CFInternational " Finance Corporation "A World Bank Group IFC Financing to Micro, Small, and Medium Enterprises in East Asia and the Pacific Key Highlights IFC is working to develop solutions to close the micro, small, and (up 31.4 percent from $1.11 billion), $714 million of which was medium enterprise (MSMEI) financing gap, collaborating with attributed to long-term financing. 34 financial institutions (Fls) across nine countries in the East Asia and the Pacific (EAP) region. By the end of calendar yea (CY) 2012 PCs MSME clients had 3.32 m illon micro loans outstanding in the East Asia and Pacific (up As of June 2013, FC committed a total of $2.6 billion to MSME 8 percentfrom 3.07 milion n CY201 1), totaling $4.84 billion (down finance in the EAP region2, $2.3 billion for long term finance 11 percent from $5.07 bilon in CY201 1). Similarly, PCs MSME (including $143 million for funds supporting MSMEs), and cients had over 1.1 milion small and medium loans outstanding $314 million for trade finance. In fiscal year (FY) 2013 alone, by the end of CY2012 (up 11 percent from 1 million previous FC MSME commitments in the region were $1.45 bi(on year)3 totang $7306 b ion in this region (up 57 percent from $4641 b ilon fniCY2011)n MSME Financial Intermediary Portfolio FY2013 (as of June 2013) IFC Committed Portfolio to MSMEsl IFC Total Committed Portfolio to MSMEs EAP region ($ Million) (% of Total Portfolio) bywt the endite ofCY02rut1feretormliilinorviu =>~~$64 billio inwt CY2011).YO 200 MSME Financial Intr P o F 3 ( WORLD 500 10% Middle East & North Africa (MENA) EAP0 regoouth Asia (A) 000 S ub-Saharan Africa (SSA) 500 m Latin America & the Caribbeans ([AC) * East Asia & the Pacific (EAP) GrwtEurope & Central Asia (ECA) FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 n Micro Enterprise Sinall Enterprise m Mediurn Enterprise MSME Loans by Type of IFC Clients in EAP Region CY2012 MSME Loans by Microfinance Institutions IVSME Loans by SMVE Financial Institutions PFC was able to survey or extrapolate outreach data from 14 clients P lC was able to survey or extrapolate outreach data from microfinance institutions (MFIs) in six countries, 71 percent of these 20clients-small and medium enterprises (SME) Fls in seven countries, clients received advisory services from PFC. 70 percent of these ci ents received advisory services from PFC. Number of Outstanding Average NPL Number of Outstanding Average NPL Loans Loan Portfolio Loan %4 Loans Loan Portfolio Loan %4 Outstanding n 000$ Sze Outstandng '000 in Size Micro Loans 3,241,471 4,615,470 1,424 2% Micro Loans 78,167 222,218 2,843 7% Small Loans 116,215 2,038,879 17,544 1%Small Loans 485,291 13,146,762 27,090 4% Medium Loans 2,611 493,039 188,832 0 Medium Loans 542,577 57,378,483 105,752 4% 1. MSME firm size definitions: IFC s Financial Instiutions Group categorizes its clents sub-horrower according to the following definitions: (1) microfinance institution if loan < $10,000 at origination, (2) smal lenterprie iflan <$100,000 at origination; (3) medium enterprie if loan < $1 millon at origination ($2 million for advanced countries). 2. The share of committed loans to micofinance instiutions in the MSME regional comitted portfolio increased fom 20.7 percent in FY2012 to 21.5 percent in FY2013; small enterprises accounted for 47.6 percent in FY2013 (54 percent in FY201 2) medium enterpries accounted for 30.9 percent in FY2013 (25.4 percent in FY2012). 3 The committed portfolio in MSME Fls below does no nude comiment fo ommea banking tade nance and ol ecte investment vehicles. 4. Nonperforming Loan (NPa =s> 90 dayN pas due Aan Growth Trends of Loan Volume by Type of Institution in EAP Region, CY2006-CY2012 Volume and Number of Micro Loans by MFIs Volume and Number of SME Loans by SME Fis 5,000 3,241 - 3,500 $80,000 1 -1,200 4,500 2,7953,000 $70,000 927 1,000 43,5003 02,500 $50,000 C800 3,0001 2,000 60 2 2,500 . ,31 $40,000 0 31,251 -21,500 2,000 1,127 $30,000 - 400 - ,000 $20,000 5500 $10,000 79 105 87 -200 z gg g_ z 2006 2007 2008 2009 2010 2011 2012 2006 2007 2008 2009 2010 2011 2012 - Micro Loans Number (right axis) - Micro Loans Volume (left axis) - SME Loans Number (right axis) - SME Loans Volume (left axis) Micro loans portfolio demonstrated smooth growth over the last Temjrdie