2016 PROFIT WITH PURPOSE- MAKING BANKING ON WOMEN IMPACTFUL Learnings from BLC Bank Lebanon, Garanti Bank Romania, Garanti Bank Turkey LEARNING STUDY ON IMPACT OF BANKING ON WOMEN PROGRAMS IN EUROPE, CENTRAL ASIA, MIDDLE EAST AND NORTH AFRICA DISCLAIMER IFC, a member of the World Bank Group, creates opportunity where it’s needed most and delivers lasting solutions for development. This report was commissioned by IFC through its Financial Institutions Group (FIG) in Europe, Central Asia, Middle East and North Africa (EMENA), IFC’s Development Impact Unit and IFC’s Gender Secretariat. FIG IFC works through financial institutions to provide much-needed access to finance for millions of micro, small, and medium enterprises – including those owned by women. The IFC Gender Secretariat in turn works with firms – including banks - to reduce the gap between men and women as entrepreneurs, but also as employees, corporate leaders, suppliers, consumers, and community stakeholder. 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Our gratitude goes to the Garanti Bank Romania team (Diana Carciumarescu, Ioana Maria Dumitru, Virginia Otel and Adnan Ayman), Garanti Bank Turkey team (Faruk Nafiz Karadere, Selin Oz, Esra Kivrak) and BLC Bank team (Tania Moussallem, Hani Hoyek, Maya Margie, Karyl Akilian, Gayle Tarazi). Without their efforts, provision of data, time, information and several reviews of the study, this study would not have been possible. The authors are also grateful for the guidance, support and feedback of the IFC EMENA FIG Investment and Advisory team (Manuel Reyes-Retana, Xavier Reille, Andreia Radu, Kathrin Hamm, Kudret Akgun, Yasam Talu), the IFC FIG Banking on Women team (Jessica Schnabel), IFC country managers in Romania, Turkey and Lebanon (Ana Maria Mihaescu, Aisha Williams, Thomas Jacobs), the IFC Gender Secretariat (Henriette Kolb, Heather Kipnis, Marieme Esther Dassanou) and the Development Impact Unit (Deepa Chakrapani). This research is supported by the Canadian International Development Agency (CIDA). Authors (in alphabetical order): Andrew McCartney, Chiaki Yamamoto, Manar Korayem, Olga Ioffe Kasher, Roshin Mathai Joseph, Sammar Essmat, Ulugbek Y. Tilyayev. TABLE OF CONTENTS ACKNOWLEDGEMENTS 2 TABLE OF CONTENTS 3 FOREWORD 4 I. INTRODUCTION 7 II. EXECUTIVE SUMMARY 7 CONCLUSIONS AND RECOMMENDATIONS III. 11 IV. CASE STUDIES: 14 CASE STUDY 1: BLC BANK LEBANON: LEAD IN BANKING ON WOMEN - A STUDY 16 A. Introduction 18 B. Background 24 C. Analysis and Assessment 26 D. In Their Own Words: Customers Speak 34 E. Findings and Recommendations 36 CASE STUDY 2: GARANTI BANK ROMANIA: STRIVING TO LEAD IN BANKING ON WOMEN - A STUDY 40 A. Introduction 43 B. Background and Objectives 49 C. Analysis and Assessment 54 D. Women SME Customer Voices 66 E. Findings and Recommendations 68 CASE STUDY 3: GARANTI BANK SA: COMBINING SME BANKING EXCELLENCE WITH A PROPOSITION FOR WOMEN ENTREPRENEURS IN TURKEY 72 A. Introduction 75 B. Background 75 C. Understanding the Context in Turkey 76 D. SME Banking Platform Market Leadership 79 E. Formation of Garanti Proposition to Women Entrepreneurs 84 F. Conclusions and Recommendations from IFC 94 3 FOREWORD Xavier Reille – EMENA FIG Advisory Manager, International Finance Corporation As an investor in emerging markets, the International contributor to a bank’s growth and performance. Finance Corporation (IFC) strongly believes that Banking on women programs can help banks improve investing in women’s entrepreneurship is not only performance, drive growth and profitability. essential for economic growth but is also good business. Over the past decade, IFC has been working through IFC’s commitment to advancing gender equality financial institutions around the world to reduce the is therefore anchored in a strong business case for credit gap for women entrepreneurs. Through our profitable, gender-smart banking solutions that reduce investment and advisory engagements with client banks the gap between men and women as entrepreneurs. interested in serving women entrepreneurs, we have built IFC works through financial institutions to provide a sizeable portfolio around the globe. On their journey to much-needed access to finance for millions of micro, develop and grow these banks’ banking on women, our small, and medium enterprises – in particular to client banks have taken different approaches and in doing those owned by women. In doing so, we contribute to so have generated a considerable amount of knowledge reducing the gender credit gap, which is at the heart of and learning – in particular with regards to how these the World Bank Group’s new gender strategy and an banking on programs have affected the bank’s business. important part of the World Bank Group’s vision of It is with great pleasure that I introduce to the ending extreme poverty and building shared prosperity. readers the “EMENA Banking on Women Learning But banking on women programs not only benefit Studies”. This report compiles three individual case women entrepreneurs and close the gender credit gap, studies of banking on women programs from three they equally benefit banks by providing a growing IFC client and –partner banks. This report is a joint and profitable business opportunity. Banks who target initiative and the result of a long-standing partnership women borrowers benefit from tapping into a large, between the IFC, BLC Bank, Garanti Bank Romania fast-growing and underserved customer segment. They and Garanti Bank Turkey. The objective of these can also benefit from cultivating a customer base that learning case studies is to inspire and inform financial exhibits a more loyal behavior towards their main bank institutions, donors and others interested in developing and potentially provides more profitable opportunities similar programs and to share some of the learning compared to male customers – as we have seen in from our client and partner banks in East Europe, cases of Garanti Bank Turkey and BLC Bank. Banks Central Asia and the Middle East and North Africa. who target women borrowers can also benefit from a I invite you to enjoy the insights on good borrower segment that exhibits better pay-back rates practices and success drivers, to learn from these and more diligently adheres to payment discipline, as three case studies and to think of ways in which we have seen in the case of Garanti Bank Romania. As your institution can strengthen its business by such, the female borrower segment can be a powerful creating economic opportunities for women. 4 Deepa Chakrapani – Head, Development Impact Unit International Finance Corporation The World Bank Group’s FY16-23 gender strategy in lending to women owned SMEs, and offers a rich put forth an ambitious path toward improving and diverse set of learnings and recommendations. opportunities for women because failure to fully Despite the fact that each one of these banks capitalize on women’s productive potential represents is at a different stage of the “Banking on Women” a major missed opportunity for global economic program and as such, has taken a unique approach to growth. Women-owned micro, small and medium capitalize on this fast growing and profitable segment, enterprises (MSMEs) are already becoming a force there are unifying themes that emerged from these to be reckoned with when it comes to growth and studies. All three banks, for example, understood that development of economies in which they operate. An a superficial “pink-washing” of their “Banking for estimated 31% - 38% of formal Small and Medium Women” Strategy is not an option. On the contrary, Enterprises (SMEs) in developing economies are providing real solutions to problems faced by women owned fully or partially by women1 . Yet on average entrepreneurs proved to be critical to their programs’ only about 10 percent2 of women entrepreneurs have success. Investment in gender-disaggregated data adequate access to the capital required to grow their strongly emerged as one of the key success factors as businesses. This fast growing market segment is widely well (albeit that it remains a challenge for many banks.) underserved and represents a unique and lucrative And last, but not least, there is evidence encountered opportunity for financial institutions around the globe. that the female entrepreneurs’ customer segment makes As part of the World Bank Group and an investor in a positive contribution to the banks’ bottom lines. emerging markets, the International Finance Corporation In short, despite the fact that complexities of tackling (IFC) has a development objective to enhance access issues of access to finance for women entrepreneurs are to finance to women entrepreneurs. IFC’s Banking on unique for every financial institution that embarks on this Women Program, established in 2010, aims to help journey, successful first-movers like BLC bank Lebanon, financial institutions, especially those with mature SME Garanti Bank Turkey, and Garanti Bank Romania have lending portfolios, to tap into this tap into this growth an important role to play in transferring knowledge, segment. This publications presents IFC’s experience creating a blue-print and inspiring other banks. with three IFC client and partner banks - Garanti My hope is that you find the studies presented in Bank Turkey, Garanti Bank Romania and BLC Bank this publication informative and thought provoking. Lebanon. It showcases the unique experiences of and Without further ado, I invite you to explore these insights into the individual journeys of these banks studies and form your own conclusions. 1 IFC Enterprise Finance Gap Database (2011). 2 Banking On Women: Changing the Face of the Global Economy, http://www.ifc.org/wps/wcm/connect/9be5a00041346745b077b8df0d0e71af/ BOW+FACT+SHEET+NOV+1+2013.pdf?MOD=AJPERES 5 LIST OF ABBREVIATIONS ATM Automated Teller Machine BoW Banking On Women CAEN Clasificare Activitatilor Din Economia Nationala A Romaniei CASA Current Account/Savings Account CSR Corporate Social Responsibility CVP Customer Value Proposition EBRD European Bank For Reconstruction And Development EMENA Europe And Central Asia, Middle-East And North Africa EU SBA Small Business Act For Europe EVP Executive Vice-President GBA Global Banking Alliance For Women GEM Global Entrepreneurship Monitor IFC International Finance Corporation IRR Internal Rate Of Return IS IFC’s Investment Services IT Information Technology KPI Key Performance Indicators L/G Letter Of Guarantee MENA Middle East And North Africa MIS Management Information System MoET Ministry Of Economy And Trade MSME Micro, Small And Medium Enterprises NGO Non-Governmental Organization NFS Non-financial service NPS Net Promoter Score NPL Non-Performing Loans OD ACC Overdraft Account OECD Organization For Economic Co-Operation And Development OPIC Overseas Private Investment Corporation POS Point-Of-Sale RM Relationship Manager RoAA Return On Average Assets ROT Return On Turnover SME Small And Medium Enterprises TGB Turkiye Garanti Bankasi TL Turkish Lira UNDP United Nations Development Program WE Women Entrepreneurs WE-INITIATIVE Women Empowerment Initiative 6 I. INTRODUCTION The overall objective of this report is to learn about the results of the International Finance Corporation (IFC) “Banking on Women Program” (BoW) in Europe, Central Asia, the Middle East and North Africa (EMENA) as well as other Banking on Women programs. Established in 2010, IFC’s “Banking on Women The EMENA program is active in nine countries. Program” uses IFC’s investment capital to help financial institutions around the world with lending Garanti Bank Romania, BLC Bank in Lebanon, track records to small and medium enterprises (SMEs) both IFC client banks, and Garanti Bank Turkey3, to profitably expand their portfolios and provide were selected for this publication as individual case women entrepreneurs with access to finance. IFC also studies. Each of the three case studies looks at the works with financial institutions to deepen their ability existing capacity and performance of each of these to reach women-owned businesses through segmenting banks in terms of serving women entrepreneurs. In their target market, positioning their brand and doing so, the study places particular emphasis on the repositioning their products to reach female borrowers. extent to which these banks are able to deliver their As of 2016, IFC’s BoW Program has a portfolio of women banking programs in a commercially viable, over $1 billion, invested in 32 banks around the self-sufficient manner that is based on the bank’s own world for on-lending to women, and is working with in-house resources and capacities. Where possible, each 22 banks globally to build up their capacity to bank study also aims to understand if and how the female with women. IFC’s “Banking on Women Program” in borrower segment has affected each bank’s business EMENA was launched in 2011. Since then, IFC has (bottom line, sustainability and growth targets). provided over $130 million in finance to six banks for on-lending to women entrepreneurs: Garanti Bank A separate and parallel assessment of this program Romania, Fibabanka A.S ¸ . Turkey, Alternatifbank A.S ¸ looks at the impact of the program on the end in Turkey, S¸ ekerbank T.A.S ¸ in Turkey, Bank of Georgia, beneficiaries, i.e. women-owned SMEs. This Transcapitalbank in the Russian Federation. IFC has beneficiary survey will provide insights into how delivered advisory services to an additional five banks effectively the bank’s female borrowers are reached to build up their capacity to serve women customers and served. Ultimately, this study aims to generate (BLC Bank in Lebanon, Bank al Etihad in Jordan, learning for IFC and its client banks in order to Bank Muscat in Oman, Habib Bank Ltd in Pakistan strengthen the design and delivery of the banks’ BoW and Bank of Palestine in West Bank and Gaza). program, as well as IFC engagements in this area. II. EXECUTIVE SUMMARY Each of the three banks has followed a different path in building their Banking on Women program. In doing so, the banks have generated at each step of their journey much learning that other banks can benefit from. 3 The case study on Garanti Bank Turkey was produced and launched in 2014 and added to this report to be included in the meta-analysis. 7 While the individual case studies have aimed to highlight both - good practices as well as opportunities to do things differently and strengthen program results, this section focuses on presenting a summary of the leading practices and success driver that we were able to identify in the three banks’ Banking on Women programs. LEARNINGS ON GOOD PRACTICES internal and external gender-smart approaches 1. STRONG SME BANKING AS A FOUNDATION: across its entire bank operation to enhance the All three banks built their Banking on external perception and credibility of the Bank Women programs on a strong foundation in the Lebanese market as the “Bank of Choice of an existing SME Banking platform. This for Women”. At inception, BLC Bank focused is because they all recognized that a bank only on women entrepreneurs as a customer looking to excel at doing business with segment. Once this was successfully established, women entrepreneurs must have a mature the Bank turned its attention to women inside its and sophisticated SME banking platform on own operations, i.e. women in the BLC Bank’s which to build. For Garanti Bank Turkey, SMEs workforce and leadership. Similarity, Garanti has represented a key part of the Bank’s strategic Bank Turkey’s strategy aimed to go beyond focus for some 15 years. Garanti Bank Turkey was just providing financial services to women-run one of the earliest adopters of an organizational SMEs. Positioned at the centre of an extensive structure dedicated to targeting SMEs – from its network that supports and promotes women head office, down to regional offices and into its entrepreneurs in Turkey, the bank decided to vast branch network. Garanti Bank Romania has support a whole ecosystem in which women been developing its SME banking capacity since entrepreneurs live and work. To achieve that, 2007. BLC Bank has been building a sizeable, Garanti Bank Turkey developed partnerships with self-funded SME banking business along with a broad array of institutions that support women a strong platform in SME banking for both entrepreneurs. These include business women small and medium enterprises since 2011. All organizations, local NGOs, universities, policy- three banks have used the core elements, tools makers and chambers of commerce. Gradually, and expertise that was rooted in their SME as the bank’s focus on women strengthened, banking program (segmentation, relationship Garanti Bank Turkey had broadened its approach management, customized product packages) to include its operations, i.e. women in Garanti to build their Banking on Women programs. Bank Turkey’s workforce and leadership. 2. CLEAR VISION: A vision to become the “Bank Both, BLC Bank and Garanti Bank Turkey of Choice for Women” was a critical element are aspiring and working toward becoming for each bank in setting the stage for their the “Employer of Choice for Women” in their respective Banking on Women programs. respective markets. Both banks have also started to Both, BLC Bank’s and Garanti Bank Turkey’s explore a further broadening of their external focus strategic vision is to become the bank of choice from an initial focus on the women entrepreneurs’ for women. While Garanti Bank Turkey’s vision customer segment to a broader customer segment was initially focused on being the “Bank of that includes female retail banking customers. Of Choice for women entrepreneurs” by providing the three banks, Garanti Bank Romania has taken them “the managerial and consultancy support the most narrow and focused approach, choosing to strengthen their competitiveness”, BLC Bank’s to keep its program within the boundaries of vision was somewhat broader, aiming to be a the women entrepreneur customer segment. bank of choice for [all] women in Lebanon”. But in doing so, the Bank still went beyond just selling loans to women entrepreneurs by offering 3. BROAD APPROACH: The three banks have all a broader suite of non-financial services and taken some variation of a broader approach support to complement its financial offering. to “Banking on Women” that goes beyond just selling loans to women entrepreneurs. BLC 4. INTEGRATION ACROSS THE BANK: All three Bank’s ‘holistic strategy” has focused on aligning banks have - to varying degrees - integrated 8 the various elements of their Banking on 5. CUSTOMIZED VALUE PROPOSITION: Two Women program into relevant departments, out of three banks started out with a fully units and functions in their bank. Garanti Bank developed, research-based customer value Turkey has gone the furthest in integrating and proposition (CVP) for their female customer anchoring their women banking programs across segment. All three banks understood that its entire banking business. The bank developed uninformed, superficial “pink-washing” is not the Banking on Women program based on the sufficient and that providing real solutions to Bank’s SME banking business, and it manages problems faced by women entrepreneurs was the program through close collaboration among critical to program success. Both BLC Bank the product development team in the head office, and Garanti Bank Turkey developed their Banking the sales teams at the regional and branch levels, on Women program from the onset with a vision and the Bank’s central marketing unit within the to develop a comprehensive and differentiated SME Banking department. The bank has made CVP for their female SME customers. The a special effort in mainstreaming its Banking on development of their respective CVP was preceded Women SMEs program across its subsidiaries. and informed by market research that generated Being a part of a diversified financial-industrial insights into female borrowers’ needs and solutions group, Garanti Bank Turkey aimed to integrate that could address those. Garanti Bank Turkey’s its program for SMEs - and by extension for market research showed that women valued women SMEs - across its subsidiaries such as emphasis on relationship management, simple Garanti Payment Systems, Garanti Mortgages, business processes, differentiated products, non- and others. This approach creates synergy between financial support, low interest rates and service business lines and leads to greater efficiency. fees. These findings informed the development of its Women in Business Proposition based on BLC Bank followed a very similar approach of the three pillars of financial support, educating integrating its Women’ Market value proposition and also encouraging women entrepreneurs that across all departments and functions of the are key to the bank’s strategy for this segment. Bank, rather than creating an insular unit for its Banking on Women Program. From the Bank’s Similarly, Garanti Bank Romania’s offering leadership all the way down to the branch level, aims to address the specific needs of women the Bank allocated program-specific resources entrepreneurs in Romania. The Bank’s offering is and responsibilities to its relevant staff. At the a combination of financial services, customized leadership level, a Steering Committee was created marketing, education and non-financial services. to provide guidance. At the head office level, While the financial products that are offered to specialists for program planning, coordination women SMEs are largely a variation on standard and implementation with the branches were put SME products, the bank put emphasis on a in place. At the branch level, branch staff were differentiated marketing approach to reach this assigned the program relevant responsibilities. segment. Garanti Bank Romania chose not to Garanti Bank Romania has also integrated its focus on the financial product offering itself, Banking on Women program into its various but rather on taking a differentiated approach central departments but with a more narrow focus to developing brand awareness of the Bank’s on head office operations. The BoW Program women entrepreneur banking program through is integrated at the central level into the SME marketing, social media, and through the Banking business line at the bank. Like all four sponsorship of events. Similar to Garanti Bank other lines of Garanti Bank Romania’s banking Turkey, the bank complements its financial business, the Banking on Women program is offering with education and non-financial services supported by the central communications and (business training and education for SMES, product development teams. The Bank has opted networking events). BLC Bank seems to have not to assign dedicated relationship managers for gone the furthest in differentiating its financial this specific customer segment at the branch level. offering, which includes a collateral-free loan for businesses. Like the other two banks, BLC 9 Bank complements its financial offering with these details are missing, it becomes very difficult non-financial services which include mentoring, to track the full women-in-business portfolio. business skills training, networking opportunities, Garanti Bank Turkey used data cleaning, with recognition and awards. The bank’s emphasis in relationship managers responsible for following this approach is on providing a comprehensive up with clients to overcome this challenge suite of traditional banking financial services and complete client data on file. Investing customized to women in Lebanon that is time and effort (including manual account complemented with non-financial services. reviews) to tag the female customer base is a particularly challenging task. For businesses, 6. DATA: Investing in gender-disaggregated the banks that do not have a gender-tag in their data is critical for success and yet data MIS have to manually review each account disaggregation remains a challenge for many and tag it as woman-owned based on the sales banks. BLC Bank has made the most progress by team’s knowledge of its clients. This is hugely investing in its MIS systems to generate gender- time-consuming and produces inconsistencies disaggregated data. The bank has introduced a and inaccuracies. All three banks either had gender-tag into its MIS, which has allowed the “engendered” their MIS (BLC Bank) or were bank to create a gender-disaggregated baseline, planning to do so (Garanti Bank Romania) define and track performance targets for all WE Initiative segments and products, as well 7. BUSINESS BENEFITS: There is varying as incorporate these into the bank’s existing evidence encountered by all three banks that incentive structure. It was also important that the female entrepreneurs’ customer segment BLC Bank was willing to make the required is contributing in some form to the bank’s investments into its MIS. The bank adapted its business. For Garanti Bank Turkey, the segment’s MIS to ensure that all customer data is gender- contribution to the business has mostly been in disaggregated, repurposed an unused field in the the form of profitability. Evidence from Garanti MIS to track account ownership by gender and Bank Turkey supports the notion that women updated applications to collect this information. make profitable SME customers. On average, women entrepreneurs at Garanti Bank Turkey Garanti Bank Romania followed a different consume more financial services. Furthermore, approach. While Garanti Bank Romania’s MIS far higher wallet shares are maintained for women currently does not allow for disaggregating entrepreneurs, and by definition, this segment has its SME information by gender, the bank has a higher profitability per relationship. Similarly, taken a pragmatic and innovative approach BLC Bank was able to derive economic value toward identifying alternative methods to from its female SME customer segmenting. BLC track data by gender. For example, the Bank Bank calculated that the IRR of its Banking on uses reference numbers on customers’ personal Women Program stands in excess of 34%. It identification cards. In Romania these begin was not clear to what extent this is the case at with either 1 or 2 depending on the gender of Garanti Bank Romania. Where the three banks the cardholder. Thus, female client numbers can differ is the segment’s contribution to portfolio be gathered through the personal ID numbers quality. Garanti Bank Romania and BLC Bank’s associated with opening a bank account. The NPL-rates for female SME borrowers were lower same