opportunity bank, serbia - mfr · 2018. 11. 12. · clients at third loan cycle social rating...

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Standard Social Rating Social Performance Management Client protection, social responsibility Outreach Quality of the services D C B BB A AA Institutional data Individual Opportunity Bank, Serbia CLIENT PROTECTION AND SOCIAL RESPONSIBILITY QUALITY OF THE SERVICES OUTREACH Active borrowers Active savers Gross outstanding portfolio, Euro Total active savings, Euro Branches Total staff Dec-15 Social indicators Rural coverage, clients Female clients Female staff Female staff in management Average disbursed loan amount, Euro Clients at third loan cycle Social Rating Committee: April 2016 Previous Social Rating: A- November 2013 SOCIAL RATING RATIONALE 20,585 32,055 55,663,613 9 284 Feb-16 Good social performance management and client protection systems. Social mission likely to be achieved. SOCIAL PERFORMANCE MANAGEMENT SYSTEM The breadth of outreach is good, as the FI is well established in all Serbian districts, and in particular in the rural areas. The outreach to households with vulnerable demographic characteristics is good, while the outreach for women is adequate. The FI closely monitors the alignment to the target population by classifying them as poor, very poor and low income. The FI offers a good varietry of financial services that meet the economic needs of the target client. The accessibility and flexibility of their credit products are good, which is also reflected in the high scores of client satisfaction surveys. The client drop-out rate is adequate but improvable and the offer of non-financial services could be scaled up. MicroFinanza Rating Srl Via Rigola 7, 20159 Milan – Italy Tel: +39-2-3656.5019; www.mf-rating.com Copyright © 2016 MicroFinanza Rating Srl (MFR). Any reproduction without MFR express permission is forbidden. 59.7% 10.4% 8.6% 43.6% 2,709 24.1% 3.4% 15.3% 23.6% 96.0% A Product design is informed by client feedback, and the repayment capacity analysis is comprehensive and well disseminated amongst staff. EIR is properly disclosed and the staff appraisal puts significant weight on portfolio quality. Client data protection and grievance mechanism are strictly regulated by NBS and well implemented. There is room for further limiting the FX risk, currently transferred to some clients. Gender balance and staff turnover level are good. The environmental strategy is not yet formalised, but the institution engages in numerous socially responsible projects. SOCIAL RATING The recently updated ownership structure ensures uniform commitment to the mission. the Bank's alignment to the double bottom line is good, as the business plan includes clear social goals and targets, and the top management regularly assesses social performance related risks. However, the institution adopted the Opportunity network's mission statement, hence, there is room for improvement in the key terms definition and in possibly tailoring it to OBS strategy and intentions. Staff recruitment is well aligned to the mission. Loans in > third cycle Average balance per borrower / GNI pc Average saving balance, Euro Client drop-out ratio PAR30 15.0% Network Area of intervention Credit methodology Financial services Non financial services Geographical coverage See annex 2 and 4 for more details. Dec-15 Opportunity International Bank Rural 73,216,906 2,627 34.9% 54.9% 40.4% 2002 Staff turn-over ratio Average annual percentage rate (APR) Average transparency index Growth in active borrowers Legal form Year of inception Credit, saving, payment Training National Opportunity Bank Serbia Bul. Oslobodenja 2a, Novi Sad - Serbia Tel: +381 21 530 111; 530 024; http://www.obs.rs

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Page 1: Opportunity Bank, Serbia - MFR · 2018. 11. 12. · Clients at third loan cycle Social Rating Committee: April 2016 Previous Social Rating: A- November 2013 SOCIAL RATING RATIONALE

Standard Social Rating

Social Performance Management

Client protection, social responsibilityOutreach

Quality of the servicesD C B BB A AA

Institutional data

Individual

Opportunity Bank, Serbia

CLIENT PROTECTION AND

SOCIAL RESPONSIBILITY

QUALITY OF THE

SERVICES

OUTREACH

Active borrowersActive saversGross outstanding portfolio, EuroTotal active savings, EuroBranchesTotal staff

Dec-15Social indicatorsRural coverage, clientsFemale clientsFemale staffFemale staff in managementAverage disbursed loan amount, EuroClients at third loan cycle

Social Rating Committee: April 2016 Previous Social Rating: A- November 2013

SOCIAL RATING RATIONALE

20,585 32,055

55,663,613 9

284

Feb-16

Good social performance management and client

protection systems. Social mission likely to be

achieved.

