Client Highlights

Saigon Thuong Tin CommerCial JoinT SToCk Bank (SaCom Bank) VieTnam
objective and Client needs: Sacombank is the largest Joint Stock Commercial Bank in terms of distribution network in Vietnam. It has built a successful niche as a lender to retail and SME clients. IFC has partnered with Sacombank since 2002, providing both investment and advisory services. iFCs response and results: IFCs investment has helped Sacombank support its continued growth, particularly in the areas of SME financing, mortgage lending, trade finance, and investing in branch expansion and technology. IFC has provided Sacombank with advisory services to improve its business operations, outreach to SMEs, delivery channels, product development, reporting policies and procedures, management information system, and data centers. IFC has provided on-site training courses for bank staff and advice on the organizational adjustments necessary to strengthen the banks efficiency and enhance its operational risk management system. Development impact: Sacombank has increased its number of loans to MSMEs by 60 percent and its MSME portfolio volume by 68 percent per year on average. As of December 31, 2007, the bank had an outstanding MSME portfolio of 5,385 loans (of which 84.4 percent was in SME loans), worth a total of $498.8 million (of which 99 percent was for SMEs). Tran Xuan huy, Ceo, Sacombank: The IFC advisory services that started in 2006 have significantly assisted us in improving our business processes and organizational ability. After two years, the advisory service components provided tangible results. We look forward to IFC enabling Sacombank to improve its capacity to manage risks while continuing to be highly profitable.

IFC: The Partner Of Choice

hamkorBank uzBekiSTan
objective and Client needs: Hamkorbank, established in 1991, is a private bank focused on serving micro and small businesses. It has been undergoing a transformation into a nationwide FI with 24 branches across the country. IFC has partnered with Hamkorbank since 2001, providing both investments and advisory services. iFCs response and results: IFC committed $1 million in 2001, and another $3 million in 2006 in debt. To strengthen the banks capacity, IFC has supported Hamkorbank in its institution building efforts over a number of years. IFC advisory services focused on improving the lending processes, introducing risk management, improving asset and liability management and treasury operations, establishing human resource management, and upgrading the management information systems. IFC has provided Hamkorbank with advisory services to introduce leasing as a new financial product. Development impact: As of December 31, 2007, the bank had 6,510 MSME loans (of which 10.2 percent were SME loans), worth a total of $45 million (of which 61.3 percent was for SMEs). The bank grew its MSME portfolio by 34 percent in terms of number of loans and by 165 percent in volume from 2005 to 2007.
IFC, a member of the World Bank Group, creates opportunity for people to escape poverty and improve their lives. We foster sustainable economic growth in developing countries by supporting private sector development, mobilizing private capital, and providing advisory and risk mitigation services to businesses and governments. Our new investments totaled $16.2 billion in fiscal 2008, a 34 percent increase over the previous year.

our ShareD ViSion is that people should have the

opportunity to escape poverty and improve their lives.

iFC: key FaCTS

Credit rating: Triple-A (Moodys, Standard & Poors) Portfolio: $25.4 billion, representing 1,410 investments in 116 countries (as of June 30, 2007) Total Staff: Approximately 3,100 (50 percent of whom are based outside of Washington, D.C.) number of Transactions Committed in Fiscal year 2007: 299 industry Coverage: Global financial markets; private equity and investment funds Global manufacturing and services; agribusiness; health and education Infrastructure; information and communication technologies; oil, gas, mining and chemicals; subnational finance

our Core ValueS are

Excellence Commitment Integrity Teamwork

SME Banking
oPPorTuniTieS in FinanCial markeTS

our PurPoSe is to
Promote open and competitive markets in developing countries Support companies and other private sector partners Generate productive jobs and deliver basic services Create opportunities for people to escape poverty and improve their lives

key Contacts
ghada Teima Program Manager, Specialist (Global) GTeima@ifc.org Paul rusten Principal Banking, Specialist (Global) PRusten@ifc.org