applies to the formal owner or manager when compared with overall SME portfolio of an SME and the ID number associated with performance which includes the men-led SME that person. This arrangement has allowed the borrower segment. NPL rates of BLC Bank’s bank to track certain customer data by gender. female borrowers were better than the NPL figures for BLC Bank’s portfolio as a whole and For Garanti Bank Turkey, gender-disaggregated have consistently outperformed results for the data generation was similarly cumbersome. The overall portfolio by more than two times. For details related to shareholders and gender are not Garanti Bank Turkey by contrast, there were no always captured during the account opening. If appreciable differences in NPL rates between 10 the two genders in the portfolio. (Both Garanti transfer knowledge. BLC Bank’s Banking on Bank Turkey and Romania developed statistical Women program, for example, informed the risk assessment tools with no gender-related development of IFC’s standard Women Market parameters). BLC Bank and Garanti Bank (WM) Value Proposition to banks. The IFC WM Romania have also seen higher growth rates of Value Proposition, designed after the BLC Bank the female SME portfolio when compared to the programs, serves as a template for other banks rest of the SME portfolio. BLC Bank’s women- all over the world. All three banks’ Banking on led SME portfolio, for example, grew at a much Women program are illustrating the opportunity higher rate than the overall SME Portfolio and are having an important demonstration in with regards to the number and value of loans their immediate market (Garanti Bank Romania disbursed and outstanding over this time period. in Romania, where other banks are starting to consider this segment), in their geographic 8. KNOWLEDGE TRANSFER: Successful first- region (BLC Bank in the Middle East, where movers such as BLC Bank, Garanti Bank it plausibly inspired Bank Muscat; Bank Al Turkey and Garanti Bank Romania are critical Etihad; Bank of Palestine; HBL) and globally in transferring knowledge, creating the (Garanti Bank Turkey) with banks in those blue-print and inspiring other banks. Two of various locations showing strong interest in (and the banks are members of the Global Banking in some instances commitment to) investing Alliance (GBA) and are extensively using the in their own banking on women programs. GBA and other platforms - such as the IFC – to III. CONCLUSIONS AND RECOMMENDATIONS Each of the three banks is at a different stage of their Banking on Women program. Each study included in this publication has produced a rich and diverse set of learnings and recommendations. Some of the recommendations below speak to banks with relatively new banking programs, such as Garanti Bank Romania. Other recommendations are relevant to those who have been in the market with a Banking on Women program for a decade, such as Garanti Bank Turkey. Regardless of where banks are on this spectrum, they may find the recommendations below relevant to their specific case and aspirations: 1. For banks that would like to develop a to be targeted (which may not be the same as “Banking on Women” program, it is critical to for the general banking focus); 4. definition of start with the formulation and implementation risk-appetite focus that includes gender-sensitive of a strategy for the female customer management of credit risk; 5. further development segment development. For banks that intend of products attractive to the female client segment to support this segment, better business impact based on research into segment preferences. and sustainability of the program can be achieved through a defined and costed strategy that would 2. At the core of any “Banking on Women” include: 1. focus on the female client segment program strategy needs to be the in SME banking to define and build market development of a substantially differentiated share; 2. cost/benefit analysis of the financial Customer Value Proposition (CVP) based on impact to the bank; 3. regions and industries in-depth market research of this segment. 11 The CVP needs to extend female segment product clientele and reduce risk related to capacity and diversity beyond a focus on general product performance concerns. These NFS also help discounts and deposits and leverage opportunities build the pipeline for the provision of financial of cross-selling of additional banking services services to women entrepreneurs. The key in the to an existing client base. Other pillars of a long-run will be for banks to refocus their NFS solid “Banking on Women” program strategy offering to ensure that the banks’ NFS services are: 1. risk-scoring or risk pricing formulae remain innovative and reflective of their female for the female segment; 2. strengthening of clientele’s needs. The banks should also critically marketing and access to product information and assess the contributions of NFS provided to female measurement of the impact of NFS activities by customers for the Bank’s objectives and targets tracking customer leads and conversion rates set for the Banking on Women program. This means paying special attention to the impact of 3. For “Banking on Women” programs to be NFS provided to female customers on the Bank’s successful and sustainable, it is critical ability to attract and retain female customers as for banks to put in place a dedicated well as sell its various financial products to them. female segment unit within SME and Retail Departments and incentivize teams. The 6. For “Banking on Women” programs to be experience of other banks shows that a small successful and sustainable, they need dedicated team in each of the Retail and SME to be scalable. Otherwise, “Banking on departments, managed and incentivized on the Women” programs will remain limited basis of KPI methodology, is better equipped to to representing only a small - likely drive growth than a “universal” approach to female insignificant - portion of a bank’s business. client sourcing and relationship management that Banks need to aim for scalability to realize the take place between the head office, branches, and potential of this segment and to ensure that their clients. Many banks globally with “Banking these programs are commercially successful on Women” programs have adopted champion and and sustainable. To increase sustainability and ambassador roles for women’s banking among their scale, banks need to place greater emphasis on branch staff and CRM in their branch networks. segment performance and -profitability through improved analytics and CRM. While there 4. To ensure course corrections, banks are social objectives related to the support of establishing a “Banking on Women” women entrepreneurs, this segment must be program need to develop a methodology assessed as a profitable business proposition, and institutionalize a system to disaggregate just like any other in a bank’s portfolio. female-segment performance data. Availability of refined data to indicate the degree of tangible 7. To achieve scale, banks may need to create and intangible contributions of the female more scalable platforms for the provision segment is particularly critical when making the of differentiated non-financial services to case to the Board for commitment of resources women. These may include financial literacy and capital to develop this niche segment. education and business training for the small and mass-segment of women entrepreneurs. 5. For “Banking on Women” programs to be E-learning and webinars could be powerful tools successful, banks need to recognize the to achieve scale in NFS. Such steps should go importance of moving beyond solely an hand-in-hand with greater tiering of the offering access-to-finance view of the women’s based on current and potential client value. entrepreneurship market to also providing It will be critical that these mass-solutions are encouragement and consultancy support sufficiently differentiated for the female segment. for women entrepreneurs – non-financial services to women entrepreneurs (NFS). 8. Banks that have pioneered “Banking on These NFS are an effective way to provide Women” programs are starting to see other capacity building opportunities for the female banks come into this markets. For the First- 12 movers and the pioneering banks, it will be their female SME customer base and critical to stay relevant, leverage on past cultivates these relationships. This will success and innovate in order to continue to allow to create a new or adjust the existing be successful. To maintain their role in their long-term strategy for this customer sub- market as the bank of choice for women, these segment with a focus on developing a specific first-mover banks need to continue evolving and approach to providing solutions that allow tailoring their services based on the ever changing top performers to maximize their potential. needs of their existing female customer base. To do so, these banks will need to keep a close 11. Banks with successful Banking on Women eye on how existing female customers perceive programs for women-led SMEs can benefit and experience their services and seize new by building on their experience and taking opportunities to serve their female clients as they a similarly structured, research-based arise. These banks can do so by listening actively approach for building up their female client and attentively to the needs of the new women portfolio in retail banking for women. entrepreneurs’ customer segment. Tools for banks to stay connected to their customer base and 12. Banks with successful Banking on Women listening actively and attentively include regular programs have an opportunity to not only and tailored customer surveys to systematically provide access to finance for women collect feedback from female customers. These entrepreneurs - but also use their own surveys will continue to provide the banks with in-house procurement to provide women opportunities to gain insight into ways the banks entrepreneurs with access to business can improve their offerings in these fast changing opportunities. Banks are typically larger buyers times. In particular, the banks should consider of products and services. There is an opportunity leveraging online and app-based surveys. Other for banks with Banking on Women programs tools at the disposal of first-mover banks are a to introduce a supplier-inclusive, diversity- revisiting of focus groups conducted when their friendly approach to procurement across their Banking on Women program was first designed. institution. This could include establishing a To do so, these banks can leverage the online supplier diversity program that includes a core platform and virtual community that the banks component to encourage women-owned SMEs have already established for their female customer as suppliers, contractors, and sub-contractors of base as well as social media (such as Facebook goods and services along the bank’s value chain. groups and their discussions etc.) to generate and lead these discussions in discussion forums. 9. First-movers and pioneering banks need to build a pipeline of future female borrowers in order to keep growing its female customer pool and stay ahead in the market. Attracting and cultivating young women as new customers to these banks may require attracting a younger generation that is typically not targeted by these banks. This in turn requires understanding the needs and wants of this sub-segment, leveraging technology and mobile banking tools more, which are likely to resonate with younger generation women. 10. First-movers and pioneering banks in “Banking on Women” need to identify top performers and underdogs in 13 CASE STUDIES  CASE STUDY 1 BLC BANK - LEBANON: LEADING IN BANKING ON WOMEN - A STUDY  LIST OF FIGURES Figure 1 Cumulative Performance Results to Date (since beginning 2012) Figure 2 BLC Bank Project Indicators 2012-2015 Figure 3 Compound Annual Growth Rate (CAGR) Years 2012-2015 Figure 4 Return on Assets for 2014 Figure 5 NPL Rates by Segment 18 A. INTRODUCTION 1. PURPOSE OF THE REPORT each banks’ respective BoW program was The overall objective of this study is to learn about guided by the following considerations: the impact of International Finance Corporation’s (IFC) “Banking on Women” (BoW) Program in • The focus of the study is on what the authors the Europe and Central Asia and the Middle East consider as aspects critical to a successful BoW and North Africa (EMENA) through BLC Bank investment and advisory program. For the of Lebanon. IFC’s BoW Program was launched in metrics of success parameters, see section below. EMENA in 2011. Since then, IFC has provided over • Particular attention is paid to acknowledging $130 million in finance to six banks for on lending the varying influences on a client bank’s to women entrepreneurs and has delivered advisory success including but not limited to services to an additional five banks to build up their different types of IFC interventions, stages capacity to serve women customers. The program is of program maturity, client buy-in and active in nine countries. Three of these IFC partner commitment and data challenges. banks were selected for this learning study and their • The focus of the study is on banking for women- respective experiences are being studied in individual led SMEs. While looked at the margins of this case studies. Each study looks at the existing capacity study, retail banking to women is not the focus and performance of each of these banks with regards of this study. The definition of women-led SMEs to sustainably and effective servicing of women for the purpose of this study is based on the entrepreneurs. Each study also aims to understand if definition provided by BLC Bank Lebanon. and how the female borrower segment has affected the respective bank’s bottom line, sustainability and growth Data and information collected and analysed for targets. It is also envisaged to separately undertake the purpose of this study comes from five sources: a phase two of this study, wherein the impact of the program on the end beneficiaries (women-owned Desk research SMEs) will be assessed. Ultimately, this study aims • IFC’s internal project governance systems, to generate learning for IFC and its client banks in data and documents (DOTS, ASOP) order to strengthen the design and delivery of BoW • Client bank’s internal documents, programs as well as IFC engagements in this space. such as strategy documents, financial and portfolio data provided The objective of this specific case study is to • Public reports and information, including bank understand the success of the BoW program for websites, media articles, other studies conducted BLC Bank in Lebanon in terms of the program’s on BLC bank’s online/print brochures, bank contribution to the bank’s bottom line, the growth presentations, annual report, sustainability report and sustainability of the BoW business, as well as the capacity created within the bank to sustainably service Field research women entrepreneurs and consumers. BLC Bank’s • Face-to-face interviews with BLC Bank staff BoW Program has been branded by the Bank as the • Face-to-face interviews with BLC “We Initiative” (Women Empowerment Initiative) Bank’s female SME clients and will be referred to as such throughout the study. 3. DEFINING SUCCESS PARAMETERS 2. STUDY APPROACH AND METHODOLOGY In order to assess the achievement of the In conducting this study, the assessment of “We Initiative” of BLC Bank, this report will 19 use a set of objective, quantitative metrics Non-financial bank-specific KPIs that help in commonly used by IFC and by banks with sustaining the growth of the “We Initiative” leading women banking programs: program recently developed by BLC Bank. Key Performance Indicators (KPIs) for the We umber of subscribers, active members of • N Initiative, that help the Bank define and measure We Initiative and SME Toolkit websites progress toward its goals for the initiative. • Number of trainings and learning hours spent on the program and number and Financial KPIs, Segment Performance satisfaction of training participants and Profitability • Number of conferences and road shows and number and satisfaction of training • IRR participants vs. the planned activity • Value of SME lending portfolio outstanding via controlling the conversion rate for women-led SMEs vis-à-vis BLC Bank’s SME portfolio as a whole Based on these success metrics, the IFC team • Value of SME deposit portfolio outstanding has reviewed available data from the work with for women-led SMEs vis-à-vis BLC BLC Bank and found very good data availability Bank’s SME portfolio as a whole overall, although with support for a stronger Number of loans disbursed to women SMEs • business case for more data in the area of segment vis-à-vis BLC Bank’s SME portfolio as a whole profitability. Another area where a lot of interest • NPL ratio for women-led SMEs vis-à-vis and attention is being given is in quantifying BLC Bank’s SME portfolio as a whole the impact of Non-financial Services offered on • Number of women-led SME borrowers BLC Bank’s portfolio and profitability growth. Assessment of Gender-Disaggregated Data Availability at BLC Bank Metrics Available Segment Performance and Profitability NPLs comparison for women segment vis-à-vis overall SME portfolio  IRR  ROA comparison by segment  Estimated revenues from the balances, taking into account costs of funds  Average profit margin per SME for both men and women  Number of financial products per SME woman customer  Segment Growth and Sustainability Number of deposit accounts opened  Number of active women depositors  Number of women borrowers  Number of loans disbursed  Number of loans disbursed to women  Value of loans disbursed (US$)  Value of all loans disbursed to women borrowers  Value of outstanding loans (US$)  Value of all loans outstanding to women borrowers  Number of outstanding loans  Number of loans outstanding to women borrowers  Value of deposit accounts opened (US$)  Non-performing loans (%)  20 Value of loans > 90 days overdue (US$)  Number of new financial products launched  % of SME new disbursed loans from total Bank new disbursed loans  % of SME portfolio outstanding from total Bank portfolio  % of Disbursement to women SMEs from total SME  % of Women's outstanding loans from total outstanding loans to SME  Number of retail loan products per women-led SME customer  Value of SME lending portfolio outstanding for women-led SMEs vis-à-vis BLC Bank’s SME portfolio as a whole  New customer acquisition rate for women vis-à-vis BLC Bank’s portfolio as a whole  Non-financial Bank-specific KPIs that Help in Sustaining the Growth of the We Initiative Program Recently Developed by the BLC Bank Number of subscribers, active members of We Initiative and SME web sites  Number of trainings and learning hours spent on the program and number and satisfaction of training  participants Number of conferences and road shows and number and satisfaction of training Participants vs. the planned  activity via controlling the conversion rate 4. BLC BANK’S WE INITIATIVE CAPACITY ASSESSMENT Strategy / Research And Market Knowledge A vision/ambition for the We Initiative is explicitly formulated and has quantitative targets YES Market research about the women’s segment has been conducted YES Explicit strategy for the We Initiative exists, integrating both the financial and non-financial service YES components Partnerships are being leveraged to support the We-initiative program YES We Initiative has clear targets set YES Quantifiable impact of non-financial services on bank’s bottom line and portfolio growth has In progress been identified Product and Service Customization / Sales and Marketing Customer Value Proposition for the We Initiative exists (customized offering) YES Substantially customized financial products exist YES Customized non-financial offering exists YES Bank integrates financial products with branding and non-financial advisory support services into YES a single overall offering for women Marketing and branding strategies address women explicitly YES Online presence targeting women exists (website, social media) YES 21 Capacity (HR and Staff Knowledge) We Initiative unit /dedicated team or staff in place YES We Initiative responsibilities are present in existing teams for SME Banking YES We Initiative responsibilities are mainstreamed across the bank YES Internal knowledge and competitive insights on the We Initiative exist YES Bank staff receive gender-sensitive awareness, sales and customer service training YES Initiatives are present to foster gender equality in the workplace across different levels in the In progress organization Data and Customer Management An approach is in place to identify and track women clients on the main core banking system YES A gender-tag is in place to track women clients on the main core banking MIS YES KPIs for women customers are in place YES Gender data by industry/sector is available to inform new business banking programs In progress Legend keys: 100% gap – not in place 75% gap – little in place but opportunity for substantial reorientation 50% gap - something in place but opportunity for some rework 0 % gap - fully in place 22 23 B. BACKGROUND 1. ABOUT BLC BANK Lebanon’s growing women-owned SME Established in early 1950, BLC Bank is one of segment is even more underserved Lebanon’s oldest banks. With an estimated national Within the pool of SMEs in Lebanon, women-owned market share of 2.7%, it is also one of the best- businesses and female participation in entrepreneurial positioned banks in the market. The Bank, which activity is growing. Women account for over 36% offers banking, insurance and asset management of all entrepreneurial activity in Lebanon3; and services, holds US$5.7 billion in total assets (as of 31 own 33% of businesses4. Furthermore, recent December 2015) and operates through 56 branches research5 indicates that overall, women tend to be across Lebanon and Cyprus. Over a decade ago, BLC loyal customers and cautious investors, in addition Bank was able to overcome critical market challenges to having better loan-payback rates. Serving the and re-establish itself as a major player in Lebanon’s women's market segment makes good business financial sector. With the market environment sense. Yet women in Lebanon receive only 3% becoming increasingly challenging and banking of bank loans6. As a customer segment, they are more and more competitive – most dramatically vastly underserved by Lebanon’s banking sector. after the 2006 war – the Bank made a concerted effort to look for new ways to grow its business. 