SOCIAL PERFORMANCE

MANAGEMENT SYSTEM

The breadth of outreach is good, as the FI is well established in all Serbian districts, and in particular in

the rural areas. The outreach to households with vulnerable demographic characteristics is good, while

the outreach for women is adequate. The FI closely monitors the alignment to the target population by

classifying them as poor, very poor and low income.

The FI offers a good varietry of financial services that meet the economic needs of the target client.

The accessibility and flexibility of their credit products are good, which is also reflected in the high

scores of client satisfaction surveys. The client drop-out rate is adequate but improvable and the offer

of non-financial services could be scaled up.

MicroFinanza Rating Srl

Via Rigola 7, 20159 Milan – Italy

Tel: +39-2-3656.5019; www.mf-rating.com

Copyright © 2016 MicroFinanza Rating Srl (MFR). Any reproduction without MFR express permission is forbidden.

59.7%

10.4%8.6%

43.6%2,70924.1%3.4%

15.3%23.6%96.0%

A

Product design is informed by client feedback, and the repayment capacity analysis is comprehensive

and well disseminated amongst staff. EIR is properly disclosed and the staff appraisal puts significant

weight on portfolio quality. Client data protection and grievance mechanism are strictly regulated by

NBS and well implemented. There is room for further limiting the FX risk, currently transferred to some

clients. Gender balance and staff turnover level are good. The environmental strategy is not yet

formalised, but the institution engages in numerous socially responsible projects.

SOCIAL RATING

The recently updated ownership structure ensures uniform commitment to the mission. the Bank's

alignment to the double bottom line is good, as the business plan includes clear social goals and

targets, and the top management regularly assesses social performance related risks. However, the

institution adopted the Opportunity network's mission statement, hence, there is room for

improvement in the key terms definition and in possibly tailoring it to OBS strategy and intentions.

Staff recruitment is well aligned to the mission.

Loans in > third cycleAverage balance per borrower / GNI pcAverage saving balance, EuroClient drop-out ratioPAR30

15.0%

NetworkArea of interventionCredit methodologyFinancial servicesNon financial servicesGeographical coverage

See annex 2 and 4 for more details.

Dec-15

Opportunity International

Bank

Rural

73,216,906

2,62734.9%54.9%40.4%

2002

Staff turn-over ratioAverage annual percentage rate (APR)Average transparency indexGrowth in active borrowers

Legal formYear of inception

Credit, saving, paymentTrainingNational

Opportunity Bank Serbia

Bul. Oslobodenja 2a, Novi Sad - Serbia

Tel: +381 21 530 111; 530 024; http://www.obs.rs

Page 2: Opportunity Bank, Serbia - MFR · 2018. 11. 12. · Clients at third loan cycle Social Rating Committee: April 2016 Previous Social Rating: A- November 2013 SOCIAL RATING RATIONALE

OBS, Serbia

AssessmentFactorArea

AdequateSocial mission

+

Social Performance

Management system

+

Good

Social Strategy Good

Main results

Social governance

Good

Adequate

Social and financial

balance

Social monitoring

and reporting

AdequateHR alignment to

the mission

+

+

+

+ The top management compensation is consistent with the

institutional social mission.

The staff recruitment process is well aligned to the mission. The

mission dissemination among the employees is adequate.

The alignment of the staff appraisal to the mission is moderate;

staff contribution to the mission is not fully assessed.

+

+

The mission is formalized and includes the institution's social

goals.

The institution adopted the network's mission statement, which

has been recently reviewed. However, there is room for

improvement in the key terms definition, while the social goals

could be further tailored to OBS strategy and intentions.

+

+

+

The updated ownership structure ensures uniform commitment

to the mission. No major mission drift risk was detected.

The BoD ensures a strong supervision and control of the

management activities, covering the achievement of the plans and

providing relevant feedback to the management.

There is evidence that the Board informally considers the overall

adherence to the institutional values and some social

performance parameters while evaluating the CEO.

+

+

+Periodic use of client satisfaction surveys and monthly monitoring

of drop out are used to adjust the quality of the services.

