ПРОГРАММА МАЛОГО БИЗНЕСА КАЗАХСТАНА Kazakhstan Small Business Programme

1. ПРОГРАММАМАЛОГО БИЗНЕСАКАЗАХСТАНАKazakhstan Small Business Programme KSBP- Microfinance in Kazakhstan Lorenz Gessner Almaty, 10 November 2005

2. Summary • History and results • Sustainability • Lessons learned

3. Yesterday – the situation in 1998 MSE CLIENTS: • MSE clients had very limited access to credit resources • Money was borrowed on the black market at high interest rates • Slow development of the MSE sector KAZAKH COMMERCIAL BANKS: • Disbursed loans only to very large companies and state-owned enterprises • Lack of an approach to lending to microenterprises (sole proprietorships and very small firms) • Lack of trained staff who could analyze MSE clients • Little interest in disbursing loans to MSEs (poor reputation)

4. KSBP - organisation of processes

5. IPC GmbH (Internationale Projekt Consult GmbH) • Consulting firm with 25 years’ experience in microfinance IPC’s range of services comprises three components: • Consultancy services • Project management • Bank management services IPC developed a credit technology precisely tailored to the special conditions prevailing in transition economies • Similar projects in Russia (RSBF), Kyrgyzstan (MSFF), Ukraine (UMLP), Armenia (GAF) • Best practice banks (ProCredit Banks) in Serbia, Bulgaria, Ukraine, Romania, Albania, Russia, Macedonia, Moldova, and also in Africa and South America

6. KSBP portfolio as a share of partner banks´ total loan portfolio (end-June 2005)

7. Kazakhstan Small Business Programme Results

8. Kazakhstan Small Business Programme Results

9. KSBP regional expansion with partner banks (in 47 cities and over 210 branches)

10. KSBP portfolio at risk(as of end-October 2005)

11. Express • Micro • Small Outstanding loan portfolio volume: Breakdown by loan size(as of end-October 2005)

12. Breakdown by maturity(as of end-October 2005)

13. Sustainability - key factors FACTORS PRIORITIES Products Easy to obtain, accessibility, service Terms and conditions Adapted to target group, competitive Training of loan officers High quality, regularity Documentation Complete and clear description of procedures Lending technology Strict, but with flexible elements Organisational structures MSE credit department at head office, people, workflow Audit High quality, regularity, training Profitability Continuous monitoring of profitability of MSE lending

14. Easy to obtain EXPRESS LOANS - target group: sole proprietorships • Loans up to USD 5,000 • Disbursement within 2 days • Minimum collateral - 100% current assets (stocks) MICRO LOANS - target group: sole proprietorships, micro companies • Loans up to USD 10,000 • Disbursement within 4 days • Minimum collateral - current assets, movable assets (cars, personal goods, stocks) SMALL LOANS - target groups: legal entities, companies, sole proprietorships • Loans up to USD 200,000 • Disbursement within 5 days • Collateral - fixed assets (real estate, vehicles), current assets AGRICULTURAL LOANS - target group: sole proprietorships and legal entities in the agricultural sector • Loans up to USD 200,000

15. Adapted to the target group • Maturities: initially up to 1 year, now up to 7 years • Collateral: more flexible approach • Repayments: initially strict equal instalments, now grace periods or varying instalments possible • New businesses: initially only existing businesses, now also new businesses set up by existing clients

16. High quality • Training comprises 5 different types of seminars and intensive practical instruction • Micro • Express • Small seminars • Senior • Back Office • Training of bank auditors

17. Number of seminars conducted- 135 Number of loan officers trained – 2,647 Regularity

18. Complete and clear descriptions • Credit procedures • Job specifications for employees • Documents on loan officer training, selection and career opportunities • Incentive systems • Code of conduct

19. Strict, but with flexible elements Financial analysis Internal credit committee CREDIT CYCLE Client acquisition Credit committee Arrears Loan disbursement Repayment of loan Monitoring

20. MSE credit departments at head office Example of a structure of MSE lending co-ordination at head office of a partner bank Head of Department Head of Co-ordination 2 Auditors for MSE lending Regional Co-ordinationUnit Methodology and Training Unit Training Methodology Regional Manager Regional Manager Regional Manager Regional Manager

21. Continuous monitoring of profitability Contribution to overheads and profit before tax for 2004 Total: USD 20 million • KKB USD 4.0 million • BTA USD 4.7 million • HSBK USD 6.1 million • BCC USD 2.3 million • ATF USD 2.9 million

22. Percentage of KSBP partner banks´ total loan portfolios financed with own funds (end-October 2005)

23. Analysis of business growth based on KSBP lending

24. Analysis of business growth based on KSBP lending

25. Analysis of business growth based on KSBP lending

26. KSBP - Lessons learned • Competition in financial sector • Adaptation of products and procedures to clients’ needs • Contribution to TA from partner banks enhances project success • Banks have to be engaged as early as possible (transfer of responsibilities) • Long-term interest in MSE lending depends on institution building and the ownership of the bank

27. KSBP III- agricultural and rural lending • New programme since Nov. 2005 • EBRD-credit line of USD 100 million • Participants: Commercial banks and a non-bank microfinance organisation • Targeting on the regional outreach- access for farmers and micro-businesses in the regions