3. BLC BANK: SMALL AND MEDIUM ENTERPRISES (SME) BANKING 2. LEBANON’S MICRO, SMALL AND MEDIUM PLATFORM AND WE INITIATIVE ENTERPRISES (MSME) SECTOR Given the market opportunity, serving these SMEs represent a large and under-banked market underserved SMEs, and particularly the women's SMEs are the driving force in the Lebanese economy, segment, was a logical decision for the bank and as they account for 97% of total enterprises in has become an important component of its growth Lebanon and employ more than 51% of the working strategy. By 2011, BLC Bank had built a sizeable, population1 (mostly in retail trade sector). While self-funded SME banking business along with a SMEs in Lebanon are typically understood to have strong platform in SME banking for both small less than 50 workers2, over 90% actually have less and medium enterprises. The Bank understood than four workers. Given their large number, SMEs that the SME client segment will continue to are important for the banking business in Lebanon. represent the area where the Bank has the most They represent a large market and a compelling to offer and to gain. To that end, the Bank’s business opportunity, involving diversified risk, senior management made a strategic decision to a higher profit margin, cross-selling opportunity be a leader in a small number of target markets among the market segment, a source of cheap deposit (‘depth’) rather than a small player in a large funding, and solid opportunities for leverage and number of markets (‘breadth’). Targeting women synergies of infrastructure and knowledge. It is for entrepreneurs is an important part of this mandate. these and a host of other reasons that BLC Bank is In 2011, the Bank decided to create a banking focused on growing its SME customer segment. platform that, while open to both women and 1 Lebanon’s Ministry of Economy and Trade (MoET) 2 MoET data 3 “BLC Bank Lebanon: Becoming the 'Bank of Reference' for Women in Lebanon” presentation 4 World Bank Enterprise Survey, Lebanon, 2009 5 “Women in Business, Stories of Impact”, by IFC AS, June 2013 6 GEM Women’s Report 2010 24 men, had features and functions designed with BLC Bank dates from April 2010, at which time women’s needs in mind. Currently, BLC Bank BLC Bank joined the IFC Global Trade Finance serves more than 32,000 women customers, with program. Subsequently, BLC Bank engaged with a loan portfolio of US$188 million and deposits IFC Advisory Services in a far-reaching technical of US$834 million as of the end of 2015. capacity-building program focused on seizing promising business opportunities in the local SME sector and particularly in the nascent female segment, 4. ABOUT IFC AND BLC BANK largely unrecognised at that time. The result of the The establishment of BLC Bank’s SME Banking co-operation has been the hugely successful We Platform and We Initiative was strongly supported Initiative, designed specifically for female clients. by IFC. The co-operation between IFC and 25 C. ANALYSIS AND ASSESSMENT 1. HOLISTIC FRAMEWORK TO EMPOWER to achieve that, the Bank realized that it needed to WOMEN FROM CONSUMER BASE address women and their needs in all of the various economic roles they might have: whether they are an TO BANK’S LEADERSHIP individual to be served by the Bank; or an existing BLC Bank created its We Initiative program with an or aspiring business owner; or the Bank’s employee exclusive focus on serving women-owned SMEs in seeking opportunities to join the Bank’s leadership Lebanon. The Bank’s logic was to focus on the female (please see the pyramid diagram below as a visual SME consumer base as part of its concerted effort to expression of this holistic approach). look for new ways to grow its business. Soon however, BLC Bank shifted this focus and adopted a much As part of this effort, the Bank adopted gender broader and more holistic approach of empowering inclusion as a guiding principle to do business women across all of its operations: from its consumer externally and running its operations internally base, to its internal workforce and all the way to the (please see details in the diagram below). The bank’s top leadership. This shift was gradual and Bank was also able to demonstrate that adopting was driven by the Bank’s ambition to become the this principle had a positive impact on the Bank’s “Bank of Choice for Women in Lebanon”. In order business. BLC Bank’s Holistic Framework To Empower Women From Consumer Base To Bank’s Leadership” Leaders Entrepreneurs Employees Consumers 26 Internal External • Setting a target for gender parity at • Leading the change in the Lebanese senior management level by 2020; market, establishing role models of women • Ensuring women entrepreneurs/suppliers are entrepreneurs through the We Initiative and integrated into BLC Bank’s value chains; BLC Bank’s Brilliant Lebanese Awards; • Improving the working environment for BLC Bank • Offering a banking services package of staff: flexible part-time schedule with full pay financial and business support services that for mothers returning from maternity leave; speak to women entrepreneurs, employees • Embedding the Women's Banking, We and non-working women’s needs; Initiative, across all banking operations • Making access to banking services easy and • Training all bank staff to facilitate a culture change convenient for time-deprived women employees; in BLC Bank, as well as in the market, for the • Providing the Non-Financial Services offering; women-inclusive bank and service offering. • Profiling women leaders’ role models. • Increasing the number of women across all levels in the organization; The following sections will review and assess BLC With support from IFC, BLC Bank launched the Bank’s program activities for each of the four We Initiative program in 2012. Through the We stakeholder groups that BLC Bank has aimed to address Initiative program, BLC Bank became committed to through the adoption of its gender-inclusion principles: two objectives: to become the bank of reference for women as well as the employer of choice for women in 1. Female consumers Lebanon. To develop its Customer Value Proposition 2. BLC Bank’s female employees (CVP) for women, BLC Bank’s team conducted more 3. Women entrepreneurs research among both male and female customers 4. BLC Bank’s female leadership and noncustomers, which yielded surprising results: women felt disrespected by and mistrustful of banks, and while they were mostly satisfied with BLC Bank’s 2. RESEARCH AND MARKET KNOWLEDGE existing products, they wanted better support and BLC Bank, with IFC’s help, put in time and effort in more personalized services. researching the female borrowers market in Lebanon. The research showed that women are attractive In conclusion, BLC Bank has demonstrated best banking customers because of their a) savings patterns, practice through investing in understanding its female b) risk profile and c) growth of this demographic target market through in-depth market research group. The research also showed that women are better and developing a CVP that addresses the needs as customers when it comes to loyalty and referrals than well as the gender-specific challenges that women men. The Bank has also studied the specific challenges entrepreneurs in Lebanon face. BLC Bank’s research- that female entrepreneurs in Lebanon face. based approach to serve the female segment of the population is one of the critical success drivers for the Based on the results of this research, the Bank realized bank’s ability to differentiate itself in the market to the value of women as a lucrative market segment, this specific segment. BLC Bank’s We Initiative has and seized an opportunity by applying solutions become an example of global best practice. to the market gaps highlighted by the female entrepreneurs, thus serving the full Lebanese market. Based on the research findings, BLC Bank developed a full spectrum of services for women entrepreneurs, salaried employees and executives, providing them with innovative product packages and services to support their advancement. 27 greater access for women who own small businesses. 3. PRODUCT AND SERVICE CUSTOMIZATION – COMMITMENT TO THE CUSTOMER BASE BLC Bank was also the first bank in Lebanon to launch a comprehensive alternative delivery channel, “BLC Entrepreneurs: Starting With Women Cloud®”, allowing users to experience full self-service Entrepreneurs banking with the convenience of securely managing their The We Initiative is a unique value-proposition to accounts anytime anywhere (Full ATM, Internet and women entrepreneurs (women-run SMEs) that offers Mobile Banking). Also, BLC Bank was the first bank a comprehensive suite of traditional banking financial in Lebanon to have its full network of ATMs become services applicable to women in Lebanon, along with SMART, accepting both check and cash deposits. non-financial services such as mentoring, business skills training, networking opportunities, access to Non-Financial Services: In addition to new financial markets, and recognition and awards. These non- services, BLC Bank differentiated its offering by financial services are aimed at enhancing the capacity introducing non-financial services critical to supporting of its women clients in business management through the growth of women-owned businesses. These included a range of training workshops, networking events, SME training/seminars, a web portal dedicated to business competitions and awards. The Bank has women, facilitating knowledge sharing and networking, also utilized and adapted the IFC SME-Toolkit to and the annual Brilliant Lebanese Awards, recognizing provide online business tools and technical knowhow entrepreneurs, including women entrepreneurs’, role to existing and prospective clients. The We Initiative in the economy. The Bank’s extensive market research, is supported by a website (www.we-initiative.com). mentioned earlier, found that these non-financial services were the most critical aspect of the innovative Customer Value Proposition for Women way in which BLC Bank served women entrepreneurs Entrepreneurs (i.e., in the Bank’s CVP for women entrepreneurs). Financial Services: In the Financial Services offering, BLC SME training/seminars – power of connection to Bank addressed two particular knowledge and to each other: The Bank’s extensive market gaps which women in Lebanon research revealed that many women entrepreneurs feel faced: lack of collateral among that they lack core competencies to start and grow their women entrepreneurs and time and mobility constraints businesses. To support its clients in achieving their full on women entrepreneurs who have family potential in this area, BLC Bank developed a series of responsibilities. Both of these challenges make banking financial education and talent development programs and bank visits for women entrepreneurs particularly delivered through the Business Power Sessions. These difficult. The Bank offered a collateral-free loan for platforms, in the Bank’s own words, are “intense, businesses that have been in place information-rich, walk-on-fire for at least two years. Given that brain charge business networking BELOW – BELOW – property rights in Lebanon heavily events designed to help [our clients] Sample invitation Sample invitation favor males over females, this to a Business to break free, dig deep and make to the Women in particular product aims to provide Power Session amazing progress in record time”7. the Lead event 7 https://www.ihjoz.com/events/544-business-power-sessions 28 To ensure delivery of this knowledge to entrepreneurs in cash. Since 201310, the Awards show is broadcast-ed in more remote areas, BLC Bank has partnered with on national television, raising the honorees’ profiles specialized associations to conduct roadshows around the and providing them with nationwide exposure before, country (12% of Lebanon’s population lives in rural areas)8. during and following the event. In 2014, BLC Bank also partnered with a local TV station to produce Facilitating knowledge and enhancing networking: a 16-episode series that showcased real-life stories Recognizing the importance of networking and the of successful BLC Bank women entrepreneurs. many social and business constraints women face, BLC Bank went further than connecting women Consumers: Expanding the Consumer Base to with business knowledge and peer entrepreneurs and Include Focus on Women in Retail Banking developed several support programs to connect women Customer Value Proposition for business owners to suppliers, mentors and experts. Retail Banking: BLC Bank has created the Mother-Child Web portal: The Bank’s We Initiative website is one of account, a fiduciary account the key tools that supports the Bank's effort to connect that enabled women to open women among each other and with experts and advisors accounts and name their minor children as beneficiaries along with business tools, exposure and advisory without having to refer to the child’s legal guardian — services to implement sustainable business practices. ordinarily prohibited by Lebanese law. Brilliant Lebanese Awards for Networking and Market Exposure: To provide its female clients with nationwide 4. INTERNAL COMMITMENT TO BLC BANK’S exposure and networking opportunities in the Lebanese FEMALE WORKFORCE AND LEADERSHIP business circles, BLC Bank organizes since 2012 the annual Brilliant Lebanese Awards, which includes Employees: Aligning Internally to Become an Employer of Choice for Women Through extensive market research and attentive listening to feedback from its employees and being a firm believer that they need to practice what they preach BLC Bank realized it would need to become the employer of choice for women in order to become the bank of choice for women. The Bank’s commitment to the UN Women empowerment principles11 in 2011 translated into tangible actions for the Bank’s female two categories the "Business ABOVE – employees. Among several policy changes, the Bank of the year" and the "Woman Brilliant Lebanese introduced an additional two months' part-time Awards show Entrepreneur of the Year". schedule to its maternity leave benefits with full pay, and in 2015 The award has four key introduced paternity leave. evaluation criteria: Creativity, Financial Performance, Sustainability, and Corporate To maintain open lines of communications, encourage Social Responsibility and personal commitment to the feedback, and enhance employee motivation and loyalty, business and the community. In 5 years , more than 9 the Bank put in place a clear grievance policy as well as 700 applications have been received. Winners of the employee satisfaction surveys and Net Promoter Score two categories received, each, a prize of USD 30,000 (NPS). To stay true to its principles of equality, the Bank 8 World Bank, data.worldbank.org/indicator/SP.RUR.TOTL 9 “BLC Bank Lebanon: Becoming the “Bank of Reference” for Women in Lebanon” presentation 10 https://www.blcbank.com/content/publications/detail.aspx?type=4&id=140 11 BLC Bank Presentation, “We Initiative SME Conference May 8, 2013 Dubai” 29 also incorporated diversity into procurement practices. To with banking for women programs by being one of the track progress on its commitments, the Bank enhanced very few globally to adopt a holistic approach, the most diverse Key Performance Indicators and established notable global leader being Australian Westpac. The specific targets for women, including recruitment, Bank stands out among its few peers in the Middle East staffing levels, remuneration, employee development and North Africa (but also globally) by mainstreaming and turnover. As a result of many of these changes, BLC its We Initiative across the Bank. Internal alignment Bank’s female employee representation has grown from has been critical in strengthening the credibility of the 47% to 51% since the launch of the We Initiative. By Bank's reputation and brand as a bank of choice for 2014, 35% of staff in middle management were women. women. This enhanced credibility and brand in turn The Bank has an overall employee turnover of 3.5%.12 has had an impact on market and consumer perception, and is thought to contribute positively to the bank’s ability to grow its business with female customers. 5. LEADERS: FROM FEMALE BLC BANK EMPLOYEE TO FEMALE BLC BANK LEADER To recognize and benefit from 6. RESULTS AND IMPACT – NUMBERS TALK: the talent of female high FINANCIAL RESULTS OF THE SME BANKING achievers, the Bank developed the Staff Awards Program and PLATFORM PERFORMANCE AND THE WE put in place policies that INITIATIVE promote gender equality through remuneration and Women SME Portfolio Size, Growth and promotions. To ensure that staff in middle management Profitability have career support, the Bank established internal Overall, BLC Bank’s We Initiative has been very mentoring programs and empowered female employees successful and its contributions to the Bank’s business to establish the We Club. BLC Bank also publicly have been considerable. announced a target of 50% women in senior Size: Currently BLC Bank serves more than 32,000 management (from 43% in 2015) by 2020. women customers, with a loan portfolio of US$188 million and deposits of US$834 million as of the end In sum, BLC Bank has set itself apart from other banks of 2015. Figure 1: Cumulative Performance Results to Date (since beginning 2012). Indicators Cumulative by December 31 2015 Increase in the number of SME women borrowers since launch in 2012 82% Increase in the SME women outstanding loans portfolio since launch in 2012 121% % of Disbursement to Women SMEs from Total SME (average 4 years) 12% % of Women Outstanding Loans from Total Outstanding loans to SME (Dec (2015) 11% Source: BLC Bank Growth: Not only has the Bank’s women segment been 121%, compared to an increase of 46% in the total growing considerably since the We Initiative launched number of SME borrowers and 71% in the total SME in 2012, but the segment has generated good business outstanding loans portfolio balance. As such, the benefits. Since the beginning of the program in 2012 Women SME Portfolio grew at a higher rate than the (between end of 2011 and December 2015), the number overall SME Portfolio. Furthermore, over a similar time of SME women borrowers increased by 82% and the span, the total women deposits portfolio grew by 65%, SME women outstanding loans portfolio increased by compared to 34% for the total bank deposits. 12 “GBA Case Study: BLC Bank: Strategic Differentiation in Women’s Market Yields Significant Profits” 30 Figure 2: BLC Bank Project Indicators 2012-2015 Indicators 2012 Cumulative by December 31 2015 Number of deposit accounts opened (SME) 1,529 5,989 Number of deposit accounts opened to women (SME) 270 1,112 Value of deposit accounts opened (SME) (US$) 51,476,000 200,088,000 Value of deposit accounts opened to women (SME) (US$) 4,960,000 28,039,000 Number of loans disbursed - SME 1,953 8,082 Number of loans disbursed to women - SME 290 1,329 Value of loans disbursed (US$) - SME 95,576,000 418,560,000 Value of loans disbursed to women (US$) - SME 8,743,000 48,769,000 Indicators Beginning 2012 Cumulative by December 31 2015 Value of loans to women borrowers - SME 11,160,000 24,696,000 Value of all loans outstanding (US$) - SME 137,135,000 234,642,000 Number of loans outstanding to women borrowers - SME 339 621 Number of loans outstanding- SME 2,848 4,088 Number of women borrowers - SME 285 528 Source: BLC Bank Program Returns: In addition, BLC Bank performed Market program since the program's launch, and an analysis to calculate the overall project IRR and calculating all of the program’s expenses, BLC Bank economic value added to the Bank. Estimating the determined that, on a conservative growth scenario, We marginal cash inflows for all segments of the Women’s Initiative’s IRR is in excess of 34%. Figure 3: Compound Annual Growth Rate (CAGR) Years 2012-2015 3-year Program CAGR (SME and Retail) 2012-2015 8.8% 8.4% 8.0% 7.5% 7.6% 4.5% 4.0% 3.4% 2.6% Loans CAGR Deposits CAGR Gross Income CAGR WOMEN (SME & RETAIL) MEN (SME & RETAIL) TOTAL BANK (SME & RETAIL) Source: IFC/IBRD Roundtable Discussion: “Innovations in the Banking Industry Women Banking Champions: Framing the Opportunity for Banks, Cairo, 29 October 2015. Hani Hoyek, Head of Strategic Development, BLC Bank, Lebanon 31 Figure 4: Return on Assets for 2015 ROA 2015 8.67% 8.45% 8.20% 8.26% 8.03% 7.35% Small Business Medium Business Large Business WOMEN MEN Source: IFC/IBRD Roundtable Discussion: “Innovations in the Banking Industry Women Banking Champions: Framing the Opportunity for Banks, Cairo, 29 October 2015. Hani Hoyek, Head of Strategic Development, BLC Bank, Lebanon Portfolio Quality and Performance: BLC Bank’s for BLC Bank’s portfolio as a whole. NPL results for business was able to benefit from its women customers’ women SME owners have consistently been less than better track record when it comes to non-performing the results for the overall portfolio. The same is true for loans (NPL; > 90 days). NPL rates of BLC Bank’s individual women borrowers (see figure 5). female borrowers were better than the NPL figures Figure 5: NPL Rates by Segment NPL Rate for SME 2014 NPL Ratio 2015 NPL Ratio Women SME 2.69% 5.52% Total SME 6.35% 7.38% All Women 1.90% 2.45% Total Bank 5.46% 5.74% 32 D. IN THEIR OWN WORDS: CUSTOMERS SPEAK GarageLuxe, First Official Pre-owned Luxury Reseller in Lebanon Mina Mneymneh and Carine talk, they deliver. It is not a ABOVE – Farsoun are founders and owners onetime thing with the Bank. Carine Farsoun and Mina Mneymneh, founders and of GarageLuxe, the first official re- They hold your hand and help owners of GarageLuxe seller of luxury fashion products you to get going,” explains one in Lebanon. Their consignment of the owners about their choice store opened in downtown Beirut of BLC Bank. GarageLuxe Mina and Carine further state in 2014. received an SME loan in the that “Applying for the BLC amount of $20,000. GarageLuxe Bank's Awards has allowed us Mneymneh and Farsoun are was a finalist in BLC Bank’s to look at our business from a young mothers who wanted Brilliant Lebanese Awards 2012. different perspective and inspired to have an independent source The BLC Bank-led competition us to keep going. We were an idea of income. To establish their acknowledges and awards and now thanks to BLC Bank, business, they chose to seek successful women entrepreneurs we are a growing business. We finance from BLC Bank. in Lebanon. It celebrates women think BLC Bank is the leader and who have succeeded in business innovator in the SME market, “While every bank promises to and benefited the community, particularly when it comes to give you a good deal on your creating jobs and empowering technology. As women we feel loan, BLC Bank doesn’t just women in the process. empowered by the Bank”. 34 Qi Juices, Detox and Wellness Juice Bar and Spa Center Qi Juices was started by Hana Alireza and Leila Nashabe – two young mothers with a love for healthy lifestyles and a desire to have an independent source of income. The pair was drawn to BLC Bank because of how easy it was to work with the Bank. “As mothers we are always pressed for time”, said Ms. Alireza. The ladies chose to enroll in BLC Bank’s SME loan program. “We like saving time when ABOVE – depositing checks,” said Ms. Hana Alireza and Leila Nashabe from Qi Juices Smart ATMs was a big draw. Nashabe. Maison Khatib, Manufacturers and Wholesalers of Garments and Accessories Tina Khatib is an owner of the established family business, Maison Khatib, who are manufacturers and wholesalers of garments and accessories. The company started a relationship with BLC Bank in 2003, when it made the decision to grow. The company received loans from BLC Bank in 2004 and 2006, which allowed the business to double their production premises. By 2012 - and with a third loan from BLC Bank - the company opened its third factory. “BLC Bank loans helped the company grow from six employees in 2004 to 50 employees in 2014”, said Ms Khatib said that the main relationships with its customers Ms. Khatib. Seventy percent draw of working with BLC and builds these relationships of Maison Khatib factories Bank for her was and is the for the long haul. employees are married women. fact that the bank values 35 E. FINDINGS AND RECOMMENDATIONS 1. LESSONS LEARNED: WHAT IFC AND OTHER BANKS HAVE LEARNED FROM BLC BANK BLC Bank’s We Initiative has seen a lot of success. BLC Bank’s We Initiative has also provided several valuable lessons for IFC and for banks interested in establishing their own programs to bank women. KNOWLEDGE TRANSFER: Successful first-movers such as BLC Bank are critical in transferring knowledge, creating a blueprint and inspiring other banks • Knowledge creation: The success of BLC Bank of the GBA, became a board member of GBA in 2014 informed the development of IFC’s standard Women's and Chair of the GBA since September 2015. BLC Market (WM) Value Proposition to banks globally Bank inspired IFC clients like Bank Muscat, Bank Al in 2013. The IFC WM Value Proposition, designed Etihad, Bank of Palestine, Access Bank and HBL to after the BLC Bank project, serves as a template for invest in targeting women’s markets, illustrating the other banks all over the world. The Project successfully opportunity in developing markets. This illustrates tested and implemented fundamental components the demonstration effect of the BLC Bank model in required for banks to become Women Banking the region and globally, with banks showing strong Champions in their own markets. commitment to investing in becoming Women • Demonstration Effect: As part of the work with BLC Banking Champions. At least five new projects with a Bank, IFC introduced the Bank to the Global Banking strong gender focus have materialized over the past two Alliance of Women (GBA, http://www.gbaforwomen. years, at least partially attributable to the BLC Bank org/). Through GBA, the BLC Bank team interacted assignment. BLC Bank has taken further bold steps with best-in-class banks with successful WM operation, beyond project implementation to secure sustainability like Westpac, Australia and RBS, UK to acquire the for its Women Banking model, such as becoming the know-how of targeting WM. BLC Bank joined GBA in first bank in the region to commit to the UN Global October 2011 and as an active and progressive member Compact/UN Women’s Empowerment Principles. CUSTOMER VALUE PROPOSITION: Don’t just ‘pink-wash’ – offer real solutions to female borrowers • An uninformed, superficial “pink-washing” of a that provides real solutions to the problems faced by business strategy is not sufficient for becoming a women is critical to effectively and successfully tap into women-friendly bank that is taken seriously and the women’s market. Market research that generates appreciated by the female customer segment it aims insights into female borrower’s needs and wants and to serve. BLC Bank’s example has shown other banks the development of an offering that addresses them are that a customer value proposition to women borrowers among prerequisites for success. STRATEGY: Integrate, don’t segregate Integrating the Women's Market value proposition across • At the department level: A We Initiative Project all departments of the Bank was a critical success factor Team was established, with cross-functional for the program. Rather than create a dedicated unit for representation from implementing team members, the We Initiative, the platform was mainstreamed across to ensure on an ongoing basis the successful all functions in the Bank. This approach is specific to development and execution of the program. BLC and worked well for the Bank. • At the leadership level: A We Initiative Steering 36 Committee of senior managers was also created to support them in meeting KPIs for the Women’s to provide high-level guidance on major decisions Market program. about the program. • At the branch level: Each branch has a We Initiative • At the head office level: Two new positions were Ambassador who ensures that her or his location created at the head office: the We Initiative Brand has We Initiative branding, promotes We Initiative Manager, with the main responsibility for planning workshops and other non-financial services to and coordinating program strategies, and the We customers and prospects, and liaises with local Initiative Specialist, responsible for working with municipalities, women’s associations and NGOs the branches to ensure uniform branding and to coordinate and market these activities. Finally, implementation of the program, to support Bank program ambassadors work at the regional level as staff in approaching women-owned companies and We Initiative liaisons to the team at the head office. DATA: What is measured gets done – investing in sex-disaggregated data is critical for success • Creating a gender-disaggregated baseline: Bank also updated its monthly performance Investing time and effort (including manual account scorecard to give Women’s Market incentives a reviews) at the outset to identify a baseline of their greater weight. female customer base was critical for BLC Bank’s • Tracking performance targets for female program success. Tagging the existing female customers: Setting up an effective performance customer base was a particularly challenging task. management system from the beginning that Identifying the sex of a personal account holder was allows tracking of customer data, targets and loan relatively easy, but in the case of businesses, the Bank performance of female customers was essential had to manually review each account and tag it as to the program’s long-term success. It was also woman-owned based on the sales team’s knowledge important that the Bank was willing to make the of its clients. This effort took considerable time and required investments into its MIS. The first step in resources, but it was very important as it allowed the this process was adapting its MIS to ensure that all Bank to establish a baseline. customer data would be sex-disaggregated moving • Incorporating performance targets for all We forward. The Bank repurposed an unused field in Initiative segments and products into the Bank’s the MIS to track account ownership by sex and existing incentive structure. The targets helped updated applications to collect this information. ensure employee performance. They were tied to • Identifying female prospects: BLC Bank also results, and were set to be achievable, measurable leveraged strong Know Your Customer information and consistent with the program strategy. BLC in their systems to identify female prospects. HOLISTIC STRATEGY: Aligning internal and external gender-smart approaches and following a holistic approach increases market credibility and internal commitment and capacity • Starting with ‘the external’ - the consumer base: for its employees. The training program was based BLC Bank understood that to become the bank of on the following three modules: “Excelling in Selling choice for women in Lebanon, it was important to to Women”, “Gender Intelligence”, and “SME and be consistent in incorporating gender-inclusion at the Women’s Market”. These modules integrate all levels of its operation. At its inception, the Bank such market research findings as the importance of focused only on women entrepreneurs as consumers, establishing a relationship instead of focusing on (i.e. meaning customers of the Bank), but by the a hard sell, and selling product benefits, not just launch in March 2012, it had expanded its focus to attributes. Gender-specific sales modules have since include female individuals as retail banking customers. been integrated into BLC Bank’s induction training • Making all staff gender-smart through training: for all new hires. To increase the effectiveness of BLC Bank staff in • Strengthening market credibility through internal engaging and serving these female customers, the alignment: Once its external focus on the female Bank developed a comprehensive training program customer segment was successfully established, 37 the Bank turned its attention to women inside the bank of choice for women. Not only has this its operations, the women in its work force and sent a strong signal to the market that BLC Bank’s leadership. Institutionalizing gender equality and management is committed to supporting these values women's empowerment values within the Bank’s inside and outside its operations; it has also helped operations has been critical for the external perception increase internal commitment and credibility among of the bank and its credibility in the market as the Bank’s staff to reach and service female customers. 