Financing Women Entrepreneurship: Lessons Learned and Innovative Practices

1. Forum for South East European Women EntrepreneursIstanbul 21-22 September 2010 Financing Women Entrepreneurship: Lessons Learnt and Innovative Practices by Siv Hellén, Advisor to the President, Nordic Investment Bank (NIB)

2. Brief presentation of the Nordic Investment Bank (NIB) and the Council of Europe Development Bank (CEB) • Description of the loan programmes for women entrepreneurs • Lessons learnt • Conclusions and remarks Outline of the presentation:

3. NORDIC INVESTMENT BANK enhancing competitiveness & the environment 3

4. Iceland Norway Finland Sweden Estonia Latvia Denmark Lithuania Northern Europe’s multilateral bank • Nordic and Baltic countries as shareholders • Established in 1976 by the Nordic countries • Baltic countries joined in 2005 • Headquarters in Helsinki • Key figures 2009 • Balance sheet € 22.4 billion • Loan portfolio € 13.8 billion • Loans disbursed • € 2.0 billion • AAA credit rating • Lending in member countries and emerging markets 4

5. Mission NIB promotes sustainable growthof its Member countries by providing long-term complementary financing, based on sound banking principles, to projects that strengthen competitiveness and enhance the environment. 5

6. NIB’s global reachFramework agreements with 39 non - member countriesCurrent focus countries Asia China, India, Vietnam South Africa, Turkey Africa & Middle East Poland, Russia, Belarus, Ukraine Europe & Eurasia Latin America Brazil 6

7. CEB - COUNCIL OF EUROPE DEVELOPMENT BANK 7

8. CEB Overview Institution • Oldest pan-European supranational financial institution • Set up in 1956 to strengthen social cohesion • 40 Member States - members of the Council of Europe Key figures 2009 • Total assets: € 22.7 billion • Own funds: € 4.9 billion • Rating: AAA (Moody’s, S&P, Fitch Ratings) • Over € 30 billion in projects financed since inception • Outstanding loan portfolio: € 12.2 billion • Loans disbursed: € 1.8 billion 8

9. CEB Overview Borrowers • Member States • Local or regional authorities • Financial Institutions Activities • Loans • Guarantees • Trust Accounts Sectoriallines of action • Strengthening social integration • Managing the environment • Supporting public infrastructure with a social vocation 9

10. Loan Programmes For Women Entrepreneurs • The idea was born in 1999 at a conference in Iceland • Purpose: to support and increase women's involvement in business and decision-making processes in order to promote gender equality • Projects carried out by SMEs or individuals in the private sector • Involve local financial intermediaries • Priority given to projects creating new jobs and projects located in rural areas and in regions with high unemployment 10

11. The programme objectives • Provide credits to SMEs (women entrepreneurs), for investment and working capital • Total loan amount (CEB & NIB) € 10 million, extended by each institution in 6 loans to 5 banks in Estonia, Latvia and Lithuania • Facilitate access to medium/long term commercial credits with attractive interest rates for women entrepreneurs • Create and maintain jobs • Contribute to the promotion of welfare and equality in Estonia-Latvia-Lithuania through the development of women’s entrepreneurship 11

12. Loan Programmes For Women Entrepreneurs – Amounts and targets • The 1st loan programme was only € 1 million to be divided equally by the three Baltic countries • Followed by another loan programme, this time together with CEB, in the total of € 10 million • NIB later launched one loan programme in Russia of 2 million euro, which was less successful 12

13. Loan Programmes for Women Entrepreneurs:Structure of the Programmes

14. Loan Programmes For Women Entrepreneurs: Guidelines • Requests for loans considered on a commercial basis • Emphasis put on the strategy of the borrower, the competitiveness of the project idea and environmental aspects • Flexibility in expenditure to be financed • Maximum tenor: five to seven years • Interest rate charged by the financial intermediary based on market terms for each borrower individually • Loans must be adequately secured 14

15. Loan Programmes for Women Entrepreneurs : SME Eligibility Criteria • maximum 100 employees • maximum 75 m€ net fixed assets and • maximum 33% held by a large corporation Plus • owned or managed by women or • clearly improving women’s opportunities in the employment market 15

16. Loan Programmes for Women Entrepreneurs: Total Figures Number of projectsJobs maintained*New jobs* ESTONIA 66 562 88 LATVIA 191 1,346 363 LITHUANIA 1311,614383 TOTAL 388 3,522 834 RUSSIA 5 * Estimated figures 16

17. Baltic StatesLoan Programmes for Women Entrepreneurs:Lessons learnt NB: The CEB findings presented hereafter are adapted from the results of an ex post evaluation carried out in 2007 on these programmes. 17