OBS demonstrates an adequate capacity to monitor most of the

characteristics which are relevant to its mission. Some remain not

available for aggregate analysis.

+

-

The business plan includes clear social goals and targets in terms

of clients outreach and targeted clientele. However, some key

terms which are part of the mission are not broken down into

specific and measurable goals.

The alignment of the product strategy to the mission is adequate.

The top management regularly assesses social performance

related risks, using both internal reports and independent external

assessments.

The context risk factor for client over-indebtedness is medium,

considering OBS adjusted positioning. Growth rates have been

sustainable in the past 3 years.

The FI's alignment to the institutional double bottom line is good.

A significant portion of the profits generated is directed to

actions, programmes, products and services that increase value to

clients.

MicroFinanza Rating 2

Page 3: Opportunity Bank, Serbia - MFR · 2018. 11. 12. · Clients at third loan cycle Social Rating Committee: April 2016 Previous Social Rating: A- November 2013 SOCIAL RATING RATIONALE

OBS, Serbia

Client protection and

social responsibility

Area Factor Assessment Main results

Prevention of over-

indebtedness

ExcellentTransparency

AdequateResponsible

pricing

Good

Excellent

Mechanisms for

complaint

resolution

Social

responsibility

towards the staff

ExcellentFair and respectful

treatment

ExcellentPrivacy of client

data

+

Green index Moderate

Social

responsibility -

communityGood

-

The environmental strategy has not been formalized so far, while

the environmental protection goal is not among the institutional

values. OBS does not currently collect information on the

environmental risk of clients' activities.

OBS has a formalized exclusion list for activities that could harm

the community. The institution engages in several social

responsible projects.

GoodProduct design

and delivery

Good

+

+

+

+

+

+

+

+

+

+

Good product design, where client feedback is taken into account

for adjustments, with clear guidelines about acceptable collateral

and no evidence of aggressive sales techniques. Thorough client

drop-out analysis is regularly conducted.

Comprehensive repayment capacity analysis, which is well

disseminated amongst CAs, thanks to a lengthy induction process

with mentors. Credit bureau is consistently checked and

refinanced loans are monitored in detail. Productivity targets

remain prudential.

Complete package of information shared in written and verbal

form, including EIR. Staff are well trained about how to

communicate with clients and the summary sheet and promotion

materials are easy to understand.

Adequate conditions regarding fees, including early repayment

fees. There is room for further limitation of the FX risk, which is

currently transferred to clients with loans in EUR.

Staff appraisal and incentive scheme make sure they are well

aware of OBS values and portfolio quality. Collateral seizure and

sale process are strictly regulated and all relevant staff are

trained.

The archiving system is efficient and the client data protection is

strictly dictated by regulations. A good sanction policy is in place.

The complaint handling system offers timely solutions. Complaints

collection are encouraged by implementing obligations for branch

managers to report them and via the staff appraisal.

The gender balance is overall good.

OBS conducts formal staff satisfaction surveys annually and the

results are analysed at the management level. The staff turnover

is slightly lower than the benchmark and is concentrated in field

staff.

Salaries are line with the local microfinance labour market.

MicroFinanza Rating 3

Page 4: Opportunity Bank, Serbia - MFR · 2018. 11. 12. · Clients at third loan cycle Social Rating Committee: April 2016 Previous Social Rating: A- November 2013 SOCIAL RATING RATIONALE

OBS, Serbia

Area Factor

GoodVariety of financial

services

AdequateClient drop-out

rate

AdequateQuality of other

financial services

Quality of non-

financial servicesAdequate

Outreach

Flexibility of credit

services

Accessibility of

credit servicesGood

GoodBreadth of

outreach

Good

Geographical

outreach

alignment

Alignment to the

mission of clients

vulnerability and

financed activities

Good

Adequate

Alignment to the

mission of client

poverty and

financial exclusion

Main results

+

Assessment

Good

Quality of the services

The credit products do not present major accessibility barriers,

thanks to flexible loan sizes, multiple guarantee options and

acceptable requirements.

The need for clients to invest in economic opportunities and

address life cycle household needs is adequately met by the

products and services offered by OBS.

OBS offers both credit and savings services, as well as payment

facilities and currency exchanges. The insurance products could be

further developed.