2. RECOMMENDATIONS AND THE WAY FORWARD Building on this success, there is an opportunity for BLC Bank to further expand its We Initiative. In the SME banking space, the risk-sharing facility with IFC with a carve-out for women entrepreneurs, launched mid-2016, offers great momentum for further program expansion and deepening. A greater expansion into the women's SME market will allow BLC Bank to capitalize on the higher portfolio-growth and better NPL rates of the Bank's female SME borrower segment. There are several aspects to consider in order to deepen the Bank’s engagement with female SME borrowers as well as expand into other female customer sub-segments, including in retail banking. Stay relevant, leverage on success and innovate, innovate, innovate! In order for BLC Bank to maintain its role in the their dual responsibility at work and in their homes. Lebanese market as the bank of choice for women, • Revisiting the focus group concept which was the Bank needs to continue evolving and tailoring its used at the inception of the We Initiative program services based on the ever- changing needs of its existing for market research update insights into the Bank’s female customer base. To do so, the Bank will need existing female customer base. To do so, consider to keep a close eye on how existing female customers leveraging the We Initiative’s online platform and perceive and experience the Bank’s services and seize new virtual community as well as social media (such as opportunities to serve its female clients as they arise. Facebook groups and their discussions) to generate Active and attentive listening to the needs of the new and lead similar discussions in Bank forums. In We Initiative customer segment has been BLC Bank’s addition, the Bank is already successfully utilizing strong suite from the beginning of the We Initiative POS (point-of-sale) software to support its financial program. The Bank will benefit from staying true to product portfolio. Recent versions of POS have this strategy. More specifically, it may consider also become a more widely used tool to access • Conducting regular and tailored customer surveys feedback from a customer base. POS software can, to systematically collect feedback from its female for example, be used as a more sophisticated way customers. This will continue to provide BLC Bank to group customers into online membership and with opportunities to gain insight into ways it can interest groups that could become targeted, virtual improve its offerings in these fast-changing times. versions of focus groups, and provide diverse and Consider leveraging online and app-based surveys. helpful feedback from female customers on all topics Given that these are easy and convenient to fill out, relevant to their business. As such, custom-designed they are particularly relevant for reaching women who POS tools might be used to generate gender- tend to be more time and mobility constrained due to segregated results. Run with the wind: serve the young generation In order for BLC Bank to continue to grow its female BLC Bank. It will be critical for the Bank to identify customer pool and also build a pipeline of future young women as a potentially additional sub- female borrowers, the Bank needs to attract and segment of their female customer segment. To do so cultivate young women as customers. These young successfully, consider: women will be a new demographic for the Bank, as • Understand the needs and wants of this sub- the younger generation is not typically targeted by segment so that BLC Bank can effectively reach and 38 attract them through relevant products and services. likely to resonate with younger females. • Leverage recently introduced mobile banking • Tweak existing and suitable products, aimed at tools that enable instant and low-cost banking young customers to address some of the gender- transactions such as BLC Bank’s new HEY! App. specific challenges young women face. It is these types of banking solutions that are most Review the existing financial portfolio: top performers and underdogs As BLC Bank builds up its female SME customer base mothers is a promising start. However, retail banking and cultivates these relationships, it is critical to focus offers a much larger and more diverse space for the on strengthening customer- and portfolio quality going Bank to engage in. The size and broad variety of female forward. To do so, BLC Bank may want to: sub-segments not only allows for serious scaling and cross-selling across these segments but also – for those • Take stock of the Bank’s female SME client base women with entrepreneurial aspirations – offers the and assess the Bank’s related portfolio performance potential to help build a pipeline for future female SME to identify top and poor performers in the portfolio. borrowers. The pitfall for some banks with programs for • Adjust the existing long-term strategy or create women has been the challenge to scale their programs. a new one for this customer sub-segment, with a While scale does not appear to be a challenge for BLC focus on developing a specific approach to providing Bank, the Bank will assert its role as a global visionary solutions that allow top performers to maximize leader in women’s banking by exploiting the potential their potential. of women clients in retail banking. • Pay particular attention to the stock of Furthermore, while BLC Bank has shown impressive uncollateralized and poorly performing loans held results in growing women’s retail portfolios, there is still by the Bank’s female SME customers and identify room for growth in this segment for BLC bank. SME strategies to address poor performance or the risks of numbers (as of December 31, 2015) indicate that SME uncollaterized loans. women’s deposits portfolio constitutes only 16% of the total BLC Bank SME outstanding deposits portfolio. In conclusion, BLC Bank has demonstrated best Cumulative SME loans disbursed to women constitute practice in developing a CVP for its women-owned only 12% of the BLC Bank’s overall lending portfolio, SMEs and female entrepreneurs. Having successfully while outstanding loans to women SMEs constitute built their women-SME portfolio and business, there is only 11% of the overall SME outstanding loans now an opportunity for BLC Bank to take a similarly portfolio. The ratio of the number of women depositors structured, research-based and ambitious approach to to the number of women borrowers is close to 100%, build up their female client portfolio in retail banking. which indicates that women provide a solid client base The fiduciary account introduced as a new product for for the bank in terms of both business lines. NFS and the bottom line Non-financial services have been used by BLC bank • Consider critically assessing the contributions as an effective way to provide capacity- building of NFS provided to female customers to the Bank’s opportunities for its female clientele. Road shows, objectives and targets for the We Initiative. This learning seminars and networking events were means assessing the impact of NFS provided to important channels in BLC Bank’s effort to reach female customers on the Bank’s ability to attract and the female segment following the launch of the retain female customers, as well as to sell its various We Initiative. Now that BLC Bank has secured its financial products to them. leadership position in the market as a bank of choice • Consider taking a fresh look at the Bank's for women, it might want to review and refocus its partnership network for NFS to women, assessing NFS offering to ensure that these services remain its effectiveness and identifying potential areas innovative, cutting-edge and reflective of its female in need of expanding or/and revamping. Identify clientele’s needs. possible new partners as well. 39 CASE STUDY 2 GARANTI BANK ROMANIA: STRIVING TO LEAD - A STUDY ON WOMEN IN BANKING  LIST OF FIGURES Figure 1 Assessment of Gender-Disaggregated Data Availability at Garanti Bank Romania Figure 2 Garanti Bank Romania’s BoW Program Capacity Review Figure 3 Garanti Bank Romania SME Banking Products Figure 4 Garanti Bank Romania Financial results 2014/15 Figure 5 Women Entrepreneurs in Main Counties of Romania (2014) Figure 6 Sponsored workshops on entrepreneurship - Paul Renaud, Importance of a Clear Marketing Plan Figure 7 Garanti Bank Romania Women-Led SME Portfolio (including but not limited to IFC SME facility) Figure 8 Sector Distribution of SMEs in Romania Figure 9 Assessment of Gender-Disaggregated Data Availability at Garanti Bank Romania Figure 10 Garanti Bank Women-Led SME Portfolio 42 A. INTRODUCTION 1. PURPOSE OF THE STUDY (bottom line, sustainability and growth targets). A The overall objective of this study is to learn about separate phase two of this study is being considered, the results of the International Finance Corporation wherein the impact of the program on the end (IFC) “Banking on Women Program” (BoW) in beneficiaries, women-owned SMEs, will be assessed. Europe, Central Asia and the Middle East (EMENA). This beneficiary survey will provide insights into how Established in 2010, IFC’s “Banking on Women effectively the bank’s women borrowers are reached Program” uses IFC’s investment capital to help and served. Ultimately, this study aims to generate financial institutions around the world with SME learning for IFC and its client banks in order to lending track records to profitably expand their strengthen the design and delivery of the banks’ BoW portfolios and provide women entrepreneurs with program, as well as IFC engagements in this area. access to finance. IFC also works with financial institutions to deepen their ability to reach women- owned businesses through segmenting their target 2. STUDY APPROACH AND METHODOLOGY market, positioning their brand and repositioning The assessment of the two banks’ BoW programs their products to reach women borrowers. As of has been guided by the following considerations: 2016, IFC’s BoW Program has a portfolio of over $1 billion, invested in 32 banks around the world • The focus of the study is on what for on-lending to women, and is working with 22 IFC has defined as a successful BoW banks globally to build up their capacity to bank investment and advisory program. For the women. IFC’s “Banking on Women Program” in definition of success parameters, see “3. EMENA was launched in 2011. Since then, IFC has Defining Success Parameters” below. provided over $130 million in finance to six banks for • The study acknowledges and factors in any on-lending to women entrepreneurs: Garanti Bank gaps in the client banks’ collection of gender- Romania, Fibabanka A.Ş. Turkey, Alternatifbank disaggregated portfolio and customer data. AS in Turkey , Şekerbank T.A.Ş in Turkey, Bank While the assessment may be affected at of Georgia, Transcapitalbank in the Russian points by limited data availability, the study Federation. IFC has delivered advisory services to aims to determine where the data gaps lie. an additional five banks to build up their capacity • The client bank’s BoW program is compared to serve women customers (BLC Bank in Lebanon, and assessed against other IFC BoW client Bank al Etihad in Jordan, Bank Muscat in Oman, banks as well as against what is considered Habib Bank Ltd in Pakistan and Bank of Palestine). to be global leading practice in BoW. The EMENA program is active in nine countries. • Recipients of IFC BoW advisory services are compared against recipients of IFC Garanti Bank Romania and BLC in Lebanon, BoW investment services, in order to both IFC client banks, were selected for study as understand which elements in the type of individual cases. Each study looks at the existing IFC engagement have contributed to the capacity and performance of each of these banks in bank’s successful BoW program results. terms of its service to women entrepreneurs in the • Particular attention is paid to acknowledging long-term in a commercially viable, self-sufficient the varying influences on a client bank’s manner that is based on the bank’s own in-house success, including but not limited to resources and capacities. Where possible, each study different types of IFC interventions, stages also aims to understand if and how the women of program maturity, client buy-in and borrower segment has affected each bank’s business commitment and data challenges. 43 • The focus of the study is on banking for women- champions” and incentivized them to led SMEs. While looked at the margins of this meet targets in this sub-segment, study (see Annex), retail banking for women • complemented their NFS business skill is not the focus of this study. The definition training and networking events with tailored of women-led SMEs for the purpose of this mentoring or advice developed specifically study is based on the definition provided by for women clients to encourage relationships Garanti Bank Romania, which in turn is to and to provide tools and support to them. a large extent informed by IFC’s definition of women-owned SMEs (see p. 17). 4. DEFINING SUCCESS PARAMETERS Data and information collected and analysed for Where possible, the study aims to measure the success the purpose of this study comes from five sources: of the BoW Program for the respective client banks in terms of the BoW Program’s contribution to the Desk research banks’ bottom line (profitability), and the growth • IFC’s internal project governance systems, and sustainability of BoW business, as well as the data and documents (DOTS, ASOP) capacity created within the bank to sustainably Client bank’s internal documents • service women entrepreneurs and consumers. (strategy documents, financial and portfolio data provided) Various banks have used different metrics to measure • Public reports and information (bank some or all of the above profitability-, growth-, websites, media articles, online/ print and sustainability outcomes (BLC, Garanti Bank brochures, presentations, annual Turkey, Chase Bank). Metrics have included report, sustainability report) Segment Performance and Profitability Field research • Average profit per SME for • Face-to-face interviews with ten both men and women of Garanti Bank’s staff • Efficiency ratio per SME for • Face-to-face interviews with two of both men and women Garanti Bank’s women SME clients • NPLs, IRR and ROA comparison by segment • Annual ROI for the women’s segment based on total number of accounts, average deposit 3. DEFINING BEST PRACTICE IN values, and estimated revenues from the BANKING FOR WOMEN balances, taking into account costs of funds The review of the Garanti Bank BoW Program is guided by what is considered to be global Segment Growth and Sustainability leading practice in banking for women. Banks • Number of products per women- with successful BoW programs have typically led SME customer • Value of SME lending portfolio outstanding • developed strategies for the women client for both men- and women-led SMEs segment and how to capitalize on its potential • New customer acquisition rate contributions to the bank’s bottom line, for both men and women • invested in adjustments of their MIS systems that allow for the dis-aggregation Generally, banks around the world face the challenge of women-client contribution data, of pulling gender-disaggregated data from their MIS • have invested in in-depth market research on because they do not have a gender flag installed. needs and preferences of women borrowers Many banks are therefore unable to calculate some and used it to further differentiate products of the above metrics. Garanti Bank Romania is and services for the women-SME segment, facing a similar challenge with its MIS. The Bank • trained frontline staff and guided them has moved to solve this problem by using gender- to become “ambassadors” or “women based differences in the numbers on the Bank 44 customers’ national identification cards. Due to this Bank Romania was a pioneer in moving around data challenge, only certain gender-specific metrics this limitation to use the gender-based numbers could be calculated or pulled from the MIS. They in personal identification cards. Hence, Garanti include, for example, gender-specific NPL rates. Bank Romania is to be commended on its proactive approach to collecting gender-disaggregated data (for more, see p.15) A review of currently 5. IDENTIFYING DATA GAPS available gender-disaggregated data provided by Overall, the study has found that gender- Garanti Bank Romania showed that there is an disaggregated data collection for the purpose of opportunity to close some of the existing data reporting is done pro-actively by the Bank (‘Bank’ is gaps. With adjustments in the Bank’s MIS system, short for Garanti Bank Romania). It is only limited further data could be generated pertaining to sub- by the extent to which the Bank’s MIS system is segment portfolio performance and profitability able to generate gender-disaggregated data. As and to some extent also to sub-segment growth noted above, many banks around the world do not and sustainability. The following data was provided have a gender flag installed in their MIS. Garanti by the Bank in gender-disaggregated form: Figure 1: Assessment of Gender-Disaggregated Data Availability at Garanti Bank Romania Metrics Available Segment Performance and Profitability Number of financial products per women-led SME customer x Average profit per SME for both men and women x Efficiency ratio per SME for both men and women x NPL rates per SME for both men and women  NPLs, IRR and ROA comparison by segment x Annual ROT for the women’s segment based on total # of accounts x Annual ROT for the women’s segment based on average deposit values x Estimated revenues from the balances, taking into account costs of funds x Average loan ticket size for both men and women-led SMEs  Segment Growth and Sustainability Number of loans for both men and women-led SMEs x Number of SME loan customers, both men and women-led x Value of SME lending portfolio committed for both men and women-led SMEs x Value of SME lending portfolio outstanding for both men and women-led SMEs  New customer acquisition rate for both men and women x Increase in loan balance for both men and women-led SMEs (4-years)  Bank Capacity Number of dedicated BoW staff x Source: Garanti Bank data and interviews 45 6. BUSINESS IMPACT AMID LIMITATIONS performance, growth and to a lesser extent by portfolio profitability and sustainability due to data ON GENDER-DISAGGREGATED limitations. The study found that the key drivers PORTFOLIO OR PROFITABILITY DATA of the progress of Garanti Bank Romania’s BoW The study acknowledged and accepted that due Program are in the area of marketing, branding to MIS system limitations, some of the portfolio and online presence. There is some opportunity to data and metrics that are required to quantify complement those efforts with market research and and judge success (see p.4) were not available in capacity building for the Bank’s staff. Combining gender-disaggregated form. To draw meaningful these building blocks can maximize the success of and helpful conclusions about the Bank’s BoW BoW programs, as experiences from other banks program, therefore, the focus was shifted to assessing with successful BoW programs have shown. In success in more qualitative terms, such as steps sum, Garanti Bank has built its BoW Program on taken by the Bank to create the necessary capacity the right foundations, namely its SME Banking to reach the women’s SME segment (as the closest capacities, and good progress has been made, proxy). The focus here is on qualitative indicators driven by the Bank’s differentiated marketing, of success, which mostly pertain to BoW strategy, branding and online presence of the BoW Program. product offering and data management. Program These efforts can be further complemented success is defined by the women’s segment portfolio to maximize the success of the program. 46 Figure 2: Garanti Bank Romania’s BoW Program Capacity Review Strategy / Research And Market Knowledge A vision/ambition for BoW is explicitly formulated and has quantitative targets YES Market research about the women’s segment has been conducted YES Explicit strategy for BoW exists NO/TSE BoW has been explicitly mentioned and integrated into existing corporate or business line based YES strategies A work plan to achieve BoW targets exists TSE Product And Service Customization / Sales and Marketing Customer Value Proposition for BoW exists (customized offering) YES Substantially customized financial products exist TSE Customized non-financial offering exists YES Bank integrates financial products with branding and non-financial advisory support services into a YES single overall offering for women. Marketing and branding strategies address women explicitly YES Online presence targeting women exists (website, social media) YES Capacity (HR And Staff Knowledge ) BoW unit /dedicated team or staff in place TSE BoW responsibilities in existing teams (SME Banking) YES BoW responsibilities are mainstreamed across the bank TSE Internal knowledge and competitive insights on BoW exist YES Bank staff receive gender-sensitive awareness, sales and customer service training NO Data And Customer Management Approach in place to identify and track women clients on the main core banking system YES Gender-tag in place to track women clients on the main core banking MIS NO KPIs for women customers in place YES TOTAL GARANTI BANK ROMANIA BoW CAPACITY YES Legend keys: 100% gap – not in place (NO) 75% gap – little in place and little opportunity for substantial reorientation (TSE/ TO SOME EXTENT) 50% gap - something in place but opportunity for some rework (YES/TSE) 47 B. BACKGROUND 1. BACKGROUND ON ROMANIA require similar – but often more nuanced and adequate – support. In return, women-led SMEs MARKET CONTEXT offer to banks a largely untapped and not yet Good Economic Growth Expectations and well studied borrower segment with potentially Importance of Romania’s SME Sector interesting business potential. Between Romania’s Romania’s is one of the high-growth economies five major urban hubs (Bucharest, Cluj, Constata, in emerging Europe (GDP growth of 3.8% in Timis, Bihor), there are some 50,000 women 2015 and forecasted to grow to 4.3% in 2016). entrepreneurs. Half of these are based in the capital The service sector is the engine of the growth, the city of Bucharest. Women-owned SMEs are defined unemployment rate stabilized at 6% in August as firms with majority women ownership or as firms 2016 , the lowest level since 2009 while the real with women participation in ownership. Depending wages increased rapidly during this year by around on definitions used, the pool of women entrepreneurs 16% above the last year’s level. Overall, growth has in Romania might be much larger. A definition been driven by the trade and based on partial ownership transportation and expansion of companies translates into in other Private services sectors, 160,109 women owning like IT& Telecommunication “Without the financing shares in companies. This and Business services. that I obtained from represents 36% of total With an increase in wages and shareholders in Romania. Garanti Bank Romania, purchasing power, spending This number is close to World and retail have picked up. The it would have been Bank data, which puts the improved income perspective more difficult for me share of firms with full and but also the low interest to financially manage partial women ownership rate enviroment boosted the at 47%. Both numbers mortgage Loans (+16.6% annual my business.” represent a very sizeable pool growth as of August 2016). – of firms, which are largely Within that economic climate, Women Entrepreneur and concentrated in Bucharest. 