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TBLI CONFERENCE™ EUROPE 2011- London - United Kingdom TBLI CONFERENCE™ is the prime annual global networking and learning event on Environment, Social, Governance (ESG) and Impact Investing.
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Transforming Microfinance
TBLI Conference Europe 2011
Does Microfinance Work?
Nov 10th 2011, London, UK
Page 1
About Ronoc
Established in 2007 as an investment and advisory business.
Experience in over 40 emerging markets in retail financial services.
Ronoc MSME Impact Fund invests in financial institutions in Eurasia.
Registered as a Clinton Global Initiative ‘Commitment to Action’ in
2010.
The fund is registered on the GIIN ImpactBase.
Page 2
Page 3
About Ronoc
Does Microfinance Work?
YES - but needs to be redefined and repositioned.
Global success;
Billions of dollars invested.
Millions of the poor assisted through access to finance.
MFI clients will not remain poor forever.
Emerging economies will grow 3 times faster than western markets*.
Adapt and transform into more advanced financial institutions.
Small scale retail banks with microfinance roots.
Page 4 *Source IMF WEO September 2011. Advanced Economies are forecast to grow at an average GDP rate of 2.2% while Emerging are 6.5%
Why Transform?
Retail banking was an integral part of the community in developed
markets.
Microfinance can be the next wave of retail banking growth in
emerging markets.
Building from bottom up with ‘back to basics’ creates sustainability.
Transforming MFIs into socially responsible market leaders
contributes to wealth creation and poverty alleviation.
Success stories; Mibanco (Peru), Equity Bank (Kenya), Compartamos
(Mexico), BancoSol (Bolivia) and XacBank (Mongolia).
Page 5
Ronoc Transformation Strategy
Credit Risk
Management
Client
Management Financial
Management
Human Capital
Development
Credit Policy
Collections Strategy
Provision
Methodology
Portfolio
Management Risk Reporting
Risk Infrastructure
Research
Marketing Branding
New Product
Development
Service Delivery
Sales
Distribution
Financial Analysis
Funding
Benchmarking
Operating Efficiency
Management
Information
Governance
Compliance
Training and
Development
Talent Management
Compensation
Performance
Management
Executive
Recruitment
Page 6
Shareholders & Boards require a shared vision for transformation.
Target MFIs that can diversify and build market share.
Penetrate new market segments but also retain existing client bases.
Investment Entry Investment Exit
Credit Cards, Auto Loans and Specific-Purpose Loans
SME Lending
Mortgages
Early Stage
Micro Loans, Cash Loans and Consumer Finance
Growth Phases
Domestic and International Market Access
Liabilities Current, Savings and Deposit Accounts
Services (fee incomes)
Insurance Services
Debit and Pre-paid Card Products
Payments, Remittances
Later Stage Product Development, Value Creation, Growth Accelerated
Lending
Assets
Liabilities
Services
International Money Market Investment Products
Page 7
Transformation Strategy
Sources: XacBank, Tenger Financial Group Annual Reports
2011 Forecast use Avg YTD FX rate of MNT USD 1245. ROE for 2011 distorted by capital
injections in 2011. Share prices in MNT are from TFG Annual Report 2008, as evidenced by
share transactions that transpired in 2008 as well as from other Tenger reports; Share prices
in US dollars are calculated at the monthly average exchange rate; Return on Equity (R.O.E.)
is calculated by dividing net income by average shareholders' equity (beginning of period
equity + end of period equity/2).^January Capital increase. * Sept Capital increase is
distorted by capital raised for a start-up in China at 1 times book.
Case Study – XacBank, Mongolia
2007 2008 2009 2010
Total Assets US$m 123.0 164.6 223.4 388.3
Total Equity US$m 12.4 18.8 23.5 32.8
Net Profit US$m 2.4 2.7 1.8 6.7
XacBank’s gross loan portfolio has
grown to US$408m in Q3 2011
Active loans have increased from
4,000 to 94,993 in Q3 2011
TenGer’s share price has risen from
US$1.16 in Q1 2005 to *US$5.06 in Q3
2011, (4.4 times in 6 years)
In 2008 Ronoc invested in XacBank - one of Mongolia’s fastest-growing, most profitable banks.
Page 8
R.O.E. 21% 18% 9% 22%
US $
US $
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
0
10
20
30
40
50
60
70
80
90
100
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Q3 2011
Number of Active Loans (000's)
Loan Portfolio ($Millions)
$1.16 $1.25$1.39
$1.74$1.73
$2.52
$3.43
$4.26
$4.23
$4.69$4.34
6.78
5.06
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
$7.0
$8.0
0
1000
2000
3000
4000
5000
6000
7000
8000
2005 Mar
2005 Jul
2005 Sept
2005 Dec
2006 Apr
2007 Jul
2008 Jan
2008 July
2009 Feb
2009 Jul
2009 Oct
2011 Jan^
2011 Sept*
Share price MNT
Share price USD
2011F
632.4
73.0
10.4
21%
Page 9
Transforming Microfinance
TBLI Conference Europe 2011
Does Microfinance Work?
Nov 10th 2011, London, UK