+

+

+

+

+

+

The customer service is good, as reflected in the very high scores

obtained in the most resent client satisfaction surveys. +

+

+The client drop-out rate is below the majority of the peer groups

considered, although it remains improvable.

+

+

The targeted segments needs to build savings and manage their

cash flow are adequately met by the savings services offered by

OBS. The needs to be protected from business and household

shocks are only partly covered.

The quality of the non-financial services is good, although the

offer is not yet substantial in terms of scale.

+

+

The outreach to financially excluded people seems adequate.

The bulk of loans are backed by soft guarantee, which suggests

that the majority of clients may not necessarily own a large

amount of assets.

OBS closely monitors its outreach towards clients that are

classified as poor, very poor and low income.

The breadth of outreach is very good, as OBS presence is well

established in all Serbian districts.

The average growth of borrowers in the last 3 years shows

positive trend, although the growth pace has been reduced.

The coverage of rural areas is very large. The outreach to areas

poorer than the national average is moderate.

The outreach to households with vulnerable demographic

characteristics is good, while the outreach to women is adequate.

The share of loans financing income generating activities is high

and improving compared to 2013.

The convenience of the service delivery channels for the client is

adequate, while the loan disbursement procedure is reasonably

fast and simple for the clients.

+

+

+

+ indicates an adequate, good or excellent assessment; - indicates a moderate, weak or poor assessment.

The loan terms, the loan repayment schedules and loan amounts

are adequately tailored to the main financial needs of the target

population segments.

MicroFinanza Rating 4

Page 5: Opportunity Bank, Serbia - MFR · 2018. 11. 12. · Clients at third loan cycle Social Rating Committee: April 2016 Previous Social Rating: A- November 2013 SOCIAL RATING RATIONALE

OBS, Serbia

Benchmark

0 50,000 100,000

Opportunity Bank

ECA

Bank

High fin. intermed.

Large outreach

Individual

Rural

Active borrowers

0 100 200

Opportunity Bank

ECA

Bank

High fin. intermed.

Large outreach

Individual

Rural

Average balance/borrower/GNI pc

0 20 40 60 80

Opportunity Bank

ECA

Bank

High fin. intermed.

Large outreach

Individual

Rural

Female clients

0 20 40 60

Opportunity Bank

ECA

Bank

High fin. intermed.

Large outreach

Individual

Rural

Female staff

0.0 1.0 2.0 3.0 4.0 5.0 6.0

Opportunity Bank

ECA

Bank

High fin. intermed.

Large outreach

Individual

Rural

PAR30

0 10 20 30 40

Opportunity Bank

ECA

Bank

High fin. intermed.

Large outreach

Individual

Rural

Portfolio yield

0 10 20 30 40 50

Opportunity BankECA

BankHigh fin. intermed.

Large outreachIndividual

Rural

Client drop-out ratio

0.0 5.0 10.0 15.0 20.0

Opportunity Bank

ECA

Bank

High fin. intermed.

Large outreach

Individual

Rural

Staff turn-over ratio

MicroFinanza Rating 5

Page 6: Opportunity Bank, Serbia - MFR · 2018. 11. 12. · Clients at third loan cycle Social Rating Committee: April 2016 Previous Social Rating: A- November 2013 SOCIAL RATING RATIONALE

OBS, Serbia

-

+

+

+

+

+

Social mission

1.1 Mission, governance

and strategy

Governance good

practices

The mission includes the institution's social goals; however the social goals related to the target

population and the expected changes are generic. For instance, although OBS intends and

manages to increasingly focus on rural clients, this does not clearly come out from the mission

statement.

The mission overall reflects the institutional intentions shared at governance and top management

level, specifically in terms of reaching a specific target population. This is particularly true since the

end of 2014, when Opportunity International became the sole shareholder of OBS, eliminating

potential diverging views about the mission among the Board members. The top management has

remained stable over time with a solid understanding and commitment to the social mission.

The key terms of the mission related to the target population are formally and clearly defined

through specific demographic and socio-economic characteristics, allowing for a uniform

interpretation across the organization. On the other hand, there is some room for better

formalization of the key terms related to the expected change. OBS uses the National Statistics

Survey information as well as the income level of their clients to define rural and poor clients in

the Serbian context. However the change creation is not directly measured with respect to

children's futures and communities.