fsgiiatgot nnme 87tms n several years. Large swing in number and volume of micro loans in voue(6prntofsalndmimlaspoiedbSM CY201 1 was fostered by acquiring new clients in Indonesia, which 1inC2 1wsteaqstonfnwlrgcinsinhn, accounted for 55 percent of MFI regional portfolio in CY201 1. Vita anPhlpne,wchjnlycouedfr5pret The drop in number of micro loans in CY2010, followed by the ofSEproloiCYO.Lestepbttllatgowhn terminating business with a large Indonesian client which accounted CY02wsatiuetoigfcntrwhinvlm(3ie) for 30 percent of CY2009 micro loans volume in the region, was annubrolas(27tm)ofnef Cptesinhn. partially compensated by new entrants in IFC portfolio and scaling Thscinacotefr53pcntftisegntotolon up of CY20,01 win MSME PortfoliooComposition1by Loan CategorytintEAP Region,owth0in -Fa Mic ro Loans SMll Loans M.7um las SME Loan s Sl onE Loans Medi Clans 2006o 55a3% 32rtol% 12mnst4%e 2006t 0ro5% over th91tTemjrdie fsinfcn rwhiubr(.7%ms n C 2007.%11.2 6.5% fotrdb curn e let nIdnsa hc InC20 0.7% 8.4% 91.0%ino nwlrg lensiCia 2008nte 73.3%rcn fMF einl otoioi 0 18.3 8.4%na 2008 0hli 6%es 8hi1% 9.l acuteo 3%prcn 2009 84r8% 1nnme fmcolasiY0.5 4.8%we 200 th fSEprfloi Y0.6% 9.3% 90.1%tstl fsgothi 01pret C20 9 ir on ouei hein a 76.8 15mb7% 7o5 2010s 02.6% 10me1% 89.3%fIF arnrsiCia partall copenate by ew ntrntsin FC prtflioandscaing This client accounted for 53 percent of this segment portfolio in up of existing clients' portfolios. CY2012. MSME Portfolio Composition by Loan Category in EAP Region, CY2012 MFI Portfolio SME FI Portfolio mMedi.m aLoans -MdiuLmLoans MFI Micro Loans Small Loans Medium Loans SME Micro Loans Small Loans Medium Loans 2006 55.3% 32.3% 12.4% 2006 0.5% 7.8% 91.7% 2007 82.3% 11.2% 6.5% 2007 0.7% 8.4% 91.0% 2008 73.3% 18.3% 8.4% 2008 0.6% 8.1% 91.3% 2009 84.8% 10.5% 4.8% 2009 0.6% 9.3% 90.1% 2010 76.8% 15.7% 7.5% 2010 0.6% 10.1% 89.3% 2011 69.5% 24.3% 6.3% 2011 1.4% 24.0% 74.6% 2012 64.6% 28.5% 6.9% 2012 0.3% 18.6% 81.1% Total Portfolio Composition by Loan Category in EAP Region, CY2012 MFI Portfolio Composition: Volume of Loans SME Fl Portfolio Composition: Volume of Loans 100%- 100% - 90% - 90% - 80% - 80% - 70% - 70% - 60% - 60% 50% - 50% 40% - 40%- 30% - 30% - 20% 20% 10% 10% 0% - 0% L 2006 2007 2008 2009 2010 2011 2012 2006 2007 2008 2009 2010 2011 2012 m Corporate m Medium a Small s Micro a Retail m Corporate m Medium m Small m Micro a Retail Deposits versus Loans Comparison CY2009-CY2012s Over the last several years the deposits received by MFIs in EAP portfolio of small and medium deposits by $23 billion. Moreover, region demonstrated gradual growth. The portfolio of small and $2.7 billion increase of the client's portfolio in the Philippines (more medium deposits held by MFIs increased by 16% in CY2012 since than six times) and an acquisition of the large client in Vietnam with CY201 1, which was mainly fostered by the $208 million expansion $2.3 billion portfolio further contributed to significant growth of of a Cambodian client's portfolio (and $120 million increase of a the volume of micro deposits in CY2010. The $6.2 billion drop in Mongolian client's portfolio. Also an acquisition of the two clients micro, small and medium deposits held by SME FIs in CY2011 can in China and Cambodia in CY2012 further enlarged portfolio by be explained by no deposit information reported by a large client in $62 million. The deposits held by SME Fls had an inconsistent trend China. However, in CY2012, the micro, small and medium deposit over the last four years. The large spike of micro deposits and drop portfolio held by SME FIs demonstrated growth by 34 percent, in small and medium deposits in CY2010 were attributed to the which was mainly driven by the acquisition of the large client in restructuring of the Chinese client in 2010, which transformed Indonesia with $1 billion of micro and $5.4 billion of small and from rural cooperative to rural commercial bank and increased the medium deposit portfolio. volume of micro deposits by $2.2 billion while scaled down the Volume of Micro Loans and Deposits Volume of Small/Medium Loans and Deposits by MFIs in EAP Region (s Billion) by MeIIs in EAP Region (b Billion) $5 -$4.4 $4.6 $3-$. $4 - $3. $ -$2- $1.