94870 IFC Financing to Micro, Small, and Medium Enterprises in Sub-Saharan Africa Key Highlights IFC is working to develop solutions to close the micro, small, from $749 million in FY2013), $128 million of which was and medium enterprise (MSME1) financing gap, collaborating attributed to long-term financing. with 64 financial institutions (FIs) across 21 countries in Sub-Saharan Africa (SSA) region. By the end of calendar year (CY) 2013, IFC’s MSME clients had 1.8 million micro loans outstanding in SSA region (up As of June 2014, IFC committed a total of $1.9 billion to MSME from 697.7 thousand in CY2012), totaling $1.5 billion (up from finance in SSA Region2, $1.4 billion for long term finance, $622.0 million in CY2012). Similarly, IFC’s SME financial $255.8 million for funds supporting MSMEs, and $241.9 million institution (SME FI) clients had over 154.2 thousand small for trade finance. In fiscal year (FY) 2014 alone, IFC MSME and medium loans outstanding by the end of CY2013 (up from commitments in the region were $713 million (down 5.1 percent 101.9 thousand in CY2012), totaling $7.1 billion in this region (up from $7.0 billion in CY2012). MSME Financial Intermediary Portfolio, FY2014 (as of June 2014) IFC Committed Portfolio to MSMEs3 IFC Total Committed Portfolio to MSMEs SSA region ($ Million) (percent of Total Portfolio) 1,600 World Growth of Committed Portfolio: 1,400 2% => -1.2% drop in FY 2014 YOY 1,200 => 18.4% CAGR since 2000 $573 MENA WORLD 1,000 ECA 9% Millions 25% SA Middle East & North Africa (MENA) 800 11% 600 South Asia (SA) $688 Sub-Saharan Africa (SSA) 400 SSA 200 13% Latin America & the Caribbeans (LAC) $113 0 EAP East Asia & the Pacific (EAP) 23% FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 LAC Europe & Central Asia (ECA) 17% Micro Enterprise Small Enterprise Medium Enterprise MSME Loans by Type of IFC Clients in SSA Region, CY2013 MSME Loans by Microfinance Institutions MSME Loans by SME Financial Institutions IFC was able to survey or extrapolate outreach data from IFC was able to survey or extrapolate outreach data from 26 clients - microfinance institutions (MFI) in 12 countries, 38 clients - Small and Medium Enterprises (SME) FIs in 46 percent of these clients received advisory services from IFC. 19 countries, 53 percent of these clients received advisory services from IFC. Number of Outstanding Average Number of Outstanding NPL Average NPL Loans Loan Portfolio Loan Loans Loan Portfolio percent4 Loan Size percent4 Outstanding in ‘000 $ Size, $ Outstanding in ‘000 $ Micro Loans 1,191,002 $556,742 $467 3% Micro Loans 578,575 $916,337 $1,584 13% Small Loans 61,733 $235,117 $3,809 3% Small Loans 69,523 $1,833,867 $26,378 11% Medium Loans 1,395 $191,332 $137,155 7% Medium Loans 21,593 $4,809,264 $222,728 9% 1. MSME Firm Size Definitions: IFC’s Global Financial Markets categorizes its clients’ sub-borrowers according to the following definitions: (1) microfinance institution if loan < $10,000 at origination; (2) small enterprises if loan < $100,000 at origination; (3) medium enterprise if loan < $1 million at origination ($2 million for more advanced countries). 2. The share of committed loans to microfinance institutions in MSME committed portfolio decreased from 9.9 percent in FY2013 to 8.2 percent in FY2014; small enterprises accounted for 50.1 percent in FY 2014 (47.8 percent in FY2013); medium enterprises accounted for 41.7 percent in FY2014 (42.3 percent in FY2013). 3. The committed portfolio in MSME FIs below does not include commitments for commercial banking trade finance and collective investment vehicles. 