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European Fund for Southeast Europe
Monika Beck, KfW, EFSE Board Member
Sylvia Wisniwski, Frankfurt School of Finance & Management, EFSE Fund Advisor
Brussels, 17 June 2008
Overview
Mission and Objectives
Structure, Features and Organization
Monitoring System: Development Performance and Impact
Development Impact Study 2007: Impact on Human Capital Development at MSE Level and at the Level of Financial Institutions
The Fund aims to foster economic development and prosperity in the Southeast European region through the sustainable provision of additional development finance through qualified financial institutions, notably for micro and small enterprises and low-income private households.
Mission and Objectives
Income generation
Job creation
Strengthening local financial markets
Providing decent shelter
The Fund operates in ten nations:
Target Region
Products and Services
1
2
34
5
6
7
8
9
10
1. Albania
2. Bosnia & Herzegovina
3. Bulgaria
4. Kosovo
5. FYR Macedonia
6. Republic of Moldova
7. Montengro
8. Romania
9. Serbia
10. Ukraine
Local Office
Structure, Features and Organization
EFSE is a Luxembourg-registered SIF Fund with First Class Stakeholders
Donor Agencies
International Financial Institutions
Private and Institutional Investors
Omidyar-Tufts
Microfinance Fund
Organisational Chart
Structure, Features and Organization
Shareholders
Board of Directors
Investment Committee
Fund Management
Custodian
Fund Accounting Local Office
PLIsTransaction
Investment
Local Office Local Office
Advisory Board
Promoter
Shareholders
Board of Directors
Investment Committee
Fund Management
Custodian
Fund Accounting Local Office
PLIsTransaction
Investment
Local Office Local Office
Advisory Board
Development Facility
Principles of the Development Facility (DF)
Focused technical assistance Link to investment Separation from the EFSE Investment Fund Possible earmarking of donor funds Cost sharing of PLIs Transparency Co-operation with other donors
Stakeholders
Donors
DFC
OAM FS
Manager
Partner Institutions
IF
FiduciaryAgent
Citigroup
Monitoring System
The Fund’s development mission and objective receive particular attention in the monitoring and reporting.
Two levels:
A: Development Performance
B: Development Impact
A: Development Performance
Quarterly monitoring of subloan portfolio Focus on key development performance indicators: outreach and sustainability
Outreach to target group:• Breadth of outreach: number of borrowers• Depth of outreach: average loan balance• Depth of outreach: % of loans granted < EUR 10,000• Distribution of borrowers by economic sector• Loan purpose: working capital, fixed assets • Maturity of the loans
Sustainability:• Sub-loan portfolio quality: Portfolio at risk
Principles
What do we analyse?
Development Performance
…in a Nutshell (March 2008)
Development Performance
Subloan Portfolio Performance
B: Development Impact
Annual impact assessment Development Impact Study is carried out by a third party to ensure independent opinion Empiric study using a sample that generates statistically valid results Results are published on the Fund’s website
Development impact on the ultimate target group Development impact on the partner lending institutions Development impact on the financial sector and economy, including compliance with
environmental and social standards
Principles
What do we analyse?
Development Impact Study 2007
• Desk study based on available data from EFSE, the sample institutions and review of relevant literature concept paper including hypotheses and analysis approach
• Implementation of field study, involving a primary survey with 277 sample MSE clients from Montenegro, Serbia and Romania and interviews with 11 sample financial institutions
Methodology
Two-Stage approach, combining desk study and field study
Based on comprehensive data analysis elaboration of study report
Development Impact Study 2007
Profile of MSE sample Economic sector:
Construction: 5% Production: 32% Services: 29% Trade: 34%
Size of enterprise: 63% micro enterprises (less than 10 employees) 37% small enterprises (10 – 50 employees)
Age of enterprise: 1-3 years: 10% 3-5 years: 16% > 5 years: 74%
Gender structure: 75% male
Educational level: Elementary school: 5% Secondary school: 51% Undergraduate degree: 13% University degree: 31%
Impact of EFSE – End-borrower level
Vast majority of the MSE (88%) have sustained or created paid full time employment since a loan was taken in 2005
Employment Impact – Main findings
10 and > jobs created
1-9 jobs created
Employment sustained
Employment reduction
11%
35%
42%
12%
Impact of EFSE – End-borrower level
Promotion of long-term relationship between EFSE, partner institutions and end-borrowers fosters job creation
Positive correlation between number of loans taken and number of jobs created
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
1 loan 4 loans
10 > jobs created
1-9 jobs created
Employmentsustained
Employmentreduction
Impact of EFSE – End-borrower level
14,3
42,9
28,6
14,320,9
35,2 33,0
11,0
3,2
29,4
53,7
13,710,8
34,7
43,6
11,9
Construction Production Trade Services
10 and more jobs created 1-9 jobs created Employment sustained Loss
More labour-intensive economic sectors - Construction (57%) and Production (56%) - more likely to create jobs than the Services and Trade sector (46% and 32%)
Importance of loan in the creation of jobs for the MSEs
Impact of EFSE – End-borrower level
41%
26%
12%
21%
Very important
Important
Less Important
Not important
For 67% of the MSEs the loan was important to very important for the creation of jobs in their business
Impact of EFSE – End-borrower level
Average number of full-time paid employments created 2.95
Loans to MSEs doe not primarily increase self employment or family labour – 53% show increased full-time paid employment
Total number of full-time paid employment created by EFSE loans 2006-2007: > 230,000
Total number of employment (self-employment/ paid employment) created by EFSE loans 2006-2007:> 385,000
EFSE subloan amount per employment: 800 EUR
Access to loans and impact on enterprise growth and economic situation
Impact of EFSE – End-borrower level
41%
26%
18%
15%
My business would be a littlesmaller (< 50% smaller)
My business would be lotsmaller (> 50% smaller)
My business would beclosed/would not exist
Nothing would have changed
Majority of the MSEs reported business growth 18% reported that their business would not exist or would have closed without the loan
Improvement of (household) economic situation for 75% of MSEs because of the loan
Without EFSE…
Impact of EFSE – Financial institution level
Introduction of target group oriented lending
Promotion of target-group specific lending products
Cash-flow based lending methodology instead of collateral-based lending methodology
Promotion of responsible finance practices
EFSE funds not used for consumer finance
Social and environmental exclusion list
Promotion of transparent and fair business operations -> transparency towards clients, fair competition
Promotion of good corporate governance
Impact of EFSE – Financial institution level
Creation of jobs at the financial institutions level
Impact on employment in financial institutions
633 708 743 238 310 3250
5000
10000
15000
20000
25000
Commercial banks MF banks and MCOs
2006
2007
Q1 2008
16,7% 5,5%
29,1% 6,4%
19,400 22,600 24,000 5,100 6,600 7,000
Impact of EFSE – Financial institutions level
Building up know-how at all staff levels through training and consulting: top-management, mid-management, loan officers and other support staff
73 top-management staff, 188 mid-management staff and 157 loan officers and other support staff have benefited from activities initiated by the EFSE Development Facility
Impact of EFSE Development Facility activities on staff development of the PLIs
16%
33%
51%
Top Management
Mid Management
Loan Officers andother staff
20%
66%
14%ConsultingTraining
Thank you for your attention!
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