Benchmarking SME Banking Practices

the Pacifi c (EAP) regions. In LAC, the fi ve-year program covers over 50 fi nancial institutions, and through these institutions, aims to reach over one million MSME clients. In EAP, the three-year program covers Indonesia, Philippines, Vietnam and Cambodia. The program is expected to provide an estimated $225 million in new fi nancing for small and medium enterprises (SMEs) and benefi t about 100,000 SMEs through 15 partner banks that will share at least half of the total cost of advisory services.

Regional MSME banking programs typically entail long-term capacity building efforts that are tailored to individual institutions’ needs within the country and region. Advisory services may include

a combination of credit policies and procedures, credit risk management, training, new product development, customer segmentation analysis, marketing, and IT system development. Partner banks and fi nancial institutions work with IFC to develop a results framework that outlines an agreed outreach strategy and quantifi es targets to be achieved under the program. Results are measured and benchmarked against MSME lending worldwide, assisting partner fi nancial institutions to measure their approach against global best practice. The regional MSME banking programs ultimately involve know-how transfer and dissemination efforts to share lessons of experience. Swedish development agency (SIDA) to help build securities markets in Africa to help fi nance housing and infrastructure development.

ESMID will provide advisory services to create enabling legal and regulatory environments, build market infrastructure such as rating agencies, and strengthen capacity of market participants such as securities fi rms. It will also support new, replicable transactions, fi nance legal fees and create model documentation to help pave the way for on-going issuance of similar securities.

Given that many countries and markets in Africa are still small, ESMID aims to work in sub-regions of Africa and will support regionalization of local

marketplaces to help achieve a critical mass of operations. ESMID’s impact will be bolstered by having multi-year programs, with reinforcing advisory services and investment activities, anchored by strong local partnerships. ESMID is starting its activities in East Africa, in Kenya, Uganda, Tanzania and Rwanda and is expected to work on similar activities in Nigeria.

The true test of ESMID’s success will be the ability to raise long term, local currency funds to fi nance housing and infrastructure development in Africa. In industrialized countries, such fi nancing is mobilized mainly via securities markets but in most developing countries, infrastructure investments are mainly fi nanced with loans, often in foreign currency due to undeveloped securities market. At the same time, increasing amounts of public savings in these countries or abroad are placed in bank accounts with short maturities and at low interest rates. An effi cient securities market will help bridge the gap between the need for long term local currency fi nancing and more attractive investment products.

Reinsuring Weather & Catastrophic Risks

Risks associated with weather and catastrophic events adversely impact the development process in emerging markets’countries, particularly for those in low-income and rural households. In collaboration with the World Bank, IFC is creating a Global Index Reinsurance Facility (GIRIF) to establish technical and intermediation capacity to reinsure such weather and catastrophic event (CAT) risks as well as prepare the regulatory policy background.

IFC will support the facility through an investment transaction as well as through advisory services that will enable local capacity building, provide fi nancial assistance to insurance and reinsurance companies, and introduce market solutions for CAT-risk products. Through it’s advisory services and investment, IFC is sending a signal to the global insurance markets that weather and CAT risks can be successfully covered and is encouraging other fi nancial institutions to share such risks globally.

Expected results will include an improved legal framework, strengthened regulatory capacity and higher awareness, leading to a more widespread use of index insurance, based on improved technical and commercial market capacity.

New Payment and Remittance Systems Services and Products

The World Bank Group will upscale its capacity to provide advisory services to countries looking to reduce the cost of remittances and other retail payment services and instruments. As its main delivery mechanism, the World Bank Group will leverage its regional payments initiatives to deliver direct and sustainable advice. These payments initiatives give direct access to the appropriate authorities in over 60 countries and are a solid and tested delivery channel for effective advisory services. Existing regional initiatives coverage will be expanded to cover additional sub-regions in Africa (e.g. Central and Eastern Africa) and Asia (e.g. sub-Indian continent). The World Bank Group will work to promote international transparency by developing a methodology to track the evolution of the business environment for remittances worldwide, in particular in the area of remittance transaction costs. It will leverage its unique position to coordinate donors, foster international policy dialogue (along corridors and in regions), and gather global best practices, both for authorities and for the private sector through the General Principles for International Remittance Services.7

Secured Transactions in Vietnam

To enable greater borrowing against moveable assets such as equipment, inventories etc., IFC-MPDF is working with the Ministry of Justice to create a legal and institutional framework and a registry that will allow lenders to register their interest in a moveable asset when its accepted as collateral. The major components of this include:

▪ Identifying and addressing shortcomings in the current legal framework and undertaking advocacy to ensure adoption of best international practice.

▪ Helping the Ministry of Justice to upgrade the registry.

▪ Raising awareness with end-users of the registry (banks and other lenders such as insurance and leasing companies) so they understand the new reforms, how the registry will work and what new fi nancing products they could introduce once borrowing against moveable assets is possible.

The on-line registry is expected to be a signifi cant improvement over the current system. Lenders will be able to quickly secure (record) their fi nancial interest in an asset and search for existing claims in a database that is readily accessible to all fi nancial institutions through the Internet. In collaboration with the Vietnam Bankers’ Association, IFC-MPDF is now raising awareness about the new registry and it will use the results of its survey of existing lending techniques to assess future impact of the registry.

Building Africa’s Securities Markets

IFC has launched the Effi cient Securities Market Institution Development (ESMID) initiative, a three year, $5 million program funded by the