4. Nonperforming Loan (NPL) = > 90 days past due loans. Growth Trends of Loans Volume by Type of Institution in SSA Region, CY2004-CY2013 Volume and Number of Micro Loans by MFIs Volume and Number of SME Loans by SME FIs 600 1,400 7,000 100 Number of SME Loans, Thousand Number of Micor Loans, Thousand Volume of SME Loans, $ Millions Volume of Micro Loans, $ Millions 1,200 90 500 6,000 80 1,000 5,000 70 400 800 4,000 60 300 50 600 3,000 40 200 400 2,000 30 100 20 200 1,000 10 0 0 0 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Number of MFI clients reported Number of SME clients reported 1 4 3 13 9 14 17 19 24 26 3 9 6 12 18 23 23 26 30 38 New Micro Clients, $ Reclassified Clients, $ New SME Clients, $ Reclassified SME Clients, $ Existing Micro Clients, $ Number of Micro Loans Existing SME Clients, $ Number of SME Loans A smooth growth in volume of micro loans provided by The portfolio of SME loans provided by SME clients demonstrated microfinance institutions was observed over the last several upward sloping dynamics over the last years. Portfolio growth years. The expansion of MFI portfolio by 36 percent in CY2012 by 35 percent in CY2012 since CY2011 was driven by adding was attributed to 4 new clients in Kenya, Zambia, Cote D’Ivoire 7 new clients in Mali, Kenya, Uganda, Tanzania, Ghana, Rwanda and South Africa, which expanded the IFC portfolio by and Burundi, which jointly added $570 million to the SME loans $10 million; another $70 million came from growth of existing portfolio. Also, the scaling up of existing clients further boosted clients’ loan portfolio. In CY2013 micro loans portfolio held the growth of the SME portfolio. In CY2013 SME loan portfolio by IFC MFI clients increased almost twice in volume terms in held by SME FIs increased by 4 percent in volume and 6 percent comparison with CY2012. More than 75 percent of this growth in number terms. IFC added 12 new SME clients over the course was attributed to the new clients’ portfolios in Ghana, Nigeria, of the year, although the subsequent growth in the SME client Congo and Tanzania, which altogether constitute 38 percent of portfolio has been rebalanced by closing the projects with the regional portfolio. 6 clients that ceased to report to IFC. MSME Portfolio Composition by Loan Category in SSA Region, CY2013 Loan Portfolio of MFIs Loan Portfolio of SME FIs 0.1% 3.2% 100% 4.9% 100% 19.5% 10.4% 80% 80% 23.9% 63.6% 60% 60% 95.0% 40% 86.4% 40% 56.6% 20% 24.3% 20% 12.1% 0% 0% Number of Loans Volume of Loans Number of Loans Volume of Loans Micro Loans Small Loans Medium Loans Micro Loans Small Loans Medium Loans Total Portfolio Composition by Loan Category in SSA Region, CY2004-CY2013 MFI Portfolio Composition: Volume of Loans SME FIs Portfolio Composition: Volume of Loans 100% 100% 90% 90% 80% 80% 70% 70% 60% 60% 50% 50% 40% 40% 30% 30% 20% 20% 10% 10% 0% 0% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Retail Micro Small Medium Corporate Retail Micro Small Medium Corporate Change in Deposits Volume CY2010-CY20135 The dynamic trends of IFC clients’ portfolios can be assessed The deposits held by SME FIs consistently increased over the by comparing the loan and deposit portfolios of the sampled last four years at 30 percent a year rate on a compounded basis microfinance institutions and banks. Over the last four years since CY2010, while loan portfolio of the sampled banks grew the deposits held by MFIs in SSA region demonstrated steady at 41.1 percent a year during the same period. Deposits base of growth: the deposits volume increased at 15.7 percent annual SME FIs were on average 3.8 times larger than the loan portfolio compounded rate since CY2010, while loan portfolio grew by of the sampled banks. 30.2 percent per year during the same period. On average the deposits held by the sampled MFIs during the last four years surpassed their loan portfolio by 14 percent. Volume of Micro Loans and Deposits Volume of Small/Medium Loans and Deposits by MFIs in SSA Region ($ Billion) by MFIs in SSA Region ($ Billion) $0.14 $0.14 $0.12 $0.13 $0.13 $0.12 $0.11 $0.12 $0.10 $0.11 $0.10 $0.09 $0.10 $0.08 $0.08 $0.08 $0.08$0.08 $0.08 $0.08 $0.07 $0.06 $0.06 $0.06 $0.06 $0.04 $0.04 $0.04 $0.02 $0.02 $0.00 $0.00 2010 2011 2012 2013 2010 2011 2012 2013 Micro Deposits Micro Loans Small/Medium Deposits Small/Medium Loans Volume of Micro Loans and Deposits Volume of Small/Medium Loans and Deposits by SME FIs in SSA Region ($ Billion) by SME FIs in SSA Region ($ Billion) $1.00 $0.95 $3.00 $2.80 $0.80 $0.73 $2.50 $2.20 $2.00 $0.60 $1.65 $0.45 $0.49 $1.50 $1.26 $0.40 $0.91 $1.00 $0.71 $0.74 $0.20 $0.50 $0.34 $0.04 $0.08 $0.01 $0.02 $0.00 $0.00 2010 2011 2012 2013 2010 2011 