50% of Romania’s GDP derives SME Banking Customer of With an average women- Garanti Bank Romania from Romania’s 505,800 SMEs, SME loan ticket size of which comprise 99.7% of around € 100,000 as a proxy Romania’s total enterprises (as of (per data from the Garanti 2014 figures). SMEs contribute Bank portfolio), a combined 58% of total turnover of Romanian companies financing need of the 50,000 women-led SMEs and employ 66% of the Romanian workforce. can be estimated at €5 billion. It is not clear what While SMEs are Romania’s economic engine, share of this pool is underserved. However, like Romania still has the lowest ratio of SME per many other banks around the world, Garanti Bank 1000 inhabitants in the European Union. Romania has recognized the business opportunity As such, there is considerable potential for associated with providing banking products and entrepreneurship and the growth of that segment. services to assist in the further growth of the SME segment. In doing so, it is paying particular attention Romania’s Women Entrepreneurs to women-led SMEs and their specific needs – a Women entrepreneurs in Romania make up a large, overlooked and underbanked segment. substantial part of this business opportunity. They 49 Figure 5: Women Entrepreneurs in Main Counties of Romania (2014) Number of women-owned SMEs 26255 7284 6870 6099 5316 Bucharest Cluj Constanta Timis Bihor Geographic Regions Source: National Statistics Institute Romania’s women entrepreneurs face challenges are magnified by women entrepreneurs’ limited similar to those of their male counterparts. Research access to business networks that would enhance shows the biggest barriers that Romania’s women their development through training, finance, and entrepreneurs face at the initiation of their business business knowledge and business opportunities, are the lack of access to business training (30%), credit all of which are key to building and growing their (28%), experience in financial planning (20%) and businesses. One of the biggest challenges to women collateral (21%). They also lack access to guidance entrepreneurs in Romania is their inability to benefit and consultancy. As their business progresses, they from business referrals and connections and to avail face a somewhat different set of challenges: a lack themselves of valuable market information in the of experience in financial planning (28%), inability same way their male counterparts do. They also to manage and influence their staff (25%) as well seem to be more reliant on (but also less able to as continued difficulty in accessing credit (26%) access) peer support in order to address some of their and collateral (12%). Throughout, they continue challenges. As such, business networks that integrate to face a lack of guidance and support in addressing women entrepreneurs or provide exclusive access to their business challenges. Many of these issues are women entrepreneurs would be a powerful means to consistent with the type of difficulties that male overcoming some of these gender-specific challenges. entrepreneurs in Romania face. However, women entrepreneurs are further subject to gender-specific challenges. This is because on average, the Romanian 2. BACKGROUND ON GARANTI BANK ROMANIA woman entrepreneur is married with children, and Overview as such, is more likely than men to have family- Garanti Romania is one of the most dynamic banks related obligations. These create time and mobility on the local market, ranking tenth in the system, constraints that impact her ability to start and nurture with total assets of €2,118 million, equity of €233 her business. Many of the barriers referenced above million, and net income of €13 million at the end 50 of 2015. Active in Romania since 1998, and fully 2016. BBVA is a customer-centric global financial licensed since 2009, the Bank currently has 84 services group founded in 1857. The Group is the branches and has more than 1000 employees. largest financial institution in Spain and Mexico and it has leading franchises in South America and the Ownership Sunbelt Region of the United States; and it is also the Through two Dutch leading shareholder in Garanti, Turkey’s biggest bank Holding companies, for market capitalization. Its diversified business is Garanti Romania is focused on high-growth markets and it relies on ultimately owned 100% by Türkiye Garanti Bankasi technology as a key sustainable competitive advantage. (“TGB”). Established in 1946, TGB is Turkey’s Corporate responsibility is at the core of its business second largest private bank with consolidated assets of model. BBVA fosters financial education and EUR 90 billion as of June 30, 2016. Garanti is an inclusion, and supports scientific research and culture. integrated financial services group operating in every It operates with the highest integrity, a long-term segment of the banking sector including corporate, vision and applies the best practices. The Group is commercial, SME, payment systems, retail, private present in the main sustainability indexes. and investment banking together with its subsidiaries in pension and life insurance, leasing, factoring, Financial Performance brokerage, and asset management besides The Bank’s loan book has continued to grow (by international subsidiaries in the Netherlands, Russia 15% gross value according to IFRS) and now and Romania. As of June 30, 2016, Garanti provides a exceeds €1.5 billion, while the total banking wide range of financial services to its 14.4 million system gross loans increased during 2015 by customers with approximately 20 thousand employees 3.02%. The increase of lending portfolio was through an extensive distribution network of 971 mainly generated by the legal entities portfolio, the domestic branches; 7 foreign branches in Cyprus, one retail portfolio having a slower pace of growth. in Luxembourg and one in Malta; 3 international In 2015, the Bank recorded a return on assets representative offices in London, Düsseldorf and of 0.6%, which compares with the Romanian Shanghai with 4,650 ATMs, an award-winning Call banking sector average for 2015 of 1.24%. Center, internet, mobile and social banking platforms, NPLs of 11.91% are well below the 13.51% all built on cutting-edge technological infrastructure. market average, and the Bank is well capitalized Following the best practices in corporate governance, with 15.16%. Overall, the Bank’s financial Garanti is controlled by two powerful entities, Banco performance has been strong as net earnings and Bilbao Vizcaya Argentaria S.A. (BBVA) and Doğuş client deposits have all seen year-on year increases. Group with shares of 39.9% and 10.0%, respectively. Growth has mostly been driven by increases in Having shares publicly traded in Turkey, depositary client deposits (by 40% yearly). This focus on client receipts in the UK and the USA, Garanti has an actual deposits reflects the Bank’s deliberate drive for deposit free float of 50.06% in Borsa Istanbul as of June 30, increase to reduce dependence on external funding. Garanti Romania’s Key Financial Indicators (for 2013-2015) Key financial data (in EUR million) 2013 2014 2015 Total Assets 1,751 1,835 2,118 Gross Loans 1,204 1,292 1,477 Total Deposits 1,309 1,404 1,717 Borrowings 121 47 41 Shareholders' Equity 220 224 233 Net Income 20 0 13 Return on Equity 9.3% 0.1% 5.5% Return on Assets 1.2% 0.0% 0.6% Capital Adequacy Ratio – IFC methodology 18.43% 16.16% 15.16% 51 Products and Offering Therefore, part of its growth strategy is an expansion of Generally, Garanti Bank Romania sees itself as a the Bank’s branch network. The Bank sees its current medium-sized bank with a strong ambition to grow. smaller size as an important advantage for its growth It holds 2.34% of market share and is the 10th strategy, where being smaller has allowed the Bank to largest player in the market (H1’16). Its operations build and maintain a healthy portfolio. The Bank’s are organized around four lines of business: (1) SME growth targets include increasing portfolio size and Banking (SMEs < 10 million Euro annual turnover); customer numbers by 15-20% (in 2016) and targeting (2) Retail Banking, (3) Cards Business (retail); (4) more diverse and active customers. This assessment was Corporate Banking (>€10 million annual turnover). not able to clarify what customer type (Corporate SME Products are designed and priced and strategies or individuals, for instance) can be expected to drive developed in the Bucharest headquarters and executed the Bank’s targeted portfolio and customer growth. in the branches by dedicated and operational staff for Globally, one of the critical contributors to BoW each of the four business lines. While the process is program success has been the “right” profile of the generally centralized in headquarters, the branches are bank. With Garanti Bank Romania, the profile of the typically the first point of contact for the customer. bank has certainly contributed to program progress. Figure 3: Garanti Bank Romania SME Banking Products For SMEs: • Current activity loan - • Spot loan • Investment loan instalment repayment • Overdraft • Professional loans • Credit line • Business Debit Card • Leasing • Credit lines based on • POS credit line • Deposits receivables discounting loans • Facilities for foreign trade financing Source: Garanti Bank Romania Figure 4: Garanti Bank Romania Awards and Recognitions Garanti Bank Romania has a vision for growth in which SME banking, including banking for women-led SMEs, plays a critical role. The Bank is, however, faced with a number of external market challenges pertaining to the Romanian SME segment. To better understand the business rationale and strategic relevance for the Bank’s interest in the SME – and in particular of the women-led SME – banking segment, it is important to take a look at the overall Romanian market – and in particular the women’s – entrepreneurship space. In 2010, the Bank set up a program to reach women-led SMEs, largely leveraging its product menu for SMEs. It is, however, mostly Garanti Bank’s products for individuals that have gained the Bank market recognition. Over time, the bank has received numerous awards and distinctions, proving customers and general public confidence in our products and services: • Best Consumer Digital Bank in Romania" - granted by the reputable Global Finance magazine, within the 17th edition of the "World's Best Consumer Digital Banks • "The Most Dynamic and Innovative Bank" - award received during the “Nine O’Clock 25 Years Awards Gala” organized by the English Daily newspaper Nine O'clock • "Most Trusted Bank" - recognition received during the 2015 Awards Gala of the local magazine "Financial Markets" • "Best Banking Strategy" - during the "Financial Leaders’ Hall of Fame 2015 Gala" organized by Business Arena publication • "Best Online Banking" - within “Forbes 100 Cool Brands” in Romania 52 3. ABOUT IFC AND GARANTI flexibility on products offered generally within BANK ROMANIA the SME segment. These products are branded under the Bank’s women entrepreneurs banking In order to tap into the business opportunity program and marketed through targeted campaigns associated with providing banking products and and social media platforms. The non-financial services to the SME segment (including women-led activities include the sponsoring and organizing of SMEs), Garanti Bank Romania has been developing events aimed at facilitating women entrepreneurs’ its SME banking capacity since 2007 and its support networking and technical development. The for women-involved business entrepreneurs since following sections will review the Bank’s customer 2010. To strengthen this line of business further, package for women entrepreneurs in more detail. Garanti Bank Romania obtained in September 2011 an SME-Finance facility of €22.5 million (along with a Trade-Finance credit line of $15 million), which it subsequently used to support over 160 small businesses in Romania. Half of the SME- Finance facility was earmarked for on-lending to women-led SMEs. More recently, in July 2014, IFC granted to Garanti Bank Romania a second senior credit facility for SMEs of $35 million, of which there is an agreed carve-out of €20 million for specific on-lending to women-involved owned/ “My company is growing managed SMEs3 . Prior to obtaining financing from fast and with that have come IFC, Garanti Bank had already put in place the further financing needs. I need foundations for its BoW Program (differentiated branding and marketing material), which is firmly to upgrade and purchase new embedded in the Bank’s SME banking platform. The equipment. And I need to hire SME-banking platform, including women’s banking, and train employees. Garanti has been developed over time into a customer value proposition based around two main pillars: (1) Bank made a real effort to financial support4 and (2) non-financial services5 understand and respond to (general education and information for SMEs). my specific future financing needs. I definitely plan to In sum, Garanti Bank’s offering for women-involved SME borrowers is a customer package specifically apply for further financing for women entrepreneurs, consisting of financial and in the coming years.” non-financial products and services. The financial – products are largely a variation on standard SME Woman Entrepreneur and SME Banking products: transaction discounts and payment Customer of Garanti Bank Romania 3 This recent loan for lending to women entrepreneurs is of relatively short duration and its results have not yet fully materialized. 4 Loans for a variety of purposes (investment/cashflow-management/trade-finance/installment-term-loans/overdrafts), together with invoice factoring, insurance and leasing services. The Bank offers a range of differing term deposits, plus its “Economus” product, which is a flexible savings account. Loans and deposits are available with a wide variety of currency denominations and the Bank has developed sophisticated internet banking capability and “Smart” ATM technology. There is general call-center support available to all Garanti clients (“Alo Garanti”). The Bank offers credit and debit cards for business use, POS terminals for merchant acquiring, cash-management products such as direct debits and automated payment scheduling and also payroll schemes for SME employee’s payroll payments. 5 Many banks around the globe engaged in women’s banking are starting to build a strong offering of non-financial services to women entrepreneurs that goes beyond providing training and networking platforms. 53 C. ANALYSIS AND ASSESSMENT 1. GARANTI BANK’S “RIGHT” banking program, it is important to point out that the Bank’s “right” profile and strengths provide a strong PROFILE AND STRENGTHS foundation and platform for the delivery of SME In assessing Garanti Bank’s women’s entrepreneurship banking and banking of women-led SMEs specifically. GARANTI BANK’S STRENGTHS Good Internal Capacities Strong corporate governance and management capacity Growing use of social media to advertise the client value proposition. Internal promotion of women into departmental management positions in sales and marketing Good segmentation information already created for regions and industry sectors, (but mainly for exposure management) Preference for branch sales channels (internet take-up is relatively low) Preference for dedicated relationship management Long Experience with Various Segments Long experience of SME and retail sector development Experience and guidance available from the parent Bank which is itself developing a women client focus in its market in Turkey Good Market Position and Favourable Market Perception Growing assets and profitability year-on-year Growing reputation for providing women-focused business events Slightly better loan portfolio quality for the women segment than that of Garanti Bank Romania overall IFI funding support provided 2. GARANTI BANK ROMANIA SME within its SME segment in 2010 and, in the ensuing four years to 2014, has lent in excess AND BOW PROGRAM of €34 million to women-owned/managed Program Overview SME businesses. This lending has been to a Garanti Bank Romania started to develop a product large extent financed by IFC. This is valid only package specifically for women entrepreneurs for the loans granted under the IFC loan: Figure 5: Garanti Bank Romania’s Definition of Women-SME, for loan facilities granted under IFC loan a) Greater than or equal to 51% owned by woman/women (majority ownership); or b) Greater than or equal to 20% owned by woman/women (minority ownership); and have one or more women as CEO or COO or president or vice-president; and have greater than or equal to 30% of the board of directors comprised of women (where a board exists). c) Less than 20% owned by a woman but have one or more women as CEO, CFO or COO or president or vice-president; The definition may extend to take in other forms of registered businesses (i.e. sole-ownership). 54 Garanti Bank Romania’s BoW Program is part Strategy / Research and of its offering for SME banking and consists of Market Knowledge financial products with some minor differentiation Garanti Bank Romania’s board is supportive of in comparison to the ‘regular’ products offered to the BoW program. The Bank deserves credit for SME customers. The differentiation is mostly in the extent to which is has incorporated BoW into liability, commissions and fees applied to within existing corporate or business line based strategies. dedicated campaigns. Lower fees and commissions Based on available gender-disaggregated portfolio are applied to women customers. Specifically, Garanti data (in particular on sub-segment growth and Bank Romania has customer acquisition campaigns NPL rates, see p.15-17), this study finds that the dedicated to the women entrepreneurs segment, women-involved SME borrower segment could offering discounts on standard operational fees. There potentially be a critical contributor – perhaps is no separate or differentiated credit risk scoring even driver – to the Bank’s growth targets. model that is applied to women-owned SMEs. Loan applications that are initiated by women are assessed Product & Service Customization / by Garanti Bank Romania on a gender-neutral basis. Sales and Marketing - Customer Value The more substantial differentiation in the BoW Proposition (CVP) for Women SMEs product offering is in the marketing of products, in Financial services: Garanti bank’s financial products how women customers are acquired and in wrap- that are offered to women SMEs are largely a variation around non-financial activities. These include the on standard SME products: transaction discounts use of dedicated social media platforms (Facebook) and payment flexibility on products offered generally and competitions, customized marketing material within the SME segment6. Other banks’ experiences and special events for women entrepreneurs. with BoW programs show that offering substantially Events organized in smaller towns have proved to be differentiated financial products specifically designed especially successful in generating new women-involved for the women segment and based upon in-depth SME clients when compared to events held in the women client market research can be a powerful driver capital city. The assessment would benefit from a better for positioning a BoW program and for achieving understanding of how client referrals and leads from success. Banks with successful BoW programs have these events are generated, monitored, tracked and based their innovations and product differentiation calculated. While these Bank activities are appreciated on women’s specific needs and preferences in by the women entrepreneurs, their most pressing need banking and financial relationships. Differentiated seems to be for customized consulting services provided financial products offered by banks around the by the Bank (support with developing business plans). globe include, for example, collateral-free loans or However, Garanti Bank Romania does not have loans collateralized with moveable assets such as internal consulting capacity or expertise at the moment jewellery. They also include bridge products that help and does not at present see building a platform to individuals as they transition into entrepreneurs as offer this type of service as a corporate priority. The well as bundled products that combine personal with Bank’s view is that customized consulting services business financing needs. There is an opportunity are most relevant to and needed by start-ups. The for Garanti Bank Romania to conduct in-depth Bank gives comparatively low priority to women-led market research in this sub-segment and identify start-ups, which are seen as risky and time-consuming elements that would help make its financial products to monitor, further supporting the Bank’s lack of and services offered to women entrepreneurs more concern for providing customized consulting services. differentiated. Product differentiation here means It may be worthwhile revisiting this view, given that that the Bank develops and offers products and the quality of the Bank’s asset portfolio for women services that meet the needs of women, which are borrowers is better than that for male counterparts different from those of their male counterparts. (see section 2). As such, the lower NPL rates of the Marketing: The Bank is also to be commended on Bank’s women-involved SME borrowers counter its customized approach to marketing its products the notion that women-owned firms are riskier. and targeting this segment. The Bank has focused not 6 Companies with turnover less than €5 million. 98% of SMEs in Romania have turnover less than €2 million. 56 on the financial product offering itself, but rather Facebook membership as a powerful tool to educate on taking a differentiated approach to developing and advertise its capabilities, and sponsored events brand awareness of the Bank’s women entrepreneur and products. It has the third-largest followering for banking capacity through marketing, through social a commercial Facebook page in Romania (currently media, and through the sponsorship of events to 250,000). It is understood that the Facebook page facilitate networking and development for women targets women and women entrepreneurs. entrepreneurs. The Bank has actively developed Figure 6: Sponsored workshops on entrepreneurship - Importance of a Clear Marketing Plan The BoW Program offering has not been offered by the Bank under its BoW Program to mainstreamed into the Bank’s website, which women entrepreneurs. While not offering special currently provides information and links only training courses to women under its partnership to the Garanti Bank Romania range of business with ASEBUSS, the Bank, through its membership and personal products and services, without with the Professional Women's Network Romania illustrating the products and non-financial support (PWN), an NGO dedicated to support women available from the Bank to the women client advancement in leadership, organises technical and segment. It seems that the Bank has opted instead networking events aimed at women entrepreneurs to develop its presence more cost-efficiently in and other successful professional women in social media platforms for dissemination of news Romania. These events typically feature discussions and announcements concerning its products, on business dynamics and ethical behaviour. services and events for women. The Bank’s focus on Moreover, PWN organizes a series of workshops differentiated marketing, non-financial services and called "Toolbox for beginner entrepreneurs and online-presence is a very powerful approach which not only", in order to give women entrepreneurs has yielded success for banks around the globe. all the details and instruments needed to develop The Bank has an opportunity here to maximize the their own businesses. Many banks around the results of these initiatives through market research globe engaged in women’s banking are starting to to further enhance marketing. A meaningful way build a strong offering of non-financial services to to then measure the impact of a more market- women entrepreneurs that goes beyond providing research-driven approach would be to track any training and networking platforms. Global best changes in customer leads and conversion rates. practice in women’s banking is increasingly offering Education and non-financial services (NFS): more customized, value-added services such as The Bank associates with ASEBUSS (Romanian- individual and group mentoring and coaching for American Business School), which is recognised for women entrepreneurs, as well as providing business offering business courses to entrepreneurs leading development and management tools and advice. The to Executive MBA awards. So far, the ASEBUSS Bank is certainly on the right track here, and there program has not been specifically customized or is an opportunity to expand this line of activity. 