The BoD provides strategic directions to guide the management in defining the strategy. The BoD

members participate in setting the long-term objectives and approve the business plan,

demonstrating an adequate level of ownership of the key strategic goals. An SPM / Transformation

Committee which is a sub-committee of the Board is focused on the achievement of the social

goals.

Social mission: AdequateSocial governance: GoodSocial Strategy: Good

Social Goals

Reaching target clients

Meeting client needs

Creating change

Key words in mission statement

Underserved and financially excluded people

Providing financial solutions and training

Empower (them) to transform their lives, their children's futures

and their communities

The mission has been rephrased in the last 3 years due to the fact that minority shareholders have

exited the capital of OBS. The institution now has fully adopted Opportunity International's

mission.

MISSION STATEMENT

By providing financial solutions and training, we empower the underserved and financially

excluded people to transform their lives, their children’s futures and their communities.

The mission statement is formalized but there are some inconsistencies in its formulation in

different strategic, operational and communication documents. The HR policy for instance has

been updated to reflect the current phrasing, while the SPM methodology still displays the

previous one.

1. Social Performance Management system

MicroFinanza Rating 6

Page 7: Opportunity Bank, Serbia - MFR · 2018. 11. 12. · Clients at third loan cycle Social Rating Committee: April 2016 Previous Social Rating: A- November 2013 SOCIAL RATING RATIONALE

OBS, Serbia

+

+

+

+

-

+

+

+

+

+

+

Social Strategy

Social governance

The BoD ensures a strong supervision and control of the management activities, covering the

achievement of the plans and providing relevant feedback to the management. A periodic

assessment/self-assessment of the BoD performance is carried out. The last reported self-

assessment was performed in July 2015. The Chairman consolidates the results and members

discuss together directions that should be taken to address potential issues.

The BoD commitment to the social mission is overall adequate.

No change in the legal form/regulation recently undergone or planned in the next 2 years.

The 2015-2019 business plan includes clear social goals and targets in terms of clients outreach

(low income and rural). The SPM methodology specifies that the first goal is to have 40% share of

new loan clients categorised as Poor, Very Poor and Low Income by end of 2014 (50% by end of

2018). The second goal is to enable 20% of renewed clients to progress to a higher-income

category by end of 2018. While the third goal is to help create 100,000 new and sustain 150,000

existing jobs by the end of 2018. The strategy includes clear social goals and targets in terms of

target client, clients' needs to meet and desired impact in clients' lives, even it they do not

completely address all the aspects of the mission. The formulation of some of the targets is not

fully specific nor measurable, i.e. transform children's' future and communities.

The Board provides some general guidance to orient the strategy towards the mission. The

executive Board and the SPM champion of OBS are in charge of better defining social strategy and

do so in a committed way.

There is evidence that the Board informally considers the overall adherence to the institutional

values and some social performance parameters while evaluating the CEO. Aspects such as client

outreach are taken into account.

The risk of mission drift related to changes in the ownership structure is limited. The Board

demonstrates an adequate capacity to prevent such risk, as the social alignment of the new

shareholders is a primary selection criterion. Given that OI has since 2014 the sole ownership,

there is no formal investors' agreement, so some uncertainties remain about the identification of

the new partners.

The product strategy is well aligned to the mission. The financial products, services, delivery

models and channels are adequately tailored to the target clients and meet their needs. The link

between the product strategy and the positive change in clients' lives is less explicit. The top

management articulates how its products and services will help reaching the target clients and

achieving some aspects of the desired change in their lives, even if a theory of change is not

formalized in the strategy.

The non-financial services offered are adequately aligned to the mission and they can help reach

the target population and achieve the desired change in clients' lives. The non-financial services

are designed by taking into account the key aspects of clients' needs and preferences, analysed

through informal client feedback.

A code of conduct covering the ethical behaviour expected of BoD members and regulating

potential conflicts of interest at governance level is in place. The code is well implemented. There

is no evidence of risks of conflict of interest at the BoD or management level.

The Board does not display specific social performance expertise but Opportunity International

representatives are exposed to formal social performance trainings. All board members should,

however, be trained on social performance management key aspects.