2012 2013 Micro Deposits Micro Loans Small/Medium Deposits Small/Medium Loans 5. The deposits data includes retail, MSME and other commercial portfolio deposits. Micro and Small/Medium deposits classifications were done in accordance with definition of relevant loan size noted in footnote 1. Loan-Deposit analysis are done on the basis of repeated clients, which means that the data used for comparison of Micro/SME loans and deposits are comprised only of those clients that reported each of the last 4 years all 4 data series (Micro deposits, SME deposits, Micro Loans, SME Loans). Globally IFC had 72 such clients, 31 of which are in IDA countries, 10 of such clients reside in SSA. Trend Analysis of Compounded Annual Growth Rate (CAGR)6 CAGR Trend – Micro Loans by MFIs in SSA Region CAGR Trend – SME Loans by SME FIs in SSA Region 35% 33.3% 30% 30% 25% 24.5% 25% 20% 20% 18.8% 15.8% 15% 15% 11.8% 11.4% 10% 10% 5% 5% 3.4% 3.0% 0% 0% 2008-2010 2011-2013 2008-2010 2011-2013 Number of Micro Loans Volume of Micro Loans Number of SME Loans Volume of SME Loans Client Highlight: FCMB, Nigeria About the client First City Monument bank (FCMB) was established in Over the past 18 months, the Bank has been implementing 1982 and headquartered in Lagos, Nigeria and has emerged an SME Banking Advisory Services program with IFC. as one of the top 10 leading financial services institutions The AS supported FCMB in developing a business banking in Nigeria. In 2011, FCMBs SME market share was 3.8%. value proposition and business model, new SME products, With the acquisition of First Inland Bank PLC (Finbank), the an SME Credit manual, marketing material, Business Bank expanded its footprint in Nigeria and signed on to an Analytics support and staff training on Credit analysis and Advisory Services program with IFC to help it execute its Sales. strategy to expand its service offer to the small and mid-size business segment. Development Results To date the Banks development results have been impressive. Of the 1.53 million formal SMEs in Nigeria, 71% are The value of outstanding loans grew from US$191 million unserved or underserved by financial institutions. Only in May 2012 to US$544.7 million in June 2014. The number 5 percent of SMEs in Nigeria have access to a loan, and of outstanding loans grew from 3,200 in May 2012 to 4,957 59 percent report difficulties accessing financial services. in June 2014. Between January 2013 and June 2014, 4,233 The banks however acknowledge that despite the inherent loans, valued at US$849.9 million, were disbursed. risks the sector is underserved and has potential for greater profitability than the corporate segment. Deposit mobilization was a key driver for the Bank targeting the SME segment and the value of deposits grew from Engagement with IFC US$630.3 million in May 2012 to US$1,318 million in June FCMB is one of IFC’s strategic clients in Nigeria with one 2014. The rate of customer acquisition doubled over the of the oldest and strongest relationships. In 2007, IFC gave same period: from 1,037 deposits accounts in January 2013 the Bank a US$12.5 million trade finance facility followed and 3,105 accounts in June 2014. NPLs declined from a by a US$140 million convertible senior loan and a Trade peak of 24% to 10% within the period. The high NPLs were line of US$70 million. In June 2014, IFC provided FCMB in part attributable to the acquisition of Finbank’s portfolio. with a financing package of US$50 million, of which The Bank has increased its branches from 120 to 270 due to US$20 million has been allocated to sustainable energy Finbank and increased its market share from 3.8% in 2012 finance. IFC’s Advisory Services will build the capacity to 6% in 2014 which it projects to be 8% by 2015. of the Bank staff to ensure utilization of the facility in 24 months. 6. Compounded annual growth rate (CAGR) from 10 reporting and repeated clients in the CY2008-CY2010 period, 32 reporting and repeated clients in the CY2011-CY2013 period, excluding greenfield institutions and FIs that are closing their operations. Martin Hommes | Mhommes@ifc.org Aksinya Sorokina | ASorokina1@ifc.org