Bank muSCaT oman

objective and Client needs: Bank Muscat is the largest bank in Oman by total assets and market capitalization. The bank has been undergoing significant geographic expansion as well as increased diversification of its product offerings, especially in the SME lending area. IFC has partnered with Bank Muscat since 2006, providing both investments and advisory services. iFCs response and results: IFC committed $100 million in debt. It has helped Bank Muscat transform itself into a strong regional bank with adequate capitalization to support its expansion programs in Africa, the Middle East and North Africa, and South Asia. IFC also provided Bank Muscat with advisory services to help it develop and expand profitable SME lending operations, fostering SME lending in Oman. Development impact: As of December 31, 2007, the bank had 1,666 SME loan clients, worth a total of $161.1 million. The bank grew its SME portfolio by 40 percent in terms of number of loans and 221 percent in volume from 2006 to 2007. abdul razzak ali issa, Ceo, Bank muscat: In June 2006, in order to strategically position ourselves in the SME market, we signed an agreement with IFC to technically assist the bank to expand our SME business and customer base. This program included six modules and was successfully completed in May 2007. Many of the final recommendations have already been implemented.

iFC 2121 Pennsylvania Ave., NW Washington, D.C. 20433, USA ifc.org/gfm

ibragimov ikrom, Chairman of the Board, hamkorbank: The establishment and development of relations with IFC provided new business opportunities for Hamkorbank and its clients. Financial partnership with IFC served as a factor in the extension of the client base of OJSCB Hamkorbank, and it provided active work with small and medium enterprises, a major element of the banks strategy for development. We greatly appreciate the ability of IFC to share its skills and experiences with OJSCB Hamkorbank, through investment and advisory services.

We acknowledge support from our donors: netherlands

norway

2008

IFCs SME Banking Value Proposition

IFC is the leading investor in banks and other FIs in emerging markets. IFC offers both Investments and Advisory Services for FIs providing SME banking services to their clients.

Investment Services
Loans include senior, subordinated, and convertible loans and can be fixed or variable rate. Equity investments represent investment in share capital of SME banks, as a minority shareholder.
market segment can increase their access to financial services and generate more employment opportunities and income.
iFCs global investments in Financial intermediaries Providing Sme Banking
1,800 1,600 1,400 US$ Millions 1,200 1000 800 600 400 200 0

Advisory Services
As part of its development mission, IFC has positioned itself as a leader in providing advisory services that strengthen the capacity of FIs to downscale and adopt international best practices. In 2007, IFC launched the Global SME Banking Program. The program aims to have a broad and global impact on providing access to SME financial services in the developing world. Unmet demand exists in the area between micro and corporate banking, given that SMEs have largely remained an untapped market in most developing economies. IFC works to reduce the SME finance gap by providing instituion building services and disseminating of best practices to efficiently target the SME segment.

The Case for SME Banking

Small and medium enterprises (SMEs) are critical for the economic and social development of the emerging markets. They play a major role in creating jobs and generating income for lowincome people; they foster economic growth, social stability, and contribute to the development of a dynamic private sector. As such, access to financial services is vital in developing a vibrant SME sector in any economy. In many emerging markets, however, access to financial services for SMEs remains severely constrained. Most financial intermediaries (FIs) have hesitated to target this sector. Banks, which have traditionally served the corporate and large segments of the market, view SMEs as a challenge because of information asymmetry, lack of collateral, and the higher cost of serving smaller transactions. However, as corporate banking margins continue to shrink and increasing fiscal restraint lowers yields on government borrowings, banks have begun to assess the opportunities offered by SMEs. Providing banking services to this underserved SME

Quasi-equity investments include subordinated loans and income notes, which normally rank junior to loans in the event of a liquidation, and frequently are counted as Tier 2 capital for regulatory purposes. Risk management products include guarantees on cross-border bank loans, bond issues, and other debt service obligations, as well as guarantees on client undertakings, such as performance bonds.
role of Sme Banking in iFC access to Finance
Financial Infrastructure

