Mr. Zafar Masud Regional Managing Director Barclays Bank Southern Africa

1. Financial Services for the Informal Sector in Zambia • Presentation to AFRACA • 23rd September 2008 • Livingstone - Zambia Mr. Zafar Masud Regional Managing Director Barclays Bank Southern Africa Presentation to the CEEC – 10th May 2008. Mulenga Presentation to the CEEC – 10th May 8/2008

2. Informal Sector Definition Standard Definition – Key Characteristics • The informal sector consists of units which typically operate at a low level of organisation, with little or no division between labour and capital. Labour relations - where they exist - are based mostly on casual employment, kinship or personal and social relations rather than contractual arrangements with formal guarantees. (2) Typically, Sole Proprietorship or Household Enterprises with limited or no distinction between the business & the owner’s assets & liabilities. The owners have to raise the necessary finance at their own risk and are personally liable, without limit, for any debts or obligations incurred in the production process. (3) Activities performed by the informal sector are not necessarily performed with the deliberate intention of evading the payment of taxes or social security contributions, or infringing labour or other legislations or administrative provisions. Accordingly, the concept of informal sector activities should be distinguished from the concept of activities of the hidden or underground economy. The Fifteenth International Conference of Labour Statisticians For purposes of this Presentation INFORMAL SECTOR = UNBANKED SECTOR IN AFRICA/ ZAMBIA

3. Unbanked Sector Statistics ILO Statistics Finscope Research Zambian Information • Population figures show that there could be over 12 million people. • The annual GDP growth rate was 6.2% and over 4.5 million people employed. • The informal economy is growing faster than the formal economy, and some formal shop owners are selling their goods largely to operators in the informal economy in order to evade paying tax. (ILO) • About 43% of urban employment is in the informal economy. (ILO) Finscope, 2005 • Large adult population still not banked • Huge amounts of money outside the banking system • Opportunities to hook more people into the financial system

4. Why Low Penetration? • Lack of Documentation/ Books of Accounts • Comfortable with the Conventional Way of Banking/ Doing Business (mainly Cash based) • Potential Compliance Issues - inherent regulatory or policy issues (tax evasions; labour laws; etc) • Lack of Education on the Benefits of Banking • Small Size of Businesses • Physical Presence/ Location • High Risk Profile • Long Gestation Period/ Sales Cycle (within the Bank and with the Customer)

5. Essential Tools to Tap 1. Physical Presence 3. Technology 2. Product Offering

6. Barclays Contribution – Out of the Box 1. Physical Presence 2. Product Offering • Distribution Points expanded; concept of Sales Centres introduced • Sales teams enhanced; introduced the concept of Lead Generators • ATM aggressively rolled-out • Strategic Alliances - Filling Stations; introduced the concept of Work Place Banking • Introduced the concept of Kiosks • The Bank introduced the mass market product - ‘Tonse Account’ - set in 2007 to basically promote the much needed saving culture in the unbanked sector • Imminent Microfinance launch in Q1 ‘2009; introducing the ‘real microfinance’ not the ‘micro loans’ • SME Re-launched: revisited the SME model by improving credit turnaround time and introducing pre-screening/ scoring model 3. Technology • Significant investment in upgrading the technology platform to Flexicube System by Q1 ‘2009 • Use of technology has become paramount given the increasing level of awareness and usage – Point of Sale Machines rolled out aggressively • Leveraging on the cellular-phone industry growth introduce products like ‘Hello Banking’

7. Physical Presence – The Largest Bank Year End 2006 Year End 2007 Year End 2008

8. Alternative Channels – The Future Cash Back via POS LG Booth/Kiosk Community Branches Mobile Banking Units

9. Mobile Banking – Pathbreaking Route In Africa, digital opportunity is undoubtedly mobile. In Sub-Saharan Africa, nine out of ten subscribers use a mobile.  African mobile penetration doubled from 6.5 per 100 inhabitants in 2003 to 13.1 per 100 inhabitants in 2005. Africa's mobile market has been the fastest-growing averaging 50 per cent growth per year since 2000. ITU/UNCTAD 2007. Number of mobile subscribers: 2,653,203 (Dec. 2007) Number of PSTN subscribers: 90,951 (Dec. 2007) Number of mobile providers: 3 Networks Mobile tele-density: 22.66 Per 100 Inhabitants (Dec. 2007) • Mobile banking solution allows customers to make account enquiries and financial transactions like fund transfers, bill payments etc. • Hello Money not only offers convenient and secure mobile banking but is highly cost effective as well, both for the bank and customers. Over 80% Prepaid Users from informal sector

10. Microfinance – The Way to Go Provision of Savings, credit, insurance and remittance services to the poor in rural, semi-urban or urban areas for enabling them to raise their income levels and improve living standards Provision of small-scale financial services for economically active people often with multiple sources of income Access to micro-finance enables the poor to Reduce vulnerability to risks Increase household income leading to overall economic growth Achieve several other social objectives (eg: Millennium Development Goals) Understanding of Microfinance Target Clientele • Potential global base of roughly 1 Billion micro-customers • Current Micro credit portfolio estimated at 25 Billion serving around 100 M customers • Global Credit market estimated at USD 250-275 Billion (@ USD 1 a day). In case the cut off is taken @ USD 2 a day, the total potential is estimated at 2.7 B micro-customers • Un-banked and economically active population who constitute at least 70% of the Pyramid • Marked by low financial literacy and mostly not reached by formal banking channels • Engaged in occupations like medium to marginal farmers, petty traders, lower salaried and blue collar workers, roadside vendors, etc Micro Credit Micro Savings Micro Insurance • Store excess liquidity for future use • Obtain returns on investments • Keep savings secure and confidential • Reduce vulnerability and manage risk • Cushion for future events and emergencies • Expand & diversify businesses • Reduce risk & raise productivity • Micro credit is the most developed discipline of microfinance Barclays Bank Zambia Plc to launch Barclays Microfinance in Q1 ‘2009

11. Small & Medium Enterprises (‘SME’) Barclays Definition • Small and Medium Enterprise (SME) will be a business that is organised and carrying business under a registered Business Name or an incorporated Limited Company • The SME’s Annual Turnover will be from zero to no more than K7bn (equiv. £1mn) Support Requirements / Constraints • Short/medium/long term finance for business sustenance and development • Two-fold Constraints: Access to Finance & Business Opportunities Barclays Value Proposition • BBZ Value Proposition: ‘Partnership for Growth’ aims at improving access to credit through provision of appropriate product solutions and technical support as well networking opportunities • Most informal businesses will be supported under the microfinance proposition Work In Progress • Microfinance proposition for smaller businesses with annual turnover of up to K650million (approx. £100K) • Additional Product development based on market changes and requirements and these include VISA electron card, commercial property finance, mortgages for entrepreneurs’ personal homes • Strategic Alliances with Key Financial Sector Players including Governments. Currently working with the USAID (DCA Guarantee Scheme), discussions with DBZ and the IFC

12. Conclusion THIS IS A GAME OF PATIENCE AND INNOVATION. WHILE RISKS ARE HIGH, THE REWARDS ARE ENOUGH AND WORTHWHILE FOR THE BANKS LIKE BARCLAYS TO PURSUE THIS ROUTE FUTURE GROWTH OF BANKING IN AFRICA SOLELY DEPENDS ON THE SUCCESS OF THE BANKS IN PENETRATING THE UNBANKED SECTOR