006 and 2008: from $29 million to $107 in Ghana, from $32 million to $150 mil-lion in Tanzania, from $1 million to $8 million in Madagascar, and from $7.5 million to $20 million in Rwanda.

Before IFC’s effort, barriers to leasing included unsuitable legal infrastructures

and tax and regulatory regimes, as well as financial institutions that weren’t innovative.

“In the beginning, it was really chal-lenging for me,” says Kanayire Abiba, owner of Rwanda’s Creation Pagne, which makes curtains and women’s clothing. “I was not able to get a loan because of the collateral that is required.”

To overcome those obstacles to leas-ing, IFC carried out a number of initia-tives with the support of donor countries, particularly Switzerland. The initiatives include:

• Assisting governments in creating regulatory and legal environments that would encourage leasing.

• Working with central banks to develop more leasing institutions that would reach out to small and medium enterprises.

• Training more than 4,000 profession-als in the leasing industry in Ghana, Madagascar, Rwanda, and Tanzania, including entrepreneurs, lessors, accountants, lawyers, and regulators.

• Helping to fund new leasing compa-nies, either with the support of donors or by co-investing in the companies.

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An IFC effort to expand the leasing sector in Sub-Saharan Africa by providing advice and finance to banks and other financial institutions resulted in dramatic growth in leasing portfolios in some countries. Leasing provides small businesses with financing to invest in equipment.

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Farmers receive

payouts via

mobile phones

insuRing against the Ravages Of WeatheRInsurance

Adverse weather can have a major impact on the livelihood of many Kenyans. Farming is the country’s most important economic sector, accounting for three-quarters of employment. Nearly half of all farmers are entirely dependent on their harvests, both for income and for feeding their families.

Those conditions created a ready mar-ket in Kenya for a type of agricultural insurance that covers farmers’ inputs—such as seeds, chemicals and fertilizer —in case there is drought or excessive rainfall. The insurance is index-based, meaning payouts are determined by comparison to historical rainfall patterns and measured currently by solar-powered weather stations.

The Swiss-based non-profit Syngenta Foundation for Sustainable Agriculture created an index-based insurance product called Kilimo Salama (“safe agriculture” in Kiswahili) and launched it in Kenya in partnership with Safaricom, the country’s largest mobile phone company, and Kenya’s UAP Insurance. Syngenta subsequently set up a company by the same name to sell the index insurance products as sales grew rapidly.

Kilimo Salama sells directly to farmers and also collaborates with agribusiness firms and microfinance institutions (MFIs). MFIs and agribusiness partners

have allowed Kilimo Salama to scale up and reach many more farmers.

Kilimo Salama has been remarkably popular. In a pilot phase in 2009, 200 Kenyan farmers were insured. By June 2012, 51,000 farmers had purchased index insurance products.

“This technology is reviving our faded hopes in farming in this area,” says Beatrice Muthoni, 40, who farms in the Mbeere district. Her payout from last year’s damaged harvest will allow her to expand planting this year. “I tilled only half an acre last season, but this season I will extend my crop garden.”

Kilimo Salama won the prestigious 2012 Financial Times/IFC Sustain-able Finance Awardfor “Technology in Sustainable Finance.”

IFC’s Global Index Insurance Facility (GIIF) gave the Syngenta Foundation a $2.4 million grant in November 2010 to further develop Kilimo Salama’s mobile-phone-based technology and to offer index insurance more widely throughout Kenya. GIIF, a joint project of IFC and the World Bank funded largely by the European Commission, promotes the development of indexed weather and catastrophic risk insurance in developing countries. Its commit-ments in Africa totaled $13 million as of June 2012.

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Automated weather stations in each agricultural region of Kenya measure rainfall during the planting season. If the rainfall falls below or above a pre-determined amount, there is a payout to farmers who have a new kind of weather insurance.

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glObal / heaDquaRteRsWashington, D.C.2121 pennsylvania ave., n.w.washington, D.C. 20433 uSatelephone: + 1 202-473-3800www.ifc.org/accesstofinance

peer Stein, global Business Line Leader, [email protected]

James Scriven, Director, [email protected]

east asia anD the pacificrachel Freeman, advisory, regional [email protected]

aliou maiga, regional industry manager, [email protected]

euROpe anD centRal asiarolf Behrndt, advisory, regional [email protected]

Edward Strawderman, regional associate Director, [email protected]

latin ameRica anD the caRibbeanghada teima, advisory, regional [email protected]

giri Jadeja, Senior regional industry manager, [email protected]

miDDle east & nORth afRicaXavier reille, advisory, regional [email protected]

william James gohary, regional industry manager, [email protected]

sOuth asiaJennifer isern, advisory, regional [email protected]

ayaan adam, regional industry manager, [email protected]

sub-sahaRan afRicaDavid Crush, advisory, regional [email protected]

ian weetman, regional industry manager, [email protected]

cOntact us

cReDits

pRODuceD byiFC access to Finance advisory & Financial markets investments

phOtOgRaphyCover iFC commissioned Front (l–r) manar Korayem, iFC staff; Kimberlee Brown, iFC staff; Bai-tushum; mr. Jun Luo, microcred nanchong12 K2 interactive15 Sara King, iFC staff19 mr. Jun Luo, microcred nanchong21 Bai-tushum23 arvand Staff25 Haystacks: aduze traveller (CC BY-nC-Sa 2.0); iFC staff27 iFC commissioned29 Olesya Zhuchenko, iFC staff33 Jose Luis Duron (CC BY-nC-Sa 2.0)35 iFC commissioned 37 Liliana pozzo, iFC staff40 manar Korayem, iFC staff43 akbar Khan, iFC staff45 First microfinanceBank afghanistan49 iFC commissioned51 iFC commissioned53 iFC commissioned57 Kimberlee Brown, iFC staff59 iFC commissioned 61 iFC staff

Design paRtneRDaniel Kohan, Sensical Design & Communication

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Capturing Our Impact: Closing Gaps in Access to Finance

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