The Board reviews relevant information on : the number of jobs created and sustained, the share

of clients by levels of poverty (internal definitions available), the share of clientele that has

progressed into a higher income category between 2 loan cycles, share of rural clients, the client

drop-out rate, the average APR, the number of complaints received, client satisfaction results, the

staff turnover rate and overall performance regarding client protection practices. The executive

Board uses the SPI4 tool to measure and report to the Board the progress made in its Social

Performance Management practices.

MicroFinanza Rating 7

Page 8: Opportunity Bank, Serbia - MFR · 2018. 11. 12. · Clients at third loan cycle Social Rating Committee: April 2016 Previous Social Rating: A- November 2013 SOCIAL RATING RATIONALE

OBS, Serbia

+

+

+

+

Debt/Equity ratio

1.2 Social and financial

balance

Write-off ratioRestructured portfolio

Management compensation alignment to the double bottom line: Excellent

The top management regularly assesses social performance related risks (such as mission drift,

incidents resulting in harm to clients, incentives that can lead to negative employees behaviour,

lack of transparency) using both internal reports (e.g. management reports, risk management

reports, internal audit reports) and independent external assessments (e.g. ratings, audits) and

takes appropriate actions to avoid them. There is evidence of top management decisions made to

actively mitigate the social performance related risks (in the past 2 years).

Growth compatibility with sustainability and client well-being: Good

72%

12.5%3.4%

Financial performance

7%

Growth rates have been sustainable in the past 3 years, both at the aggregate level and in each

area of operations, considering the good internal capacity in terms of MIS, HR, operational

processes and credit processes. OBS main competitor has historically been ProCredit Bank.

However, this provider has changed its orientation from micro to small and medium-sized

businesses and farmers, which left micro and rural client segment uncovered. This is precisely the

direction that OBS intends to take, moving away from harsh competition allowing for safer

growth.

Return on Equity (ROE)Return on Assets (ROA)Adjusted Return on Equity (AROE)

2.2%

Fin. Self-sufficiency (FSS)Staff productivity (borrow.)LO productivity (borrow.)

4.9%14.0%2.5%

13.5%

The context risk factor for client over-indebtedness is medium: the penetration of microfinance

services in the areas of operation and the growth rates of competitors in the past years are

reasonable, the level of multiple borrowing is intermediate and the information available from the

credit bureau is good.

The market saturation (demand and competitors penetration) is assessed on an annual basis in all

branches and regions. There is evidence of corrective measures taken in the past to ensure that

the current growth is sustainable. After facing harsh competition from ProCredit on the medium

sized segment, OBS adjusted its strategy to grow in the rural areas with smaller sized loans.

6.0%

35.6%Growth in active borrowersGrowth in outstanding portfolioGrowth in number of staffGrowth in number of branchesPAR 30

Dec-15Dec-14Dec-13

15.0%13.3%18.3%

46.2%19.5%

Investors' alignment to the institutional double bottom line: GoodProfitability compatibility with client well being and long term sustainability: Good

Oper. Self-sufficiency (OSS)

11.2%27.4%5.5%

1.0%8.2%

115%113267

20.7%11.6%-11.1%4.2%1.8%6.3%

11.0%1.7%9.3%1.4%111%109%116310

1.2%

21.5%

4.5%

117%

7.0%12.5%

0.7%5.0%0.8%105%106%

96274

11.8% 11.8%

Adjusted Return on Assets (AROA)

Operating expense ratioFunding expense ratio Provision expense ratioPortfolio yieldRisk coverage ratioCost of funds ratio 7%

4.9

35.3%5.0%

20.1%56%

Source: OBS data adjusted by MicroFinanza Rating4.9

6%4.9

32.3%6.6%

20.9%59%

Growth compatibility

with sustainability and

client well-being

MicroFinanza Rating 8

Page 9: Opportunity Bank, Serbia - MFR · 2018. 11. 12. · Clients at third loan cycle Social Rating Committee: April 2016 Previous Social Rating: A- November 2013 SOCIAL RATING RATIONALE

OBS, Serbia

+

+

+

+

+

+

+

+

1.3 Social performance

measurement

Back in 2013, the Board had established that 1 to 10% was the desired range for ROE. In July 2014,

the Risk Appetite Statement enlarged the range reaching a ceiling of 20%. However in February

