22ndnd European Microfinance European Microfinance Conference 2005Conference 2005

WORKSHOP« Transparency: Agreement

on basic benchmarks in Europe? »

Barcelona 28 October 2005

October 2005

ShoreBank Advisory Services International

ShoreBank Advisory Services – International

Benchmarking

ShoreBank Corporation

Largest development finance institution in U.S.

Founded in 1973 to maintain banking services and arrest decline in Chicago community

Has grown to $1.7 billion in assets• Bank achieves returns equal or superior to banks of

comparable size that do not have a community banking focus

• Managed to “triple bottom line” of development impacts, conservation and profitability

Core competencies in• Financing residential real estate rehabilitation• Small business lending• Promoting wealth accumulation for lower-income families

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SASI disseminates ShoreBank’s unique experience internationally• Facilitates access to capital through the private

sector• Understands the specific requirements of

communities with constricted access to capital. • Creates relationships with entrepreneurs and

businesspeople in developing communities by being part of that community

ShoreBank’s International Footprint Led to Creation of SASI

Our International consulting business began when Muhammad Yunis of Grameen Bank asked us to go to Bangladesh and work with him on risk management and lending in disadvantaged communities 2

ShoreBank’s International Organization

ShoreBank Corp(Holding Company)

ShoreBank Advisory Services

(Consulting)

ShoreBank Advisory Services

UK Ltd

Shore Overseas Azerbaijan

(Non-Bank Finance Co)

Technicalassistance

InvestmentShoreCap

International(Investment Fund)

ShoreCap Exchange

(TA Facilitator)501(c)3

ShoreBank Advisory Services

Mexico S.A. de C.V.

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CGAP Donor Guidelines

1. Outreach – How many clients are being served?

2. Depth of outreach – How poor are the clients?

3. Portfolio quality – How well is the financial institution collecting its loans?

4. Financial sustainability – ability to maintain and expand without continued subsidized donor funds?

5. Efficiency – Is the financial institution providing services at the lowest possible cost to client? 4

Developing vs. Developed

Interesting to note difference• International Donors (DFID, KfW, FMO, AFD,

EBRD) require performance based reporting and link further funding to assessments.

• The consultants and investors from Europe into developing microfinance do the same (IPC, Bank Akademie, Planet Finance, ShoreCap, Oikocredit)

• Yet US and UK CDFIs have taken longer to provide similar levels of reporting and benchmarking

• Donor/Funders in developed countries have taken a gentler approach. NCCA took 20 years to introduce CARS.

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Road Map to BenchmarkingDrawing from CGAP and Developing MFI

Lessons:

• Funder/Donor Requires Reporting• Coupled with capacity building, information

used by MFI to improve operations• After initial experience, becomes tool for

fundraising and marketing • Becomes a must within sector• Benchmarking and relative performance is

feasible

Funder DrivenReportingRequirement

Info used to improve operations

Becomes tool for fundraising & marketing

Benchmarking feasible

Key ratios &Reports a Sector norm

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Challenges• Volunteer Boards

• Funders/Donors without skills, capacity, interest

• Inadequate Systems

• Small and stretched management teams at MFIs

• Associations lack leverage

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Questionnaire

• What indicators do you currently report?

• Provide definitions for each• Who requires these indicators –

management, board, stakeholders, donor/funders?

• How are these indicators used?• What challenges do you face in

reporting and tracking indicators? 8

Possible Indicators:

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Outreach Number of Loans disbursedNumber of Active Clients

Depth of Outreach

Number of clients in target market (deprived, on benefits, ex-offenders, etc)

Portfolio Quality

PAR > 30

Financial Sustainability

Earned Revenues as % of Total Revenues

Efficiency Operating expense ratioNo. of Loans disbursed per loan officerNumber of active loans per loan officer