$1. $4 - 92 $3 - ' $3 - $2.2 $2.3 $2- $1.2 $13 $2 - $1$0 $1 - $06 J$0. $0.5 $0.4 $1- $01 _ _ __ _ 2009 2010 2011 2012 2009 2010 2011 2012 b Micro Deposits e Micro Loans x Small/Medium Deposits m Small/Medium Loans volume of Micro Loans and Deposits Volume of Small/Medium Loans and Deposits $14- by SME Fis in EAP Region (p Billion) $80- by SME Fis in EAP Region ( Billion) b3prn $12 - $11.6 $10.6 $70-$7. $10 - $60- $8-$8.3 $50- $82$44.5 $40- $28 $25.3 $5 voum of micro deposit by$.$blin3hl0saedw h $4- $20- $2 - $4$.6 $10- $5 - $ 2009 2010 2011 2012 2009 2010 2011 2012 m Micro Deposits a Micro Loans a Small/Medium Deposits a Small/Medium Loans 5. Micro and Small/Medium deposits classification is based on the deposit size and irrespective of the recipient (retail/commercial). The classification was done in accordance with definition of the relevant loan size noted in footnote 1. Trend Analysis of Compounded Annual Growth Rate (CAGR)6 CAGR Trend - Micro Loans by MFIs in EAP Region CAGR Trend - SME Loans by SME Fis in EAP Region 80% - 50% - 70% - 67.1% 43.7% 42.2% 60% - 56.5% 40% - 34.3% 50% - 30% - 29.1% 40% - 33.4% 30% - 26.6% 20% - 20% - 10.8% 10% - 10% -iw -0.5% -2.5% 0% .. 0%- 2004-2007 2008-2010 2011-2012 -10%. 2004-2007 2008-2010 2011-2012 n Number of Micro Loans * Volume of Micro Loans a Number of SME Loans a Volume of SME Loans Client Highlight: XacB3ank, Mongolia Objective and Client Need: Since then, IFC has kept providing various supports to facilitate XacBank, which started as a micro credit project over 10 the further development of XacBank and its head company years ago, has established its leading position as the primary Tenger Financial Group (TFG). provider of banking services to the lower-income segment of The bank received advisory services in terms of capacity building the Mongolian population. It operates in all 21 provinces and the capital city serving more than 500 thousand customers through andocorpoate ernac in adi t fin l support its 97 retail and business branches as well as specialized banking thrulans, equity investment in TF has outlets15.2 percent of shareholding, and its latest EMPS valuation was 70 Savings and Credit Cooperatives. US $12.3 million, representing an IRR of 24.4 percent. The development of a strong SME sector is essential to creating jobs and maintaining a reasonable degree of economic Development Impact: diversification in Mongolia which is undergoing a mining boom. With strong market demand and XacBank's implementation XacBank has an important role to play taking into account the skills, the SME portfolio accounted for 45 percent of the private sector's contribution to support SMEs. As a consequence, total portfolio as of December 31, 2011 and contributed XacBank has begun developing its SME business by leveraging more than 50 percent operating income in 2011. The total its expertise in credit management gained from the extensive gross loan portfolio sums up MNT537 billion (approximately microfinance experience. US$386 million). Now, XacBank is the fourth largest bank in Mongolia in terms of outstanding loans and total assets. IFC's role: According to the statistics of the Central Bank, at the end of IFC's cooperation with XacBank started in 1999 with an advisory CY201 1, XacBank had a market share of 9.6 percent in lending. project to assist the Bank's transformation from a NGO-project to a Non-bank financial institutions and then to a microfinance bank. "XacBank has beneSfitted a lot from the continuous support from IFC. Currently, XacBank is maintaining its leadership positions in micro finance and SME financing in Mongolia, and with the assistance from IFC, the bank is expanding its presence in the Asian region. " Mr Ganbaatar President, XacBank 6. Compounded annual growth rate (CAGR) from 16 reporting and repeated clients in the 2004-2007 period, 40 reporting and repeated clients in the 2008-2010 period, 60 reporting and repeated clients in the 2011-2012 period, excluding greenfield institutions and Fls that are closing their operations andcororteovrnaceinadIin tofnancinalsupr 15.2i percent of shareholding,r andits ast EMPSpval ationwa USk$12.3 million, rersetn anorIRRnofif24.4gpercent. With ~ F strong maktdmn n aBank' imopleetto more tha 50pretoeaigicoei-01 h oa gros lanporfoioumsupMNT37bilio (approimate US38 mlio).Nw,XaBnkiste out lrgs bnki