57 Capacity, HR and branch levels and training and incentivizing them to Staff Knowledge be champions or ‘ambassadors’ for the BoW program The BoW Program is integrated can be powerful, successful drivers of BoW programs. at the central level into the In sum, Garanti Bank Romania can be commended on SME Banking business line, which is led by the Head the extent to which it incorporates BoW into existing of the SME and Commercial Banking Department. corporate or business-line-based strategies, on its Like all four lines of business, it is supported by the proactive and pragmatic approach to collecting gender- Communications and Product Development teams. disaggregated data in the face of limitations posed by In terms of BoW capacity and resources at the branch its MIS system and its differentiated and customized level, the Bank does not have dedicated relationship approach to marketing its products to this segment. managers for this specific customer segment in All these have been drivers of program progress. place, nor does it use ‘ambassadors’ or champions for Having come this far gives the Bank momentum upon women’s banking within the branch network, as do which to build and to use in-depth market research some other successful providers of women’s banking to further differentiate and customize financial services. Garanti Bank’s stated preference for reaching and non-financial products for women SMEs, thus women entrepreneurs is through branch sales channels, building up its internal resources. There are examples as internet take-up is relatively low. The Bank has of good practise from around the globe in women’s also stated a preference for dedicated relationship banking which may provide ideas and guidance. management as a means to reach and serve customers. So there is an opportunity to build up dedicated expertise and resources at the branch level to target 3. SME AND WOMEN-LED SME and service this segment. Other banks with successful PORTFOLIO PERFORMANCE BoW programs from around the globe have shown Overall SME Portfolio Size that identifying customer relationship managers at the Currently, Garanti Bank Romania has a portfolio of 26,298 SME clients7 with a loan portfolio value of €304 million. As of February 2015, Garanti Bank’s “I face many challenges in SME portfolio is showing 6,622 women-involved running my business - from segment borrowers with a portfolio value of €144 million. As such, women-involved SME borrowers managing my production represent a quarter of Garanti Bank Romania’s SME costs to accessing the right as per bank internal definition and half of Garanti business partners. Garanti Bank’s SME loan portfolio value. As of February 2015, Garanti Bank Romania had granted 3,625 loans to Bank understands that we as SMEs. Of these, 1,085 loans were granted to women- women entrepreneurs need involved SMEs. This represents a share of 30%. These advice and support. They are impressive numbers and a dramatic increase since organize business management Garanti Bank first set up the IFC SME Facility in 2011, which initiated the Bank’s lending to SMEs. training to give us the skills to deal with some of these Assessing the Success of IFC SME Facility challenges and they organize In 2011, IFC set up an IFC SME facility with a carve-out for on-lending to women-owned SMEs and business network events. More for which IFC and Garanti Bank Romania jointly than anything, it’s this type of set reach targets for women. This IFC SME facility support that we most need. began Garanti Bank‘s lending to SMEs (including – women-owned SMEs) and is now part of Garanti Women Entrepreneur and SME Banking Bank’s broader SME lending portfolio. Considering Customer of Garanti Bank Romania the overall SME-portfolio numbers above, Garanti 7 Source: Garanti Bank 59 Bank Romania has come a long way since it first set up compared with 2018 goals for IFC’s repeat loan to the IFC SME facility with a baseline of six outstanding Garanti Bank – 489 outstanding loans by the end of SME loans for women SME borrowers in 2010. 2018 – the Bank has again overachieved, having already This section assesses the size and growth of the reached 567 loans in 2014, from a baseline of 206 in women-owned SME portfolio associated with the IFC outstanding SME loans for women at the end of 2013, SME facility only. IFC’s loan dispersed to Garanti higher than the target by 16%. In terms of portfolio Bank Romania in 2011 for on- lending to women- value for lending to women-led SMEs, the Bank has owned SMEs set a target for Garanti Bank: up to 300 also overachieved its target, by 47%. The Bank was to outstanding loans to women by the end of 2015 from realize a portfolio value of $90 million in outstanding a baseline of six loans at the end of 2010. This target loans by the end of 2018, from a baseline of $38 was surpassed by 89%: 567 loans to women-SMEs million in outstanding SME loans at the end of 2013. in 2014 versus 300 loans targeted by 2015. When It has already achieved a value of €144 million in 2015. Figure 7: Garanti Bank Romania Women-Led SME Portfolio (including but not limited to IFC SME facility) Women Other SME Total SME Share of Share of Entrepreneur customers customers women- men-led SME (excl. led SMEs SMEs Customers women- in total in total owned (in %) (in %) SMEs) Customers and Loans Number of SME customers 6,622 19,676 26,298 25 75 Number of SME loans 1,085 2,540 3,625 30 70 Working capital loans 796 Investment loans 289 Value of SME loans granted (€) 144,232,741 160,337,177 304,569,918 47 53 Working capital loans 90,080,688 94,237,102 184,317,790 49 51 Share of working capital loans in total SME loans (in %) 62 59 61 Investment loans 54,105,545 66,146,583 120,252,128 45 55 Share of investment loans in total SME loans (in %) 38 41 39 Average value per loan (in €) 132,933 63,125 84,019 Working capital loans (in €) 113,167 Investment loans (in €) 187,216 NPLS Number of SME customers with overdue loans 252 560 812 31 69 Number of SME customers with overdue >90 days 110 297 407 27 73 Deposits Number of SME customers with time deposit 49 735 784 6 94 Number of SME customers with demand deposits 5,530 11,561 17,091 32 68 Source: Garanti Bank Romania, as of 28 February 2015 Portfolio Profile (25%) and administrative support services (15%). Of the SMEs in Garanti Bank’s portfolio, 17% 8 In terms of loan value, 39.5% of these SMEs loans operate in the commerce and distribution sector, held are for business investments, 60.5% for working followed by 15% in administrative and support capital. The split between working capital loans and services, 13% in healthcare and tourism, and 13% in investment loans is more balanced for men-led SMEs other services. By comparison, women-owned SMEs in (41% versus 59%) than for women-led SMEs (38% Garanti Bank’s portfolio are concentrated in commerce versus 62%), which hold more working capital loans. 8 run by men and/or women 60 Figure 8: Sector Distribution of SMEs in Romania Sector distribution for SMEs in Garanti Bank 3% 3% 5% 17% 5% 5% SHOPS AND RETAIL DISTRIBUTORS ADMINISTRATIVE & SUPPORT SERVICES HEALTHCARE & TOURISM 6% 15% OTHER SERVICES CONSTRUCTIONS AND CONTRACTING TRANSPORTATION AND LOGISTIC TRADERS DOURABLE GOODS AND ROW 7% MATERIALS WHOLESALERS INDUSTRIALS GOODS PRODUCING HEAVY INDUSTRY MANUFACTURING NON FOOD 8% 13% WHOLESALERS DURABLE GOODS AND CHEMICALS AGRICULTURAL LIVESTOCK & FOODS 13% Sector distribution of SMEs owned or run by women - in Garanti Bank 1% 1% 2% 3% 4% 5% 25% 5% COMMERCE 5% ADMINISTRATIVE & SUPPORT SERVICES WHOLESALERS COMMERCE MANUFACTURING OTHERS CONSTRUCTIONS 7% HORECA & TOURISM 15% HEALTHCARE & SOCIAL ASSISTANCE TRANSPORT REAL ESTATE 9% AGRICULTURE IT & TELECOM NON-BANK FINANCIAL INSTITUTIONS 9% 10% EXTRACTION Source: Garanti Bank Romania 61 MIS and Data Limitations Prevent Therefore the contributions of the women’s sub- Profitability Analysis segment portfolio have been difficult to analyse. At present Garanti Bank‘s MIS does not allow for Garanti Bank has, however, stated in interviews its disaggregating its SME information by gender intention to address this information gap, and merits beyond the metrics listed in figure 7. In the face credit for its innovative approach toward identifying of this data challenge, this study was unable to alternative methods to track data by gender, such as delineate the profit contribution from the Bank’s reference numbers on personal identification cards women customer segment in terms of its assets (see p.17). The review of gender-disaggregated data and liabilities, specifically, the income deriving below, provided by Garanti Bank Romania, aims from interest and fees on women-segment loans, to assist the Bank in finding where gaps exist and together with the implied value of average deposit where it will be of most benefit to the Bank to make balances from women-segment depositors. Segment corrections. These gaps seem to be in the area of contributions and profit are recognised in totality performance and profitability and to some extent also at the SME- and retail division levels respectively. in the area of segment growth and sustainability: Figure 9: Assessment of Gender-Disaggregated Data Availability at Garanti Bank Romania Metrics Available Segment Performance and Profitability Number of financial products per women-led SME customer x Average profit per SME for both men and women x Efficiency ratio per SME for both men and women x NPL rates per SME for both men and women  NPLs, IRR and ROA comparison by segment x Annual ROT for the women’s segment based on total # of accounts x Annual ROT for the women’s segment based on average deposit values x Estimated revenues from the balances, taking into account costs of funds x Average loan ticket size for both men and women-led SMEs  Segment Growth and Sustainability Number of loans for both men- and women-led SMEs  Number of SME loan customers , both men- and women-led  Value of SME lending portfolio committed for both men- and women-led SMEs x Value of SME lending portfolio for both men- and women-led SMEs  New customer acquisition rate per for both men and women x Increase in loan balance for both men- and women-led SMEs (4-years)  Bank Capacity Number of dedicated BoW staff  Source: Garanti Bank data and interviews Analysis of Quality and Growth can be gathered through the personal ID numbers Trends of Segment Portfolio associated with opening a bank account. The In the absence of an MIS that is able to gender-tag same applies to the formal or legal representative and -track customer data, the Garanti Bank team in relation with the Bank and the ID number initiated an interim solution, using the reference associated with that person. This has allowed the number on personal identification cards in Romania bank to track certain customer data by gender, in which begin with either 1 or 2 depending on the particular NPL rates for SME loans, average loan gender of the person. Thus, women client numbers ticket size and segment growth rate (by value of 62 loan balance). This data points to some interesting SMEs. This is a particularly important finding, findings on portfolio quality and growth. given that the Bank is making concerted efforts to target high-quality borrowers in an effort to Spotlight on NPL Rates of strengthen the health of its SME portfolio. In times Women SME Borrowers when high loan provisions are a huge burden for Among the most significant findings of this study’s the Bank’s profitability, the Bank’s women-involved gender-disaggregated portfolio analysis are the SME borrowers – who perform better than portfolio dramatically lower NPL-rates for women-involved average – could become critical in contributing SME borrowers when compared with overall SME to the Bank’s profitability. This not only confirms portfolio performance and with the men-led SME the business rationale for having tapped into this borrower segment. Only 31% of SME customers sub-segment, but further proves that continuing with overdue loans are women-led SMEs; 69% are and expanding business in this sub-segment is men-led SMEs. More importantly, only 27% of a sound business decision going forward and SME customers with > 90 days overdue loans are aligned with the Bank’s strategic direction. women-involved SMEs, while 73% are men-led Women Other SME Total SME Share of Share of Entrepreneur Customers Customers Women- Men-led SME (excl. led SMEs SMEs Customers Women- in Total in Total owned (in %) (in %) SMEs) NPLS Number of SME customers with overdue loans 252 560 812 31 69 Number of SME customers with overdue >90 days 110 297 407 27 73 Source: Garanti Bank Romania, as of 28 February 2015 Spotlight on Average Loan Ticket by a women-led SME, the ticket size of the loan is Size for Women SME Borrowers more than double the size of an average loan taken Another significant finding of this study is the out by a man-led SME. Again, this is an indication larger average loan ticket size for women-involved that women-involved SME borrowers perform SME borrowers when compared to the overall better than the portfolio average and could become SME portfolio and to the men-led SME borrower critical in contributing to the Bank’s profitability. segment. At an average €132,933 per loan taken out Women Entrepreneur Other SME Total SME SME Customers Customers Customers (excl. Women-owned SMEs) Average value per loan (in €) 132,933 63,125 84,019 Source: Garanti Bank Romania, as of 28 February 2015 64 Figure 10: Garanti Bank Women-Led SME Portfolio Loan Customers - Overdue Loans 100 80 73% 69% 70% 60 40 31% 30% 27% 20 0 SME customers with SME customers with Total SME loan overdue >90 days overdue loans customers WOMEN ENTERPRENEUR OTHER SME CUSTOMERS Source: Garanti Bank Romania, as of 28 February 2015 4. RELEVANCE OF BOW TO WOMEN the financing obtained by women entrepreneurs has SME CUSTOMER NEEDS AND had an impact on their businesses. While this case study is complemented by a more extensive survey IMPACT ON CUSTOMERS of Garanti Bank’s women-involved SME customers, One key driver of BoW program success is the one ‘beneficiary story’ were compiled through segment’s contribution to the Bank’s business. This is interviews conducted with two women entrepreneurs measured by the segment’s portfolio performance and who are customers of Garanti Bank Romania and profitability as well by its growth and sustainability who obtained financing from the Bank for their (see 3. Defining Success Parameters). Program businesses. The beneficiary perspective provides success is further defined by the Bank’s ability insight into how Garanti Bank’s BoW Program is to effectively service this segment. Success of a impacting women entrepreneurs in Romania. It BoW program is equally defined by the program’s gives insight into the financial needs these women ability to reach and provide access to underserved entrepreneurs have and how well Garanati Bank’s women entrepreneurs and address their specific offering addresses these and other potentially unmet access-to-finance constraints. In other words, needs. It also provides a sense of other financing program success can be defined by how well the options women entrepreneurs have available in the Bank’s BoW program is able to address the specific market and to what extent they are considering those. financing needs of women entrepreneurs and how 65 D. WOMEN SME CUSTOMER VOICES NICOLAE FELICIA, CARPATI MODERN FURNITURA SRL - (PART OF OVO DESIGN GROUP) OVO Design Furniture Group SRL is a Romanian outstanding loan amount is €1.3 million. The loan manufacturer of classic and modern luxury furniture. was not associated with any preferential interest rates The company’s range of products includes kitchen, and was used by the company for working capital. living-, dining- and bedroom furniture. They also produce The company further holds a checking account and furniture for restaurants, offices and conference rooms. corporate credit cards and processes its payroll through Established in 1994, the company has been in the the Bank. The company’s CFO, Nicolae Felicia, offers market for over twenty years and has grown from a some interesting insights into why women entrepreneurs smaller size enterprise to one with an annual turnover may chose a specific bank to do business with. In the of close to 6 million euro in 2014. OVO Design Furniture case of Ovo Design the main reasons for the CFO’s Group SRL has been categorized as a women-led SME choice of Garanti Bank was the Bank’s reputation in primarily because the company is the market, its flexibility and part of Ovo DesignH Group which the personal relationship Ms. has minority women ownership, “I chose Garanti Felicia already had with the while Carpati Modern Furnitura Bank because of its Bank. This is very much in line SRL itself has a women CFO, a reputation in the market, with research conducted on top manager with decision making women’s banking preferences, authority (see definition on p. 17). its flexibility and the which revolve around trust Not only is the CFO of Carpati personal relationship I and relationship building Modern Furnitura SRL a woman; had already had with with the Bank, as opposed some 80% of managerial positions to opportunistic transaction them. That relationship in the company are held by women. orientation (a consumer pattern Nicolae Felicia, the company’s key is very important to me” prevailing among male banking decision maker, has a long-standing – customers). Ms. Felicia confirms relationship with Garanti Bank. Nicolae Felicia, CFO, Carpati that without the financing The company is a recent SME Modern Furnitura SRL obtained from Garanti Bank, banking client of Garanti Bank. It the company would have been obtained its first loan from the Bank as recently as in cash constrained and it would have been very difficult 2013, in the form of two short-term loans, one cash to manage the business. The company did consider and one working capital, with a letter of guarantee in alternative sources of finance at the time it obtained the value of €2.5 million..The loan was collateralized financing from Garanti bank. These included other through property owned by the company. The currently commercial banks in the market as well as funds. 66 In conclusion, as the all the interviewed customers can be considered a benchmark to the women entrepreneurs segment in Romania, interviewed are representative of the larger pool of women entrepreneurs, it seems that brand awareness, market reputation and relationship building are key drivers in the Bank’s ability to attract and build a women-involved SME customer base. Further, women customers expect a clear product differentiation for the financial products offered by Garanti Bank, as well as non-financial services that help address the companies’ real and most pressing challenges, such as enhancing cost-efficiencies through energy savings. Indeed, the company has tapped into other sources of financing since Garanti Bank launched its BoW Program and did obtain a €1.5 million loan from the Bank of Cyprus. This funding was however unrelated to the financing the company received from Garanti Bank and the loans it has from Garanti Bank did not in any way help obtain financing from other banks. In spite of its beginning as a start-up, the company has never used personal loans for its business. Ovo Design is growing fast and with that have come further financing needs. The company plans to apply for further financing in the coming two years, mostly to upgrade and purchase new equipment. Given Ovo Design’s growth and expansion, the company would direct any additional financial resources into upgrading its equipment and training its employees. It would also consider purchasing new equipment and hiring more qualified staff. Ms. Felicia further offers some insight into the challenges that small businesses in Romania, including women- led firms, face and the specific finance and non-finance needs they typically have. The biggest challenge to the company is tax and labour regulation, in addition to access to reliable electricity/power. This includes costs associated with power as well as compliance with labour regulations. The company considers that two most pressing needs that can be addressed by the Bank are lower interest rates for women-led firms, and customized business consulting services for women clients. Because of the costs associated with accessing power, the company is further interested in energy efficiency financing and energy efficiency audits. 67 E. FINDINGS AND RECOMMENDATIONS 1. OUTCOME OF IFC INVESTMENT involving greater amounts for on-lending to women REGARDING GARANTI BANK entrepreneurs. The Bank’s women SME client ROMANIA BOW PROGRAM acquisition is increasing and there is real momentum for further program expansion. In fact, the Bank has Garanti Bank Romania intends to offer finance and already started to look for ways to further expand banking services to women clients as evidenced by its outreach to women-led SMEs. The experience of the Bank’s incorporation of BoW into its existing banks which have mainstreamed their BoW programs corporate or business-line- based strategies, its shows that the use of in-depth market research can differentiated marketing approach (branding and further differentiate and customize financial and non- on-line presence) to the women SME borrower financial products for women-owned SMEs. Building segment and its proactive approach to collecting up its internal capacities to deliver BoW programs gender-disaggregated data in the face of limitations has proven to be a further powerful approach. posed by its MIS system. All these have been drivers The study recognizes the of program progress. In “There are usually very limitations of the Bank’s short, Garanti Bank has few opportunities for existing MIS system in terms laid the right foundations women entrepreneurs of gender-disaggregation of for its BoW Program and data and is therefore focusing progress has been made. This like myself to meet and on more qualitative aspects of is shown by how the Bank network with other women program success. That said, has overachieved its targets business owners. Garanti there is great value to the on loans to women SME Bank in generating gender- Bank regularly invites us borrowers by 89% for 2015 disaggregated portfolio and by 16% for 2018. The to networking events. It data and quantifying the Bank has also overachieved its has been very energizing contribution of the sub- 2018 portfolio value targets for me to be part of a segment to the Bank’s by 47%. While the study is bottom line. It is really clear on program reach and community of like-minded worthwhile to consider the portfolio value, the BoW business women.” ‘data challenge’ and address Program contribution to the – it. For example, looking at Bank’s profitability is less clear. Women Entrepreneur and NPL rates through a gender This is due to data limitations. SME Banking Customer of lens has revealed that women Garanti Bank Romania SME borrowers exert better Despite success in program payback behaviour and are reach and portfolio value targets, there are indications therefore more desirable customers for the Bank. of further room for the Bank to exploit the market More of this type of data is likely to provide similar opportunity offered by the women SME client insights and allow the Bank to think about how to segment (estimated at around €5 billion), to further derive more business benefits from this sub-segment. expand and differentiate the BoW Program and ultimately realize more business benefits from Garanti Bank Romania intends to remain engaged it, most notably to capitalize on the better NPL in this segment and has several areas of strength that rates of the Bank’s women SME borrowers. IFC it can leverage for further program expansion and signed a repeat loan to Garanti Bank in 2014, differentiation: 68 women owners of businesses and potential new businesses 2. LEARNING AND RECOMMENDATIONS place high value on advice and mentoring from their banks. FOR GARANTI BANK ROMANIA This ranks equally with the need for finance facilities, and has a positive influence on loyalty and trust factors Opportunities for further BoW Program between client and Bank. There may be opportunities expansion and differentiation: for Garanti Bank Romania to initiate regular regional Building on these strengths, there are concrete technical workshops, to attract existing and potential BoW measures that the Bank can take in order to further clients and to provide basic business-management tools differentiate and scale its BoW Program. and instructions in their use as a value-added service. • Institutionalize the linking of information on Develop , formulate and implement a strategy women-involved business-account owners for women customer segment development with private client products and services; Since Garanti Bank Romania intends to support this There may be missed opportunities to cross-sell segment, there is an opportunity here to achieve better additional banking services to an existing client base. business impact and sustainability of the program through • Develop and use risk-scoring or risk pricing a defined and costed strategy that would include: formulae for the women segment; • Focus on the women client segment in SME It would be beneficial for Garanti Bank Romania to banking to define and build market share; develop a rule-driven scorecard, based upon credit • Cost/Benefit analysis of the financial impact to policy and risk appetite for its SME business. The Garanti Bank Romania, including cost of capital overall risk-profile for SMEs is gender neutral and so the employed; value of the women deposit base; gross methodology could be widely used to deliver consistency income contribution; net income contribution of quantitative and qualitative outputs across the range after direct and extrapolated indirect costs; of SME borrowers. If Garanti Bank Romania should • Regions and industries to be targeted which may decide to make certain policy changes to better support not be the same as for the general banking focus; women-segment development, such as financing start- • Definition of risk-appetite focus: At present credit ups subject to considered criteria, which are outside risk is managed on a gender-neutral basis, and yet the general parameter–risk computations, it would various studies of international women-in-business be a simple matter to alter a scorecard to reflect such projects indicate that a large number of prospective characteristics. The introduction of risk-based pricing women-owned businesses are start-ups which could allow Garanti Bank Romania to change its risk/ Garanti Bank Romania will not readily consider; reward criteria for small-business lending and to reduce its • Further development of products attractive to decline-rates on new loan applications. This is particularly the women client segment based upon research relevant for the women business-client segment which into segment preferences. At present the value- has acknowledged difficulty accessing finance. proposition is based mainly upon variations in A structure for risk-based pricing can have beneficial existing products and transaction patterns. consequences not only for profit contribution but also for borrower behaviour, and a beneficial Develop a substantially differentiated impact on default ratios, as has been seen in the Customer Value Proposition based on in- development of the micro-lending industry. depth market research of this segment; • Strengthen marketing and access • Extend women segment product diversity beyond to product information; general product discounts and deposit focus; There is an outstanding opportunity to develop the There is potential for the Marketing Department, in Garanti Bank Romania website to include a comprehensive conjunction with the Retail and SME Departments, to section describing its value-proposition to women use branches and Garanti Bank Romania’s sponsored clients. At present, there is no direct information events to research women client product and service available and Garanti Bank Romania is striving to preferences and then to consider the cost/benefit of increase internet-banking usage beyond its present low providing the desired products and services as part of a level of an estimated 7% of transaction volume. 