2016 GARANTI BANK ROMANIA: STRIVING TO LEAD - A STUDY ON WOMEN IN BANKING 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. The conclusions and judgments contained in this report should not be attributed to, and do not necessarily represent the views of, IFC or its Board of Directors or the World Bank or its Executive Directors, or the countries they represent. IFC and the World Bank do not guarantee the accuracy, reliability or completeness of the content included in this work, or for the conclusions or judgments described herein, and accepts no responsibility or liability for any omissions or errors (including, without limitation, typographical errors and technical errors) in the content whatsoever or for reliance thereon. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. The findings, interpretations, and conclusions expressed in this volume do not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent. The contents of this work are intended for general informational purposes only and are not intended to constitute legal, securities, or investment advice, an opinion regarding the appropriateness of any investment, or a solicitation of any type. IFC or its affiliates may have an investment in, provide other advice or services to, or otherwise have a financial interest in, certain companies and parties including named herein. COPYRIGHTS The material in this work is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. IFC encourages dissemination of its work and will normally grant permission to reproduce portions of the work promptly, and when the reproduction is for educational and non-commercial purposes, without a fee, subject to such attributions and notices as we may reasonably require. International Finance Corporation is an international organization established by Articles of Agreement among its member countries, and a member of the World Bank Group. All names, logos and trademarks are the property of IFC and you may not use any of such materials for any purpose without the express written consent of IFC. All other queries on rights and licenses, including subsidiary rights, should be addressed to IFC’s Corporate Relations, Department, 2121 Pennsylvania Avenue, N.W., Washington, D.C. 20433. ACKNOWLEDGEMENTS The authors would like to thank the financial institutions that have contributed to this report. Our gratitude goes to the Garanti Bank Romania team (Diana Carciumarescu, Ioana Maria Dumitru, Virginia Otel and Adnan Ayman). 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, IFC country manager in Romania (Ana Maria Mihaescu), 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. CONTENTS A. INTRODUCTION 7 1. Purpose of the Study 7 2. Study Approach and Methodology 7 3. Defining Success Parameters 8 4. Identifying Data Gaps 9 5. Business Impact in the Absence of Portfolio- or Profitability Data 10 B. BACKGROUND AND OBJECTIVES 13 1. Romania Market Context 13 2. Background on Garanti Bank Romania 15 3. About IFC and Garanti Bank Romania 17 C. ANALYSIS AND ASSESSMENT 18 1. Garanti Bank Romania SME and BoW Program 18 2. SME Banking Portfolio Performance 23 3. Relevance of BoW to Women SME Customer Needs and Impact on Customers 29 D. WOMEN SME CUSTOMER VOICES 30 E. FINDINGS AND RECOMMENDATIONS 32 1. Outcome of IFC Investment Regarding Garanti Bank Romania BoW Program 32 2. Learning and Recommendations for Garanti Bank Romania 34 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 women 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 women 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 BoW Banking On Women CAEN Clasificare Activitatilor Din Economia Nationala A Romaniei CVP Customer Value Proposition EBRD European Bank for Reconstruction and Development EMENA Europe, Middle-East And North Africa IFC International Finance Corporation IRR Internal Rate Of Return IS IFC’s Investment Services KPI Key Performance Indicators MIS Management Information System NFS Non-financial service NPL Non-Performing Loans NPS Net Promoter Score ROA Return On Assets ROI Return On Investment TGB Turkiye Garanti Bankasi SME Small And Medium Enterprises ROT Return on Turnover WE Women Entrepreneurs 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 Figure 11 Women SME Customer Voices 1 6 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. 7 • 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 8 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 9 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. 10 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) 11 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 13 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 14 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% 15 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 16 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. 17 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). 18 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. 20 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. 21 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 23 Bank Romania has come a long way since it first set up with 2018 goals for IFC’s repeat loan to Garanti the IFC SME facility with a baseline of six outstanding Bank – 489 outstanding loans by the end of 2018 SME loans for women SME borrowers in 2010. – 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 a realize a portfolio value of $90 million in outstanding baseline of six loans at the end of 2010. This target was loans by the end of 2018, from a baseline of $38 surpassed by 89%: 567 loans to women-SMEs in 2014 million in outstanding SME loans at the end of 2013. versus 300 loans targeted by 2015. When compared 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 24 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 25 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 26 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 28 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 IMPACT ON CUSTOMERS study is complemented by a more extensive survey 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 29 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. 30 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. 31 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: 32 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; 34 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. 35 INTERNATIONAL FINANCE CORPORATION 2121 PENNSYLVANIA AVENUE, NW WASHINGTON, DC 20433 USA TEL: (202) 473-1000 June 2016