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FINANCIAL INTERMEDIARY OPERATIONS ECA PROGRAM OF ACTIONS

FINANCIAL INTERMEDIARY OPERATIONS ECA PROGRAM OF ACTIONS. S. Brajovic Bratanovic, ECSPF. ECA Program for Financial Intermediary Operations - Objectives. Develop effective tools and mechanisms to improve quality for various types of FI operations Improve implementation performance.

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FINANCIAL INTERMEDIARY OPERATIONS ECA PROGRAM OF ACTIONS

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  1. FINANCIAL INTERMEDIARY OPERATIONSECA PROGRAM OF ACTIONS S. Brajovic Bratanovic, ECSPF

  2. ECA Program for Financial Intermediary Operations - Objectives • Develop effective tools and mechanisms to improve qualityfor various types of FI operations • Improve implementation performance

  3. ECA Program for FI Operations – Quality Enhancement Program • Establish ECA Committee on FI Operations to provide policy guidance and working groups in all sector departments (done) • Expand application of standard Bank Policies OP8.30 to all FI Operations in ECA (in process) • Establish effective, specialized “quality at entry” review and help desk (done) • Establish effective FI portfolio management assistance and “clinics”(in process) • Provide semi-automatic feed-back for continuous improvement of standards and lessons of experience

  4. ECA - FI Quality Enhancement Program – Objectives for Phase I • Develop ECA Guidelines based on consensus reached and relevant lesson of experience (This will provide basis for improved design and effective quality review at entry). • Reach (regional) consensus on“minimum standards” for policy and market environment for various types of FI operations • Learn (regional/Bank) “lessons of experience” and reach consensus on what constitutes “good practices” for various types of FI operations

  5. FI Operations to be Covered by ECA Guidelines: • Credit Lines through commercial banks (for SME development, with FSD objectives, etc.) • Rural Finance Operations also using credit cooperatives • Community Development and micro finance operations • Social Investment Funds and poverty programs • Non-bank financial institutions and operations in infrastructure/energy and other sectors

  6. ECA Guidelines for Credit Lines through Banks– Completed or Under Preparation: • Minimum Requirements for Macroeconomic, Sector and Market Environment–draft by mid-July 2002 • Minimum Requirements for Institutional and Regulatory Framework (licensing, regulations, minimum capital and capital adequacy, supervision) –draft by mid-July 2002 • Design Principles for Credit Line Operations- draft by mid-July 2002 • Appraisal and Selection Process for Participating Financial Intermediaries (PFI) - draft by mid-July 2002 • Eligibility Criteria for Participating Financial Intermediaries (PFIs) –draft completed • Eligibility Criteria for Final Beneficiaries–draft completed • Eligibility Criteria for Subprojects–draft completed

  7. ECA Policy and Case Studies –Under Preparation: • Review of ECA Operations involving Micro-Finance Institutions. Options for minimum criteria for sector and market environment. Options for minimum capital and capital adequacy requirements. • Review of ECA Operations involving Rural Cooperatives. Options for minimum criteria for sector and market environment. Options for minimum capital and capital adequacy requirements. • Review of ECA Operations involving non-bank investment fund type of intermediaries, and Social Investment Funds. Options for minimum criteria for sector and market environment. Options for minimum capital and capital adequacy requirements. • Review of credit subsidies. Options to restrict subsidies. How to calculate subsidy elements.

  8. Banking sector is straightforward, but the issues are more complex for other FIs: For example, questions to be addressed for Micro-Finance Institutions (MFI): • Who should license MFIs, and on what basis? • Who should regulate MFIs? • Who should supervise MFIs? • Should the capital adequacy be introduced for MFIs and on what basis? • What should it be?

  9. Example: Consensus on Business Environment –Must Haves for Macro/Policy Framework • Competitive and liberal market environment • Basic legal framework in place (i.e., clearly defined and effective licensing, regulatory and supervisory authority for the respective FIs to ensure that the sector and FIs remain safe and sound) • Basic regulatory framework in place • Supervisory authority with minimum capacity for regulation and supervision

  10. Example: What Constitutes Competitive and Liberal Market Environment • Free entry (i.e., transparent and well defined rules) and free exit of FIs • Markets free to introduce new products • Markets free to establish prices for their products (e.g., no interest rate regulations) • Transparent access to market information • No major market distortions

  11. ECA - FI Quality Enhancement Program - Phase II • Complete/Refine ECA Guidelines for all types of FI Operations • Develop Internet-based and other tools to further facilitate design and improve quality assurance • Develop effectiveassistance to PTLs and TTLs (who are not finance professionals) in project design and preparation • Improve quality of supervision

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