3-year strategic plan for women segment development. • Measure the impact of NFS activities by tracking There is established evidence from other markets that customer leads and conversion rates; 70 Put in place a dedicated women or business-line-based strategies, its differentiated segment unit within SME and Retail marketing approach (branding and on-line presence) Departments and incentivize teams; to the women SME borrower segment and its proactive The experience of other banks shows that a small dedicated approach to collecting gender-disaggregated data in team in each of the Retail and SME Departments, managed the face of limitations posed by its MIS system. All and incentivised on the basis of KPI methodology, is better these have been drivers of program progress, which is able to drive growth than is the case when the women evidenced by the overachieving of targets on loans to segment is simply part of a wider “universal” approach to women SME borrowers by 89% and the growth rate client sourcing and relationship management between the of that sub-segment, as well as the better NPL rates of head office and branches, and branches and their clients. the women borrowers. That said, the assessment of the profitability of the subsegment has not been possible Develop a methodology and institutionalize due to MIS system- and therefore data limitations. a system to disaggregate women- There are indications that there is further room segment performance data; for the Bank to exploit the market opportunity It will be difficult to make a case to the Board for offered by the women-involved SME client segment, commitment of resources and capital to develop a niche- estimated at around €5 billion, and to further expand segment business when there are and differentiate the BoW no refined data to indicate the program and ultimately realize degree of tangible and intangible “I learn so much by more business benefits from contributions of the women interacting with other the program, most notably segment, together with a future view business women. capitalizing on the better NPL rates of the Bank’s women SME of growth possibility based upon Garanti Bank has both internal and external factors borrowers. With IFC’s repeat (e.g. Romania’s macro-economic, created online platforms loan to Garanti Bank, signed political and market outlook). for us to engage. It in 2014 and allotting a higher really has created a amount for on-lending to Leverage capacity and women entrepreneurs, the Bank’s expertise of Garanti Bank community of women women SME client acquisition Turkey’s BoW Program entrepreneurs for us is increasing and there is real through knowledge transfer. here in Romania” momentum to further expand and deepen the program. Garanti Bank Turkey has a long- – standing and well-established BoW Women Entrepreneur and Going forward, there is an Program. There is an opportunity SME Banking Customer of opportunity for the Bank to at hand for Garanti Bank Romania Garanti Bank Romania build on the current momentum to deepen its engagement around of initial program success and knowledge transfer with its parent bank Garanti Bank the repeat loan with the IFC and expand the program, Turkey. Particularly on the issue of building staff capacity strengthening its program, assessing its profitability at the branch level and collecting gender-disaggregated and reaping greater benefits from it. In doing so, the data, Garanti Bank Turkey can transfer valuable expertise Bank has several areas of strength that it can leverage. to the Garanti Bank Romania program. Generally, These are centered mostly on the Bank’s overall good Garanti Bank Turkey has established itself as a leading internal capacities, its experiences with various segments bank in terms of both customer segmentation and and good position and perception in the market. It relationship management, as well as banking to women. can also benefit greatly from its parent’s BoW expertise (Garanti Bank Turkey’s BoW Program). Building on 3. CONCLUSION these strengths, there are concrete measures that the Bank can take in order to strengthen and scale its Overall, the findings of this study point to good progress BoW Program. In doing so, IFC can help and support in Garanti Bank Romania’s BoW Program. Many of Garanti Bank Romania through advisory services as the right foundations are in place, such as the Bank’s well as through facilitating knowledge transfer from incorporation of BoW into its existing corporate other IFC client banks with successful BoW programs. 71 CASE STUDY 3 GARANTI BANK TURKEY: COMBINING SME BANKING EXCELLENCE WITH A PROPOSITION FOR WOMEN ENTREPRENEURS IN TURKEY  LIST OF FIGURES Figure 1 Comparing SME Sector in Turkey and EU Figure 2 Standard SME Definition Adopted Across Turkey Figure 3 Turkey Credit Gap for Formal SMEs by Gender (in $ billion) Figure 4 Entrepreneurial Perceptions for Women and Men Figure 5 Garanti Bank: 3-Tiered Segmentation Approach Figure 6 Garanti Bank: Opportunities of Same Pocket Model Figure 7 Garanti Bank: Relationship Management Coverage Model by Segment Figure 8 Examples of Cross Business Line & Group Synergies with SME Division Figure 9 Examples of Product Bundles Offered by Garanti Bank Figure 10 Garanti Bank: Customer Base: WE Shares in SME Segment Figure 11 Garanti Bank’s WE Product Package Figure 12 Garanti Bank Figure 13 ˘ aziçi University: Mini-MBA Contents Garanti Bank- Bog Figure 14 Woman Entrepreneur of the Year Award: Nomination Categories Figure 15 Garanti Bank: Women Entrepreneurs Ecosystem Figure 16 Garanti’s Facebook Page Dedicated to Women Entrepreneurs Figure 17 Garanti: Customer Efficiency and Profitability: Women vs. SME 74 A. INTRODUCTION Garanti Bankasi (Garanti) is a regional pioneer in more women entrepreneurship in the country. offering products and services specifically targeted towards women entrepreneurs as a specific market This case study (the “study”) explores how Garanti segment. In 2006, Garanti created a Women’s leaders decided to focus on women entrepreneurs. Entrepreneur Support Package specifically designed It also documents and analyzes the bank’s efforts to help Turkey’s women entrepreneurs to establish to build a profitable and sustainable “women in and grow their businesses. This was followed up with business” franchise through its three-pillar approach, the creation of Women Entrepreneur Gatherings including financial support, client education, in 2007, which provided additional training and and the encouragement of entrepreneurship. The educational tools and new networking opportunities. case study also provides insights into how Garanti And in 2013, Garanti began collaborating with tapped into its highly innovative, market-leading Bogazici University, a top university in Turkey, to SME Banking franchise to more effectively target offer an intensive mini-MBA training program women in business. The study concludes with an for women entrepreneurs. Garanti also launched objective assessment of the results of the program Turkey’s first Woman Entrepreneur of the Year to date, offering suggestions from IFC specialists award, an initiative that showcases women who have on how Garanti may further scale up its women in successfully grown their businesses, encouraging business initiative in the next phase of development. B. BACKGROUND Established in 1946, Garanti is Turkey’s second 3,992 ATMs, an award-winning Call Center, and largest private bank, with consolidated assets internet, mobile and social banking platforms, all exceeding $104 billion.1 Garanti is an integrated built on cutting-edge technological infrastructure. financial services group operating across all key business segments, including corporate, commercial, Garanti’s strategy has long focused on small SME, payment systems, retail, private and and medium enterprises (SMEs) in Turkey, a investment banking. It also maintains subsidiaries segment that drives growth and employment. that cater to pension and life insurance, leasing, Today Garanti is a market leader in the SME factoring, brokerage, and asset management. segment, with approximately 1.5 million The bank has an international footprint, customers. In 2012, Garanti provided the particularly in Europe, with full subsidiaries based equivalent of $7.2 billion in lending to SMEs. in the Netherlands, Romania, and Russia. In 2006, Garanti became the first bank in the Garanti provides a wide range of financial services to region to offer products and services specifically 12 million customers across a distribution network of targeted towards women entrepreneurs, in 988 domestic branches. The bank has invested heavily line with a new Turkish government policy in a large network of alternative channels, including supporting women’s entrepreneurship. 1 Data is as of September 30, 2013. Garanti Bank is jointly controlled by Turkish Holding Co. and Banco Bilbao Vizcaya Argentaria S.A. (BBVA) of Spain under the principle of equal partnership. Having shares publicly traded in Turkey, the UK and the USA, Garanti Bank has an actual free float of 49.94%. 75 C. UNDERSTANDING THE CONTEXT IN TURKEY nine out of every 10 SMEs (Figure 1). Figure 1 1) A LARGE AND UNDERSERVED SME MARKET also emphasizes MSMEs as the leading job creators Turkey’s economy is heavily reliant on its SME and providers of economic value added to the sector to provide growth and jobs, with micro, small Turkish economy. Concentration is also highest and medium enterprises (MSMEs) accounting for in the micro and small enterprise segments. Figure 1: Comparing SME Sector in Turkey and EU Number of Enterprises Employment Value added Turkey EU27 Turkey EU27 Turkey EU27 Number Share Share Number Share Share Number Share Share Micro 2.327.524 94,4% 92.1% 2.821.329 38,5% 29,8% 48.286 45,0% 21,6% Small 120.215 4,9% 6,6% 806.152 11,0% 20,4% 12.286 11,5% 18,9% Medium-sized 14.030 0,6% 1.1% 1.436.191 19,6% 16,8% 16.412 15,3% 17,9% SMEs 2.461.768 99,9% 99.8% 5.063.672 69,2% 66,9% 76.984 71,8% 58,4% Large 3.023 0,1% 0,2% 2.257.320 30,8% 33,1% 44.751 41,7% 41,6% Total 2.464.792 100,0% 100,0% 7.320.991 100,0% 100,0% 107.232 100,0% 100,0% Source: EU SBA Factsheet, 2012 (note: “Value added” is a share of contribution to the country’s GDP) Turkey has adopted a standard definition for same for total assets (Figure 2). MSME enterprises SMEs: firms with between one and 49 employees dominate the Turkish market, with the segment, are classified as micro and small, and those with representing 99% of all businesses, 70% of all jobs, 50 to 250 employees are considered medium- and almost 72% of business revenue, according sized. Financially, SMEs must have less than the to the 2012 EU SBA Factsheet on Turkey. equivalent of $23 million in annual sales and the Figure 2: Standard SME Definition Adopted Across Turkey Micro Small Medium # of Employee 1-9 10-49 50-250 Annual Turnover < TL 1 Mn (~S 573k) TL 1 Mn > < TL 8 Mn (~S 4.6 Mn) TL 8 Mn > < TL 40 Mn (~S 23 Mn) Balance Sheet < TL 1 Mn (~S 573k) TL 1 Mn > < TL 8 Mn (~S 4.6 Mn) TL 8 Mn > < TL 40 MM (~S 23 Mn) Source: Garanti Bank, 2013 76 2) LOW FEMALE WORKFORCE live and are employed in rural areas, where businesses are often run as a male-dominated PARTICIPATION IN TURKEY family enterprise. A report issued in 2012 by the Turkey’s female labor force participation has increased World Economic Forum3 ranked Turkey 129th in recent years, but still lags. In 2012, less than 30% out of 130 countries – next to last – in terms (29.5%) of working-age women in Turkey either of the economic participation of women, and had jobs or were looking for work, according to the 108th in the educational attainment category. Turkish Statistics Institute’s Women in Statistics study. This represents the lowest figure across all According to the IFC Enterprise Finance Gap OECD countries (Mexico, by comparison, is at Database study (2011), over 200,000 formal 43%). Meanwhile, female literacy is above 92%, SMEs in Turkey – 38% of the total – are owned and the share of economically active women in the and/or run by women. Of these firms, over population (ages 25-64) is high, at over 58%. 54% are either not served or are underserved in terms of finance, with an average unmet The reality is that nearly half (49.8%2) of the financing need of $56,207 per firm. The potential women employed in Turkey are unpaid female credit need of this gap group is estimated at family workers. This can be explained by over $11.5 billion, representing a significant the fact that close to 60% of Turkish women opportunity in the Turkish market (Figure 3). Figure 3: Turkey Credit Gap for Formal SMEs by Gender (in $ billion) Men $16.4 Women $11.5 Total Credit Gap to SMEs $27.9 0 5 10 15 20 25 30 Source: IFC Enterprise Finance Gap Database, 2011 2 Women in Statistics 2012, Turkish Statistical Institute. 3 First published in 2006, the report examines four critical areas of inequality between men and women in 130 economies around the globe (over 93% of the world’s population): • Economic participation and opportunity – outcomes on salaries, participation levels and access to highly skilled employment • Educational attainment – outcomes on access to basic and higher level education • Political empowerment – outcomes on representation in decision-making structures • Health and survival – outcomes on life expectancy and sex ratio Thirteen out of the 14 variables used to create the index are from publicly available “hard data” indicators from international organizations, such as the International Labour Organization, the United Nations Development Programme and the World Health Organization. 77 Figure 4 shows how Turkey fares on the opportunity Being employed and having a social network ratio. The higher the ratios, the more women in a that includes other entrepreneurs are stronger particular country are motivated by the desire to predictors of women’s entrepreneurship than become an entrepreneur, as opposed to being driven educational attainment or household income. to it because of few employment opportunities. Figure 4: Entrepreneurial Perceptions for Women and Men: See Good Opportunity in Entrepreneurial Activity (in %) Europe-Developed (avg.) U.S. Brazil U.K. Italy Slovenia Romania Turkey Russia France Belgium 0 5 10 15 20 25 30 Male Female Source: GEM, 2012 Women and Entrepreneurship Report Although there are a number of financial institutions financial institutions; a dedicated SME Academy in Turkey that provide active non-banking support run by one of the private banks), none of them, to SMEs (a training program to support government until recently, looked at women entrepreneurs directed lending by one of the largest state-owned as a separate, potentially profitable segment. 78 D. SME BANKING PLATFORM MARKET LEADERSHIP As IFC’s research on gender finance demonstrates, SMEs – from its head office, down to regional offices a bank looking to excel at doing business with and into its vast branch network. With around 1.5 women entrepreneurs must have a mature and million MSME customers as of the end of 2012, sophisticated SME banking platform on which Garanti Bank is one of the leading private sector to build. Garanti is no exception, with SMEs banks for smaller businesses in Turkey. The bank representing a key part of its strategic focus for some continues to expand its SME customer base, having 15 years. Garanti was one of the earliest adopters of added almost 120,000 new customers in 2012, an organizational structure dedicated to targeting despite highly competitive market conditions. Garanti’s SME Business – Key Indicators (as of Sept 2013) RoAA 2.1% Loans to Deposits 83.4% NPLs 3.28% Non-interest income/ Total income 42.4% structure categories: corporations, sole traders and 1) TIERED SEGMENTATION APPROACH USING shareholders/individuals who own a business. The SIZE, STRUCTURE, AND PRODUCT USAGE bank uses its own definition of SME as opposed to Garanti has developed a tiered segmentation approach that of the regulators, and adopts multiple criteria toward the SME market (Figure 5), distinguishing (including annual sales turnover, account volume, between “mass” (non-borrowing clients4), “small,” and the size of credit limits) to establish three and “medium-sized” segments across three ownership distinct tiers within their SME banking business. Figure 5: Garanti Bank: 3-Tiered Segmentation Approach MEDIUM Annual Turnover TL 3 - 10 Mln or Banking Volume TL 200 - 600k Credit Limit TL 200k - 2 Mln SMALL Annual Turnover TL 500k - 3 Mln or Banking Volume TL 30 - 250k Credit Limit TL 0 - 200k MASS Annual Turnover < TL 500k or Banking Volume < TL 30k Credit Limit TL 0 Source: Garanti Bank presentation, 2013 (based on October 2013 criteria) 4 A “Mass” category client typically is non-borrowing for business purposes. When such a client applies for a business/commercial loan he/she is transferred to a “Small” category. Nevertheless, owners of “Mass” category businesses can have consumer loans. 79 and personal banking needs of SME clients through 2) “SAME POCKET” RELATIONSHIP a single point of contact (the RM). This helps build MANAGEMENT MODEL strong customer loyalty and ensures cross-selling Garanti Bank has a 1,600-person team of dedicated opportunities and more effective risk management. relationship managers (RMs) deployed across 973 Internal data analytics also confirm that the Same branches looking after the small and medium-sized Pocket Model not only expands opportunities for business segments. The mass segment is served by a profit and helps grow the business, but also helps separate team of customer service representatives in effectively manage risk. As Figure 6 shows, banking the branches, and the bank uses an innovative Same volumes and customer retention are, by many Pocket Model, designed to capture both the business multiples, significantly higher under this approach. Figure 6: Garanti Bank: Opportunities of Same Pocket Model Same Pocket Model Credits X8,5 Deposits X2,2 Banking Volume X4,3 Retention - Same Pocket 6,79 Retention - Different Pocket 5,20 Source: Garanti Bank presentation, 2013 The crucial factors of the Same Pocket Model split across two or more different business are Garanti Bank’s in-depth customer knowledge divisions, such as retail and corporate banking. and its ability to focus all customer services (personal and business) through a single RM. In At Garanti, RM productivity is high by IFC’s experience, this is in contrast to standard international standards, with a tiered coverage international practice; such services are typically model mirroring tiered segmentation (Figure 7). Figure 7: Garanti Bank: Relationship Management Coverage Model by Segment Segment Tier Role in Branch Total Coverage Coverage (Customers per FTE) (Customers per FTE) – Average Performer Medium SME ME Relationship Manager 242 50-70 Small SME SE Relationship Manager 450 80-150 Mass Customer Service - Branch 1275 500+ Source: Garanti Bank presentation, 2013 (Average Performer data is from IFC internal analysis of global clients portfolio) RM productivity is also driven by a range of sales client interaction requirements, which are also and profitability-focused targets, which differ by represented in the metrics. For example, an RM for segment tier. Targets include volume generated, loan the small SME segment is supposed to make four sales, customer acquisition, profit per customer, sales calls to existing and potential clients every day, customer efficiency (a proxy for wallet share) and while a medium-segment RM makes three calls. 80 its work with product development teams within 3) SYNERGIES LEVERAGED each business line. New product development is ACROSS GARANTI GROUP led by the business line that develops the initial The ability to quickly develop and roll out concept. The product development team is in regular convenient and effective products is at the core contact with sales teams at the regional and branch of Garanti’s success with the SME segment. levels, getting valuable input on various aspects of Successful product development is a result of smart, the new product. A central marketing unit within regular market research, close interaction with the SME Head Office is responsible for managing SMEs, and feedback from business line staff. referrals with group subsidiaries like Garanti Payment Systems, Garanti Mortgages, and others. Garanti Bank has a team dedicated to developing This approach creates synergy between business products across business lines, which coordinates lines and leads to greater efficiency (Figure 8). Figure 8: Examples of Cross Business Line & Group Synergies with SME Division Retail Business Line: • salary payments • CASA accounts SMEs: • Demand deposits • New clients • Volume and profit • Loyalty Commercial Business Line: Corporate Business Line: • special L/G agreements • cash management models • payment management tools (ex, “Direct Debit System”) • special credit card to finance large corporations • auto dealer relations and their distributors • receivables financing • inventory financing • purchases financing Source: Garanti Bank presentation, 2013 Being a part of a diversified financial-industrial Garanti Bank reports that close cooperation among group, Garanti Bank enjoys strong synergies its subsidiaries has helped the bank significantly through partnerships and close interaction increase profits through its SME segment: with the group’s subsidiaries in finance and • Insurance Products: SMEs represent over 20% banking. The group’s subsidiaries are active of the bank’s insurance commissions. in asset management, payments, insurance, • Commercial Credit Cards: SMEs represent 84% factoring, leasing and mortgage. Further, all of new card sales. subsidiaries are supported by Garanti Technology, • Salary Payments: 58% of salary payments come a fully functional IT Center for the group. from SMEs. • POS – Cash Management: 67% of SMEs banked at Garanti have POS terminal services. 81 Based on in-depth market research, the bank has 4) CUSTOMIZED PRODUCT PACKAGES identified specific product and service needs for FOR DIFFERENT SECTORS OF SME each target sector, and developed proposals and a set The majority of SMEs in Garanti Bank’s portfolio of complementary liability and fee-based services. fall into the mass and small segments. Financing The bank has 17 product support packages for each requirements for over 90% of firms do not justify targeted SME sector, including manufacturing, a more tailored and customized approach. For agriculture, services, tourism, exporting companies, this reason, Garanti has adopted a sector-based and importantly, women entrepreneurs. The sectors approach toward SME products and services. were selected based on their potential in terms of profitability and risk-return (see Figure 9). Figure 9: Examples of Product Bundles Offered by Garanti Bank SME product bundles Segment Proposition Loans Services • Improve company’s • Women entrepreneur loan • Checking acc, OD ACC, production capacity or • Business premises loan POS, credit card, LG’s, improve its service • Auto loan foreign trade services, Women • Brand new package • Cash loan SME pension plan, for women • SME project finance loan insurance factoring • Flexible cashflow • Tourism support loan • Checking acc, OD ACC, and FX support for • Business premises loan POS, credit card, LG’s agencies, suppliers, • Commercial vehicle loan Tourism cafés, and restaurants • Fuel management system • Support for those • Machinery loan • Checking acc, OD ACC, that want to grow • Cash loans POS, credit card, LGs, Manufac- and expand abroad • Expo participation loan foreign trade services, turing • Certificate acquisition loan SME pension plan, • Business premises loan export insurance • SME support loan • Investment and production • Tractor and harvester loan • Ekin card, agriculture financing on tens that • ST production loan insurance, SME Agriculture suit the harvest period • M and LT support loan pension for farmers • Greenhouse loan • Warehouse receipt loan • Use loans at • Tradesmen support loan • Checking acc, SME discounted rates • Loan via POS insurance, tax collection • Meet client’s financing • Commercial vehicle loan Tradesmen needs as well as collections and payments Source: Garanti Bankasi website 82 and rating tools, depending on client category and 5) OPTIMIZED CREDIT MODEL FOR EFFICIENCY financing needs. Applications from small- and Garanti Bank’s leading position in the SME mass-segment SMEs go through a retail-style credit segment is supported by a well-designed and highly process, supported by statistical scoring for mass efficient credit process, which offers three primary and a simplified rating for small. Applications from capabilities: medium-segment SMEs go through a commercial credit process based around higher loan amounts and/ • decentralized underwriting and delegated or higher levels of sophistication in terms of the loan approval authority depending on rating, loan product requested (project finance, options, trade amount, collateral, and customer type; finance). Garanti Bank uses an internally-developed • a sales team as the first line in risk assessment; simplified rating tool to underwrite applications from and medium-segment clients. • an application process handled through an automated loan origination system (LOS) Garanti’s turnaround times are some of the fastest through which application data is entered, in the industry, with time-to-yes decisions for small transferred, accumulated, and updated on a and mass clients made in as few as three hours, and regular basis. disbursements in a single day. For medium-segment clients, time-to-disbursement can be as quick as one The credit process is tiered, and uses traditional day for existing clients, while new client applications financial analysis as well as sophisticated scoring are processed within a week. 83 E. FORMATION OF GARANTI PROPOSITION TO WOMEN ENTREPRENEURS more likely to know other entrepreneurs. 1) GARANTI’S DECISION TO TARGET • WEs are more alert to the existence WOMEN ENTREPRENEURS (WE) of unexploited opportunities. Garanti began to focus on women entrepreneurs • WEs are emotionally connected as a customer segment in 2006. At this point no to their businesses. other Turkish financial institution was focusing • WEs are more focused on long- on this area of the market, though international term sustainability. interest in this sector had increased. Garanti Bank’s strategic vision was to become 2) IDENTIFYING WOMEN ENTREPRENEURS the bank of choice for women entrepreneurs IN THE PORTFOLIO by providing them “the managerial and Garanti identifies women entrepreneurs based on a consultancy support needed to help them reach a combination of ownership and management criteria. competitive level in global markets.”