2015, the definition of a precise range was abandoned. Instead, the ALM policy of OI require that

each time that ROE exceeds 10%, explanations must be given to the BoD in order to assess

potential mission drift risk. In the case of OBS, knowing that its capital is denominated in RSD, the

OI network considers that an ROE of 10% is the minimum level to compensate the annual drop of

RSD against EUR and USD. Actual return would be gains above 10%, however by convention, it

should not exceed 18% (BoD guideline). The current business plan projects a maximum ROE of

16%. No dividends are being paid to OI and the full profit is reinvested in the business. It can be

thus considered that there is an acceptable consistency between the institution’s social goals on

one side and the targeted level of profitability as set by the BoD on the other side.

The compensation of top management is fully transparent.

Social information consolidation, analysis and reporting: Good

Measurement of the target client: AdequateMeasurement of the quality of the services: AdequateMeasurement of the change/impact: Adequate

Relative to its size, the institution demonstrates an adequate capacity to monitor the client

characteristics relevant to its mission and the alignment of the outreach results to the target

population. Some relevant data is captured electronically in the MIS, including urban vs. rural

location, number of household members, poverty category (internal definition), etc.

Characteristics such as household assets (e.g. house, land), financial exclusion (e.g. clients without

previous access to formal credit), clients belonging to a marginalized group (e.g. disabled) or the

financed activity are not part of the available consolidated dataset. Some client profile data

relevant for the mission are collected for individual clients on paper (e.g. family income and

expenses, previous access to credit, etc.) but are not consolidated in a unique database and cannot

be used for aggregate analysis.

Management

compensation alignment

to the double bottom

line

Target client

The financing structure is transparent as the reported leverage ratios incorporate all funding

sources, including any off-balance sheet ones. Audited financial statement are available upon

request.

The institution has good risk policies to protect the liabilities towards the customers, including

savings.

Investors' alignment to

the institutional double

bottom line

Profitability

compatibility with client

well being and long term

sustainability

A significant portion of the profits generated is directed to actions, programs or products that

increase value to clients. An SPM (Transformation) budget has been established, allowing to

structure spending on non-financial services such as education through trainings on topics such as

agricultural production, women empowerment, etc. Also, the SPM procedure protects delinquent

clients that find themselves in very compromising financial situations, under certain conditions.

This pilot measure was enforced for Retail clients in late 2015 and was expected to spread to the

entire clientele by March 2016. Also, following the market trend, effective interest rates have

overall decreased over the last period.

Products offer a fair value to the clients for their price; this is reflected by the analysis carried out

by the institution of some key aspects of competitors' pricing and client feedback. In the client

satisfaction survey conducted in November 2015, on a sample of 131 clients, 99% claimed they

would cooperate again with OBS. However 84% of sampled clients pointed out interest rates and

loan terms as the worst features of OBS offer. The Marketing department provides monthly

reports to the top management highlighting pricing trends on the market, both for credit and

saving products.

The top management compensation is consistent with the institution's social mission. The top

management compensation is set by the BoD and takes into account the CEO performance. The

gap between the top three management and the bottom three field staff compensation is justified

and it is below the peer groups (standing at 17.3). The incentive-based top management

compensation takes into account both financial and social performance indicators.

MicroFinanza Rating 9

Page 10: Opportunity Bank, Serbia - MFR · 2018. 11. 12. · Clients at third loan cycle Social Rating Committee: April 2016 Previous Social Rating: A- November 2013 SOCIAL RATING RATIONALE

OBS, Serbia

+

+

+

+

+

+

+

+

+

The system to monitor the change in clients’ lives is acceptable considering the size of the

organization. However, the progress is monitored with few indicators (e.g. job creation), which

address only in part the social mission which in the case of OBS indicates also mentions children's'

future and communities. The tool used to measure the change in the poverty level of clients is the

declared household income, compared over two credit cycles.

Staff recruitment and training alignment to the mission: AdequateStaff evaluation and incentive alignment to the mission: Adequate

Social information

reliability and reporting

1.4 HR alignment to the

mission

The majority of the information on the client satisfaction and the clients profile (including the

poverty rate) is periodically consolidated and analysed at the institutional level. The large majority

of the social performance information is reported to the management in a timely and frequent

manner and to the BoD on a quarterly basis.