GlOBAl SME BANkING PROGRAM ACTIVITIES

Promote SME banking by providing institution building services to FIs: Design an SME-focused organization and strategy; Segment clients and build a strong value proposition in product offering and brand; Standardise products and processes; Optimize delivery-cost of products and services through appropriate delivery channels; Create a strong sales culture; Implement independent and objective risk management systems, processes; Use credit scoring and rating tools for risk appraisal, underwriting, process streamlining, and risk-based pricing; and Leverage technology to reduce the cost of services. Develop best practice tools and standards to efficiently target the SME segment: IFC SME Banking CHECK toolkit: conducts a comprehensive assessment of FIs performance in more than 100 competencies; and The SME Banking Benchmarking Survey: is a web-based survey available to all banks in emerging markets interested in benchmarking themselves against SME banking practices of their peers. Build knowledge management and disseminate information Establish a core set of qualitative and quantitative benchmarks to promote SME Banking in emerging markets; Use SME Banking Benchmarking Survey results to monitor and disseminate information on the evolution of global SME banking operations and trends; and Organize local, regional, and international outreach events, and share and disseminate lessons learned about SME banking and best practices around the world.
Portfolio amounts of iFCs Sme Financial intermediaries Clients
700 600 500 $70,000 $60,000 $50,000 $40,000 $30,000 $20,000 $10,000 $0
Millions

0.1%

Corporate & Multinationals Large Businesses Medium Businesses Small Businesses Micro Businesses

0.9%

Banks Primary Target

FY00

FY01

FY02

FY03

FY04

FY05

FY06

FY07

FY08

Central and Eastern Europe South Asia Middle East and North Africa WORLD

East Asia and Pacific Southern Europe and Central Asia Latin America & Caribbean Sub-Saharan Africa

510%

20%

THE SME FINANCE GAP Micro Finance

6575%
Traditional banks typically target only a fragment of the market

LT Finance

IFC Ventures

Equipment Finance

Leasing

Increase access to finance in developing countries by building capacity of financial infrastructure, financial markets, and FIs.
Working Capital

Micro Finance Finance Informal/Smaller Formal/Larger

Sme Contribution to gDP and employment

THE SME BANkING OPPORTUNITy

The SME market is becoming increasingly attractive as competition increases for more established corporate clients.

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Korea South Africa India Philippines Egypt Morocco

SMEs provide a new target market and business development opportunities which diversify the banks portfolio. The SME market is large, with a potential for significant growth, and still largely underserved in most emerging markets. SMEs offer an opportunity for portfolio diversification as they are active in various industry sectors and geographic locations. An SME portfolio generates a stable income and requires less complex asset-liability management at the portfolio level. SMEs are integrated ino the rest of the economy, providing cross-selling opportunities.

Regional Presence - Global Impact

IFC operates in Central and Eastern Europe, Southern Europe & Central Asia, Latin America & the Caribbean, Middle East & North Africa, Sub-Saharan Africa, and South Asia. IFC SME banking advisory services focus on supporting FIs in more and less developed countries, with a focus on IDA countries and frontier regions.
IFC is the leading international investor in private sector banks and FIs in emerging markets. As a result of our investments and advisory services IFCs 121 SME banking clients provided $75 billion in financing to an

Thousands

400 300 200 100 0

GDP

Employment

estimated 818,168 small and medium enterprise owners.

IFCs outstanding portfolio in FIs was $9.9 billion, of which 55 percent was in SME FIs, as of June 30, 2008. As of beginning 2008, IFC had 86 SME banking advisory services projects, totaling $115 million, and representing 42

Small Loans
Number of Loans

Medium Loans
Volume (US$)

percent of total funds committed for access to finance projects.

Creating opportunity and developing employment drives IFCs work with FIs. Working with FIs to improve access to financial services for SMEs we leverage IFCs finance and knowledge to generate employment opportunities in emerging markets.