(citation?) According to the bank, a women entrepreneur is any company or sole proprietor that is at least 20% owned Market research showed that women saw no by a woman or group of women, or any business financial service provider in the Turkish market where a woman or women are effectively running that understood their needs and challenges. The the business at the top management level. WE research identified a number of key principles identification is made at the opening of an account, the bank used to develop its Women in at which time the WE is asked for commercial Business Proposition. These were as follows: registration documents providing shareholder specifics. Supplementary checks through the Turkish Expectations from their bank: Trade Registry Gazette confirm and identify the • More relationship management is needed, ownership and management structure, as required. including creating a partnership. • Better understanding is expected of WE’s A key challenge with this definition is that, in Turkey, needs and differentiated solution delivery. SME shareholding structures are often ill-defined. In • Banking business processes should addition, details related to shareholders and gender be as simple as possible. are not always captured during the account opening. • Low interest rates and service fees should Typically, if these details are missing it becomes be available for price-sensitive WEs. very difficult to track the full women-in-business portfolio. Garanti has overcome this challenge via Approach to financial support: data cleaning, with RMs responsible for following • Financial solutions should not only up with clients to complete client data on file. support WE’s business cash-flow, but also production capacity, product quality, and sustainable business development. Assessing the opportunities: • WEs are confident in their own skills and 84 Figure 10: Garanti Bank: Customer Base: WE Shares in SME Segment* # of Women Owned Companies 34,662 Profit 12% # of Sole-Trader and Self-Employed 105,551 Deposit 10% TOTAL WEs 140,213 Customer Loan 11% # of Customers 12.5% Note: * This analysis is done within the customer group of women-owned companies (>50% shareholding, sole-traders and self-employed) who benefited from cash loans. team. This is interesting to IFC, given the potential 3) SEGMENT POSITIONING WITHIN GARANTI scale of the opportunity for the bank in this sector Similar to what IFC has seen globally with leading and the typical need for dedicated resources in players such as Westpac in Australia, Garanti does marketing and communications support. not manage WEs as a separate segment within the Bank. Instead it incorporates them into the main SME Banking business as a marketing sector. 4) GARANTI’S THREE-PILLAR PROPOSITION Although there is a specific WE Support Package FOR WOMEN ENTREPRENEURS designed and branded for women (“Black Shoe” Garanti’s proposition for WEs initially started brand), women entrepreneurs are managed like with the development of a WE package that other SMEs. The bank has no RMs dedicated to bundled several products (predominantly women, nor are there any specific targets provided credit products) together. This has evolved to them or new skills provided for more effective over time into a value proposition based support for women.5 The bank does not use gender around three main pillars to support WEs: champions or ambassadors within the network, as • Pillar I – Financial Support IFC has seen in other successful providers. Instead, • Pillar II – Education WE ambassadors are located in regional hub-offices, • Pillar III – Encouragement promoting and organizing WE events. Subsequent new leads and opportunities developed through 1) Pillar I – Financial Support such events are channeled to RMs for follow up. Garanti designed a support package of predominantly credit products to address the basic financing needs Organizationally, the WE business is integrated of WEs. The bank does not develop separate products into the SME Banking business line. The WE for women per se, as the bank believes fundamental initiative has to date been led by the Head of financial needs are the same for men and women Entrepreneurship Banking for the SME department entrepreneurs. The only difference in the lending and supported by the corporate communications products is in small pricing concessions (see Figure 11). Figure 11: Garanti Bank’s WE Product Package • Women Entrepreneur • POS • Insurance (covers commercial loan • Pension program for critical illness) • SME project loan women entrepreneurs • Gold secured loans • Overdraft • Leasing for WEs • Foreign trade services • Business credit card • Factoring • Letter of credit • e-commerce (vPOS) Source: Garanti Bank, 2013 5 RMs in Garanti Bank branches only have volume-based and number-of-products targets, which do not provide strong incentive to proactively push WE segment business. 86 Contrary to IFC’s global observations, Garanti significantly in product usage patterns. Women has found that women are just as price sensitive tend to have a strong affinity for savings and as their male counterparts. This is different from insurance products and a risk aversion to full the commonly held assertion that women are more credit products, though credit remains a powerful loyal customers who believe in strong relationship hook product for cross-selling (see Figure 12). management and are willing to pay for it. For Garanti, credit is deliberately priced aggressively, as women have The concept of savings is also gaining ground in been found to be more sensitive to price, and more Turkey, although maturities remain rather short likely to “shop around,” at least initially, compared term, averaging 1 to 1½ months. This is because to their male counterparts. This may be related to a SMEs tend to re-invest or utilize funds for other “culture of subsidy” in Turkey, and the perception purposes on a discretionary income basis. The that government subsidies are potentially available to bank, in conjunction with the Group’s pension support a loan to a woman entrepreneur. This deviation company, has developed a pension plan to tap from global norms might also be due to high levels of into the observed savings habits of women, and to female education in Turkey or the urban-based woman encourage longer-term savings. The plan combines entrepreneur segment the bank tends to acquire. a pension plan with educational insurance in one Collateral policies remain gender-neutral, however, installment and has proven very popular with WEs. with the same credit policy parameters adopted for male and female entrepreneurs. Other than Women also show a high propensity for buying price, Garanti makes no other customization at insurance. The figures indicate that women are an individual credit-product level for women. more risk averse and want the security afforded Women and men customers at Garanti differ by both life and non-life insurance products. Figure 12: Garanti Bank: Product Usage – Product Penetration of WE Loan Customers Non-Life Insurance 41% Life Insurance 60% Credit Card 62% Internet 58% ATM 88% POS 23% Overdraft 17% Source: Garanti Bank, 2013 The bank effectively leverages government- source of collateral for women. Banks have recently funded guarantees and financial support for been establishing gold accounts to incentivize WEs, particularly from the main two support customers to physically store gold outside the home. agencies which female entrepreneurs can access: While this product has not been designed specifically KOSGEB (Small and Medium-sized Enterprises for WEs, and has only recently been rolled out, it Development Organization) and KGF (Credit is an example of innovative product design that Guarantee Fund) which provide credit guarantees considers and takes advantage of cultural and social for SMEs and offer special programs for WEs. norms to make it easier for women to access finance. The bank launched a gold loan product in 2013, 2) Pillar II – Educating Women Entrepreneurs aiming to capitalize on gold’s appeal to women. The The bank views the education and collecting of gold is a cultural habit in Turkey, and entrepreneurial encouragement of women as women begin to accumulate gold jewelry from birth. key to its proposition. The aims in educating As such gold can represent a valuable alternative women entrepreneurs are three-fold: 87 • To provide information on essential non-clients. The local press and KAGIDER’s own subjects needed to run a business. network are extensively leveraged to advertise • To encourage female entrepreneurs in and promote the event in the community. exploring and identifying new business A typical one-day event is co-branded as Garanti opportunities through networking. Bank and KAGIDER jointly, with the focus on • To support the development of personal • Marketing and business management skills needed • Financial needs to successfully run a business. • Entrepreneurship in a changing environment • Presentation of local role models “Women entrepreneurs need more encouragement to (selected from local WEs and most move their businesses to the next level, beyond what active members of KAGIDER) they have already achieved. Through our support value • Ways to embrace the digital proposition, we encourage them to grow their existing platform (e-commerce) businesses.” – Senior Manager Responsible for Women Entrepreneurship at Garanti Bank, Istanbul, Turkey Over the past five years, the gatherings have been held successfully in 24 cities, reaching over 4,500 WEs. Women Entrepreneur Gatherings provide Garanti initially developed a formal training program a sustainable method of providing business for WEs jointly with KAGIDER, but this proved to education to WEs across Turkey. Garanti Bank be very costly and difficult to organize. In September began organizing WE Gatherings in the regions 2012, however, Garanti and Bogazici University in 2007, in conjunction with KAGIDER, the established Turkey’s first WE Executive School to Women Entrepreneurs Association of Turkey provide a mini-MBA for female entrepreneurs. and a Garanti partner. Gatherings are typically Given the time constraints of WEs, the course held in five cities each year, with local Garanti lasts only about 1½ months, and takes place in a branches helping organize and advertise the different city each quarter. The course (syllabus, events. In general, such events host on average Figure 13) requires 100 hours of classroom time, of 150-200 participants, including around 30% followed by an examination to ensure certification. Figure 13: Garanti Bank- Bo aziçi University: Mini-MBA Contents Subject / Module Hours Institutional and individual motivation 5 A financial perspective on managing a company 10 Institutionalization 5 Positive Thinking 5 Innovative Management Skills and Entrepreneurship 5 Turning Problems into non-Problems 5 Equal Practices / Good Practices in Companies 5 Management’s place in the Global Village 5 Corporate Management and Human Resources 5 Legal Matters in SMEs 10 Stress Management under Uncertainty 5 Continuity in Customer Relations 5 Success Factors in International Trade 10 Problems in Family Businesses 10 Change Management 5 Visionary Identity in Organizations 5 TOTAL 100 Source: Garanti Bank, 2013 88 As of November 2013, more than 467 in a cost-efficient manner and make a material businesswomen – about 70% of all attendees – have difference to the market. This is an issue IFC completed the program and earned certificates from frequently encounters, one in which technology Boğaziçi. To date, the training courses have been and alternative channels (mobile, internet) could conducted in Istanbul, Izmir, Ankara, Antalya, assist. Looking ahead, Garanti plans to introduce Denizli and Gaziantep, with two more cities planned training programs involving e-learning and remote before the end of 2013. A list of attendees is passed teaching tools in partnership with Bogazici. on to regional RMs, which represent a strong business development component of the initiative. 3) Pillar III – Encouraging After two years, Bogazici plans to carry out research Women Entrepreneurs to assess the impact of the training on WEs in Turkey. Research performed by Garanti Bank has demonstrated a strong need for women in Turkey to be encouraged Women entrepreneurs are offered this training to manage and grow their businesses. Garanti’s creation program for free, yet it is proving difficult to find of a Woman Entrepreneur of the Year (WEY) award sufficient numbers in the market willing to give the in Turkey is a key part of this encouragement process. time and meet strict eligibility criteria. Pro-active campaigning through RMs in branches supported The bank manages the WEY award in conjunction by strong partnership ties with local chambers with KAGIDER and the local Ekonomist magazine. of commerce can help Garanti to overcome this The competition aims to draw public attention to challenge. In IFC’s experience, such schemes are women entrepreneurship, boost WE numbers in costly, difficult to scale and hampered by traditional Turkey to match those of developed countries, and social norms. The program offered by Garanti today celebrate WEs’ contributions to the Turkish economy. is 50% cost-shared by an IFI as part of a $60 million loan for on-lending to women entrepreneurs. Yet Within the scope of the competition, success the bank needs to clearly articulate the business stories of women doing business all over case for offering such education and ensure that Turkey are evaluated and presented with the the training can remain available on a stand- intention of promoting the winners as role alone and sustainable basis. A key challenge with models. There are four specific nomination this initiative is how to achieve sufficient scale categories for the competition (Figure 14). Figure 14: Woman Entrepreneur of the Year Award: Nomination Categories Source: Garanti Bank, Competition Web Site 2013 89 The evaluation criteria vary based on category, the WE Gatherings and the WEY competition. but in general applicants are assessed against The bank also supports a number of local NGOs factors such as risk-taking, customer relations across Turkey to ensure a regional presence. management, marketing activities, financial structure, local economic impact, environmental Garanti Bank collaborates with top universities, consciousness, and innovative social solutions. such as Boğaziçi and Middle East Technical University, to develop training and market research. In 2006, the inaugural competition drew 108 As a bank of choice for WE, Garanti has positioned applicants. In 2012, more than 6,000 WEs itself to actively collaborate on policy-making competed for this honor, demonstrating the with the Ministry of Family Planning, KOSGEB, popularity of the competition and Garanti Bank’s KGF, and TOBB (the Union of Chambers of dominance in the WE space. Garanti Bank’s Commodity Exchanges of Turkey). The Bank branches assisted by helping source potential also works closely with IFIs such as OPIC and candidates, following up, and preparing shortlisted EBRD to provide additional sources of funding candidates. RMs in branches are also incentivized and technical assistance to support WEs. to nominate qualified candidates for the competition by offering a one-on-one lunch with Over the last three years, Garanti Bank has the SME banking EVP. Some 75% of competition been an active member of the Global Banking applicants are already Garanti Bank clients. Alliance for Women (GBA), a consortium of 31 member institutions working in 135 countries to build innovative, comprehensive programs that 5) DEVELOPING PARTNERSHIPS TO provide women entrepreneurs with vital access SUPPORT WOMEN ENTREPRENEURS to capital, markets, education, and training. Central to Garanti Bank’s strategy is the concept of Garanti Bank is collaborating with other members the WE ecosystem, in which the bank is at the center on identifying and sharing global best practices of an extensive network that supports and promotes in the delivery of financial services to women. WE in Turkey (Figure 15). Garanti Bank has a In September 2013, Garanti Bank hosted the close affiliation with KAGİDER, jointly organizing 12th Annual GBA Summit, in Istanbul. Figure 15: Garanti Bank: Women Entrepreneurs Ecosystem Government Universities Institutions Cooperation Dedicated Sales Team NGOs Volunteers MFIs Creating Role Models Internal & External Awareness Communication Private Sector International GSM Operators Organizations press Source: Garanti Bank, 2013 90 that sustainability needs to be a core part of Garanti’s 6) GARANTI AS AN EMPLOYER OF decision-making mechanisms and business processes. CHOICE FOR WOMEN In 2012, Garanti Bank established a full-time In IFC’s experience, banks that excel with WEs Sustainability Team under the Project and Acquisition are themselves employers of choice for women. Finance Department to enhance the efficiency of Banks strive to achieve this goal by measures its organizational structure for sustainability. To such as promoting gender balance at all staffing better inform stakeholders on how it will integrate levels or creating a women’s association and environmental and social factors into its business mentoring programs for women leaders. processes, Garanti published its first comprehensive Sustainability Report in the first quarter of 2013, Today, nearly 60% of Garanti’s 18,000 as part of a Global Reporting Initiative (GRI). employees are women. This is one of the highest proportions IFC has come across. Further, Women are a key focus for CSR, with the after a 2012 audit6, PricewaterhouseCoopers program designed as a role model in combining found no gender discrimination at the bank. a CSR program with business targets. A number of initiatives performed to date have been joint In terms of gender balance in the workforce, initiatives between the CSR and the SME Banking Garanti’s representation of women at various teams. This includes, for example, the Boğaziçi staff levels are in line with the practices of University Mini-MBA program discussed above, peers from Western countries: non-managerial which provides free entrepreneurial education for positions at 60% , managerial positions at women. Thus far, the focus has been on women 50% and top management at 20%. who already have businesses. Starting in 2014, the program will be expanded to include women While the bank does not have a women’s who are not formally employed, with a heavy association, it caters to the networking needs focus on financial education and IT literacy. of women employees through a “Kalemetek” internal website. This is a platform through which Garanti Bank has sponsored the International women employees are able to share knowledge Women Entrepreneurship and Leadership and information, discuss women-related issues, Summit, organized by KAGIDER, since its and meet virtually with successful colleagues. inception. The 3rd summit, held November 8-9, 2012, focused on “The Rising Power of Women While the bank does not use gender-specific advocacy in the New World Order,” attracting expert scores to assess female employee satisfaction, a speakers and leaders from around the world. yearly employee satisfaction survey is performed with the findings shared with the management The bank is very active on the Garanti Facebook team and directors. These are then used to page, using the tool to reach out to women on a better address employee needs going forward. range of issues. No financial institution in Europe has more Facebook followers (or “likes”) than Garanti, according to the bank sources. The bank’s page 7) GARANTI BANK AND CORPORATE dedicated to WEs (Figure 16) addresses innovations SOCIAL RESPONSIBILITY in Turkish commercial law, angel investing, Garanti aims to achieve long-term sustainable growth financial and economic news, SMEs, and more. by continuously creating value. The bank believes 6 Under the Technical Assistance of the World Bank, KAG DER (the Women Entrepreneurs Association of Turkey) has been developing the Gender Equality Model for Turkey since 2010. The Turkish version of the model (FEM) focuses on equal opportunities in the work place. The objective of the certification under this program is to help the private sector focus on key elements integral to promoting gender equality in the workplace, marketplace and community. The project also aspires to promote gender equality in employment and earnings, enhance the productivity of women in the Turkish labor force and promote equal opportunity procedures in the business world. 91 Figure 16: Garanti’s Facebook Page Dedicated to Women Entrepreneurs Source: Garanti Bank, Competition Web Site 2013 It is still not completely clear what the main drivers 8) PERFORMANCE OF WOMEN for this difference in profitability levels are, although ENTREPRENEUR’S BUSINESSES TO DATE variations in the level of efficiency or product usage As of September 2013, the Bank had 140,213 are very telling of the fact that on average, WEs customers enrolled in the WE Program, representing at Garanti consume more financial services (see just less than 10% (9.35%) of its SME customer Figure 17 below). The efficiency ratio represents base and $900 million in outstanding cash loans. an internally defined ratio, based around product usage across the ten main product groupings in Evidence from the data analytics team at Garanti the Bank. Anecdotal evidence collected by Garanti supports the notion that women make profitable also suggests that women entrepreneurs work with SME customers. Indeed, the difference in two and very rarely three banks, and prefer to have profitability is very strongly correlated with the size one main banker to hold most of accounts and of entrepreneur, so that as a woman entrepreneur conduct the majority of the transactions. They also grows her business the value of that relationship respond well as customers to a dedicated relationship grows significantly for the Bank also. This can be management model, which allows them to deal seen in Figure 17, which shows that the average with a single point of contact in the Bank. This profitability differential between average for SME appears to result in far higher wallet shares being and female entrepreneurs increases nearly six- maintained for women entrepreneurs, and by fold between a medium versus a mass SME. definition, higher profitability per relationship. 92 Figure 17: Garanti: Customer Efficiency and Profitability: Women vs. SME Women SME Women SME Efficiency Ratio 2.31 2.16 Av. Profit per SME TL3,539 TL3,440 Medium 4.36 3.71 Medium TL12,467 TL9,213 Small 3.29 2.93 Small TL3,706 TL3,165 Mass 1.91 1.74 Mass TL1,512 TL1,427 Source: Garanti Bank, October 2013 (results of data analytics exercise) A commonly held belief globally is that women in the portfolio, but that the Bank’s statistically entrepreneurs are generally a better credit risk than developed risk assessment tools have been developed their male counterparts. This does not seem true with no gender-related parameters. To the extent for Garanti Bank, however. Indeed, discussions that Garanti today has a market representative with credit analytics specialists at the bank portfolio of male and female entrepreneurs, we may confirmed that not only were there no appreciable assume that for the Turkish market at least, gender differences in NPL rates between the two sexes is not likely to be a major predictor of default. 93 F. CONCLUSIONS AND RECOMMENDATIONS FROM IFC 1. IFC acknowledges Garanti’s pioneering As the business scales up, there may be a need efforts in the introduction and growth of the to embed specific targets for WEs into the women entrepreneur banking segment within network and assign dedicated staff to manage Turkey and the region more broadly. While the sector. IFC has observed that other banks other banks are beginning to offer similar globally have adopted champion and ambassador products, Garanti Bank has acted as a role roles in their networks. This may be worth model for its peers and as such can take wider considering, if it has not already been done. credit for the promotion of this segment. 3. The WE market in Turkey, like the SME market more broadly, has significant variability both in The bank has made significant progress since terms of current and potential value per customer 2006 in developing a viable proposition for to the bank. Going forward, there may be a need women entrepreneurs in Turkey. The fundamental to create more scalable advisory platforms to strength of the bank’s SME Banking business support the educational needs of small and mass- platform has allowed the Bank to tap effectively segment WEs, perhaps through e-learning and into the women entrepreneurs market in Turkey. webinars (which Garanti Bank is already looking into). Such steps should go hand-in-hand with 2. Garanti Bank has understood the importance of greater tiering of the offering based on current and moving beyond solely an access-to-finance view of potential client value. The risk is that the current the WE market to also providing encouragement model may not differentiate enough, particularly and consultancy support for women when it comes to non-financial advisory. entrepreneurs. This can be seen in the initiatives around Women Gatherings, and the new mini- 4. Garanti Bank clearly has a strong sustainability MBA in conjunction with Boğaziçi University. framework. But as a large buyer of products and services in Turkey, the bank has an opportunity The WE business represents only a small to take a more supplier-inclusive, diversity- portion of the bank’s business, and a significant friendly approach to procurement across opportunity remains to achieve further scale the Group. This could include establishing a in coming years. Greater emphasis needs to be supplier diversity program that includes a core placed on the profitability and sustainability component to encourage women-owned SMEs of WE businesses, through improved analytics as suppliers, contractors, and sub-contractors and CRM, to create a level of transparency in of goods and services along the Group’s value terms of performance. While there are social chain. As this case study was preparing to go objectives related to the support of women to print, Garanti Bank became the partner of entrepreneurs, it must remain a profitable WE Connect International, opening its doors business proposition, just like any other. to greater supplier diversity and inclusion. 94 INTERNATIONAL FINANCE CORPORATION 2121 PENNSYLVANIA AVENUE, NW WASHINGTON, DC 20433 USA TEL: (202) 473-1000 August 2016