18. Lessons learnt - Ex post evaluationOverall a very positive outcome • The programmes performed well and efficiently • Served the businesses that were targeted • Good correspondence with CEB’s social mandate

19. Lessons learnt –Ex post evaluationThe programmes performed well and efficiently • Objectives largely met • Very satisfactory institutional arrangements • Satisfactory sub-loan performance • Banks and women entrepreneurs satisfied with management and conditions • Efficiency was satisfactory • Programmes well documented • Zero defaulting loans (June 2007) • Schedule well-respected and lead times acceptable, short even • Satisfactory cost-efficiency and cost-control

20. Lessons learnt - Ex post evaluationThe programmes served the businesses that were targeted • Great variety of sectors, often services • Half or more were micro-enterprises • Rural focus well-respected

21. Lessons learnt- Ex post evaluation – Great variety of companies

22. Lessons Learnt – Ex post evaluationRural focus well respected

23. Lessons learnt- Ex post evaluationIn line with CEB’s social mandate The programme's target represents a specific niche combining… • A commercial aspect • Credit to companies at market terms • A social aspect • Specific disadvantaged group, namely women entrepreneurs

24. Lessons learnt- Ex post evaluationRelevance was not perfect • Objectives and eligibility criteria OK • The label « women entrepreneurs » does lower barrier-to-entry for women • Rural area focus gives a chance to entrepreneurs with less collateral • Start-up finance responded to need • But • Relevance of job creation objective rapidly eroded at the time • Baltic States: narrow gender gap in entrepreneurship • Other CEE countries probably more relevant • Additionality?

25. Lessons learnt-Ex post evaluation Differentiating types of impact • Internationally operating production companies • Investments in machines, increasing productivity, efficiency, competitiveness - E.g. Siauliai textile manufacturers • Nationally operating companies • Investment to allow national expansion - E.g. opening shop in other town • Locally operating companies • Increase local client base by increasing attractiveness or capacity - E.g. refurbishment/extension beauty salon; new car lift in repair shop; fitness apparatus…

26. Lessons learnt – Ex post evaluationSustainability • Women entrepreneurs seem to have become more mainstream clients • Financed companies are healthy • But experience lack of skilled labour • Companies improved their ability to raise money • Influence of credit squeeze and overheating? • Government support, trust funds?

27. Lessons learnt - General Assumptions: Women's Point Of View • Women set up their companies, still with own capital • Women have equal opportunities to access credit • Women need more encouragement and support • Women want role models • Women need more information on credit possibilities • Women are more careful and take less risks than men 27

28. Lessons learnt - Experience Gained • Women feel that credits for SMEs are in general too expensive • Women positively surprised by friendly and helpful attitude at banks • Women found it positive that the loans were exclusively for them • Choosing the right local bank is essential • Government support was considered to be important • Majority of women entrepreneurs will ask the banks for additional financing in the future 28

29. Lessons learnt - Experience Gained: Banks' Point Of View • Difficult to combine profitability and small credits • No experience in addressing women’s particular concerns • Challenge: Banks should not give advice on how to prepare business plans • Business plans prepared by external consultants often not of good quality • Women in rural areas with start-up projects difficult to reach • Loan applicants did not have sufficient collateral 29

30. Conclusion and remarks - Have Micro Loans Reached Their Goal? • NIB's and CEB's programmes have raised several questions: • Why offer special credits for women entrepreneurs? • Are special loans for women entrepreneurs in line with gender equality? • What is innovative in NIB's and CEB's programme? 30

31. Conclusions and remarks - Why offer special credits for Women entrepreneurs ? • Women like to be target clients • Women do not need generally better terms and conditions • Women need good advice in preparing business plans • Women need information about credit possibilities • Women as an untapped resource have become a new target group for the banks • Loans for women have taught the banks to simplify their procedures and to understand women's special needs 31

32. Conclusions and remarks Are loans in line with gender equality ? Yes because: • Loans sparked discussion of women's issues and gender equality • Credits were not created to distort competition and they did not contain any real subsidy • Women got increased access to credit • Women as an untapped resource have become a new target group for the banks 32

33. Conclusions and remarks - What was innovative with the loans ? In fact not so much – back to basics A few observations: • Banking in transition countries still very male -dominated, both clientele and loan officers • Important to choose the right local intermediaries, e.g. banks with experience in SME-financing • Collateral support is needed especially in rural areas and for start-up projects • Quick and efficient/expedient loan processing essential • Advisable to enhance programmes with trust funds • Loans for women have taught the banks to simplify their procedures and to understand women's special needs 33

34. Conclusions and remarks - Key Points: Be Smart • S - Simplify • M - Market • A - Adapt • R - Respond • T -Train 34