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FINCA INTERNATIONAL INCORPORATED SMALL LOANS BIG CHANGES

FINCA INTERNATIONAL INCORPORATED SMALL LOANS BIG CHANGES. East Agri Conference May 5, 2006 BERLIN, GERMANY. REGIONAL OFFICE FOR EASTERN EUROPE AND CENTRAL ASIA PRESENTATION. FINCA – TOTAL NUMBER OF ACTIVE CLIENTS. December 2005. March 2006. August 2001. August 2002. August 2003.

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FINCA INTERNATIONAL INCORPORATED SMALL LOANS BIG CHANGES

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  1. FINCA INTERNATIONAL INCORPORATEDSMALL LOANS BIG CHANGES East Agri ConferenceMay 5, 2006 BERLIN, GERMANY REGIONAL OFFICE FOR EASTERN EUROPE AND CENTRAL ASIAPRESENTATION

  2. FINCA – TOTAL NUMBER OF ACTIVE CLIENTS

  3. December 2005 March 2006 August 2001 August 2002 August 2003 August 2004 95,239 Total Clients 36,198 43,063 46,851 59,369 110,024 Total Loans Outstanding ($000) $7,312 $12,671 $18,487 $29,490 $60,640 $68,779 Average Loan Amount Disbursed $321 $433 $457 $534 $755 $792 PAR > 30 days 0.8% 1.1% 1.2% 1.2% 1.38% 1.75% 131% Operational Self-Sufficiency 95% 89% 117% 121% 122% EURASIA – REGIONAL PERFORMANCE

  4. EURASIA – CLIENT BREAKDOWN AUGUST 2001 – DECEMBER 2005, YTD 2006 Client Growth 17% 10% Group Individual 16% 78% 6% 46% 25% 41% 46% 173 % 43,063 46,851 59,369 95,239 110,024 36,198

  5. EURASIA – CLIENTS AUGUST 2001 – MARCH 2006

  6. EURASIA – GROSS LOAN PORTFOLIO AUGUST 2001 – DECEMBER 2005, YTD 2006

  7. FINCA – Mission MISSION: FINCA’S Mission is to reduce poverty by providing financial services to economically active, poor families, so they can raise household incomes, improve their standard of living, and create jobs; and to deliver those services through a global network of local, self-sustainable microfinance institutions. FINCA International, Inc.

  8. Rural lending - OBJECTIVES Rural loan product overview Objectives for FINCA’s Rural Lending Products: • To expand the market for FINCA’s services and enable FINCA to better fulfill its mission by serving (poor) people marginalized by existing financial services that are mainly geared toward trade & services in urban areas. • Develop and implement credit products and other finance products that answer the needs of the (poor) rural population, so that they can be provided with financial services in a profitable, sustainable manner.

  9. Rural loan product overview RLP Azerbaijan progress overview: • June 2003 – Launch of the product in Southern Area of Azerbaijan • January 2004 – first RLP group was inaugurated in Western Area of Azerbaijan • October 2004 – FINCA Azerbaijan started to market RLP in North-East of the country • Currently RLP is being marketed in overall operational area of FINCA Azerbaijan • As of April 2006, F/Azerbaijan servers more than 17,000 active borrowers with its RLP program, which amounts to approximately 50% of total clients

  10. CurrentBranchNetwork FINCAAzerbaijan

  11. Rural loan product overview • Interest rate: 3.5% per month • Other fees: 2% • Grace period: none • Repayment frequency: monthly • Pre-inauguration Two meetings+disb period: within 10 days • Loan security: group solidarity • Other: cash collection service in the villages provided by FINCA • Group size: min. 8 – no maximum • Min. loan size: 45 AzM/50USD • Max. loan size: 1,000 AZM / 1,100 USD • Maturity: 6-12 months • Currency: USD or AZM • Loan use: • Farming • Livestock purchase • Trade in animals and ag products RLP Terms – FINCA Azerbaijan

  12. Rural loan product overview F/Azerbaijan: Share of RLP product in overall clientele

  13. FINCA Tajikistan RLP Tajikistan progress overview: December 2005 – Launch of the product in the Khatlon region in Southern Tajikistan As of April 2006, F/Tajikistan servers approximately 1,000 active borrowers with its RLP program, which amounts to 22% of total clients (share is steadily increasing). We expect the RLP share to reach similar proportions to FINCA Azerbaijan (i.e. more than 10,000, and around 50% of total clients) within the next two years.

  14. RLP Terms – FINCA Tajikistan • Grace period: max 2-3 months, depending on loan term • Repayment frequency: monthly • Pre-inauguration 2 meetings+disb period: within 10 days • Loan security: group solidarity • Other: cash collection service in the villages provided by FINCA • Group size: 7 (5) – no maximum • Minimum loan size: none • Maximum loan size: 1500 SMN (500 USD) • Maturity: 3-12 months • Currency: SMN • Interest rate: 3% per month • Other fees: 2%

  15. IRL 0% RL 22% GL IL 62% 16% Active Clients by Product FINCA Tajikistan

  16. Credit analysis • Credit analysis includes all household income and expenses • In case of problems with the main crop, there should be an alternative cash-flow for loan repayment Modification for “tomato grower loans”: • Borrower must have a business which is operating in rural areas and connected to producing tomatoes. • Borrowers must have contract with “Geha Food”

  17. Plans for the future 1 – CREDIT PRODUCT • To investigate and design a new, individual rural lending product • To pilot and launch the new rural lending product during 2006 • Features: • Stronger focus on product cycles • Focus on financial analysis of financed ag project – but not only! • Larger loan amounts; grace periods • Need for collateral • Sustainability of the product must be guaranteed •  Excellent portfolio quality required •  Efficient delivery mechanism required • Issue: availability of loan capital, especially in local currency •  assistance from investors/donors?

  18. Plans for the future 2a – FINANCIAL SERVICES • To investigate and design delivery mechanisms for the provision of financial services to rural areas that will greatly improve the efficiency of financial services to the rural population, and thus greatly improve their access to financial service •  This refers to • Servicing credit products, • Offering savings/deposits • Offering other financial products, such as remittances

  19. Plans for the future 2b – FINANCIAL SERVICES • Ideas: • Mobile teller units (bank on wheels) • Use mobile phone technology for payments • For credit: use hand-held computer devices for data gathering • Issue: limited financial resources for investigation and implementation

  20. FINCA – conclusion: what FINCA offers • A proven track record of sustainable development, impact on poverty, and increased outreach • The ability to rapidly scale up new programs and impact the lives of hundreds of thousands of poor entrepreneurs around the world • A range of investment opportunities across programs and regions

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