The MIS has the capacity to disaggregate the client data (including the poverty status) by most the

relevant characteristics: region, product used, urban vs. rural location. The disaggregated data

reliability is adequate.

Information is collected to monitor the use of products and services by the different client

segments, including the target population. This is mainly done through Client Satisfaction surveys.

The middle management (e.g. branch managers) has information on how the products, services

and delivery models help clients to reduce risks and cope with common emergencies, invest in

economic opportunities and address anticipated household needs. However, no formal analysis

has been conducted so far on the topic on an extended scale.

The information about the client satisfaction is formally analysed on average yearly, covering the

overall service, and some product components such as the relationship with field employees,

product terms - amount, cost, term and frequency. The findings are analysed by client segment,

even if not in detail for all the client characteristics of the target population. Representative client

surveys and focus group discussions with clients are regularly used to collect the client feedback

on the satisfaction with the financial services.

The drop-out rate is monitored on a monthly basis using a reliable formula. The system allows for

a friendly review of the level of the drop-out rate, its trend and the concentration in the branches.

The drop-out rate is also available by client segments.

Quality of the services

Change / impact

The quality and reliability of the information currently collected on OBS clients' profile, their

satisfaction and the change in their lives is overall adequate. All the aspects of the information

management process, including personnel responsibilities, methods for the collection, storage,

analysis, quality control and reporting are clear and documented in policies. The institution’s

practices reflect the social data management policies. The data collection and data entry are

covered during the initial staff training of loan administrators and client advisors. The Quality

Control department periodically checks the accuracy of the social data collected on the field and

entered in the MIS as part of their tasks.

The institution discloses social performance data in a transparent manner through the current

social rating. In addition, it has conducted a social audit and includes social information in its

annual report. The independent validation of the social information is updated with a moderate

frequency, having the previous social rating been carried out more than 2 years ago. Some of the

information included in the annual report is updated on a yearly basis.

A good system is in place to measure the poverty level of clients and the alignment of the poverty

outreach results to the social goal of the mission. The poverty assessment tool used is the per

capita household income. The poverty level of clients is measured for clients that have joined OBS

since January 2014, for all products except from the Business segment. The representativeness of

the client sample is still to be enlarged.

MicroFinanza Rating 10

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OBS, Serbia

+

+

+

+

-

Staff recruitment and

training alignment to the

mission

The alignment of the staff appraisal to the mission is moderate. The evaluation structure does not

formally cover any specific aspect of the employee contribution to the social mission, such as their

adherence to the institutional values, and their ability to recruit target clients (following SPM

criteria). However, the quality of the customer service is informally reviewed by the loan officers

supervisors on a regular basis.

A new incentive scheme was launched for the Business segment in October 2015 and for Agro in

March 2016. This new incentive scheme does not encourage the provision of big loan amounts

since they have a lower weight in the bonus system. It will not apply for the Retail segment since

there amounts are already limited (no more than EUR 5,000). However, the staff incentive scheme

does not include explicit criteria linked to the institutions' social goals to ensure the staff

orientation towards the achievement of the mission.

Staff evaluation and

incentive alignment to

the mission

The staff recruitment process is well aligned to the mission. The candidate interviews and the

reference checks include the screening of the candidate’s commitment to the institutional social

goals and willingness to support the mission. An exchange over the perceived mission and values

of OBS usually takes place. However, the inclusion of social criteria on the hiring process is

currently only a practice and it is not yet documented in OBS HR hiring policy.

The staff training contributes to the dissemination of the mission to the personnel, since it's

formally part of the topics to be addressed. The induction trainings provided to the staff includes

an overview of the mission and values, the social goals and the client protection principles. Besides

the presentation of the topics, the trainings do not specifically include practical simulations of how

the social topics translate into the daily work of the staff. The frequency and coverage of the social

performance training is acceptable, considering the branch network and employee turn-over.

The mission dissemination among the staff is adequate. The management and the field staff

overall share a uniform understanding of the target population and the desired change in clients

lives. However, small differences in the interpretation of the institution's social goals exist across

branches or between old and new employees, mainly due to the change of the mission wording

since OI took over full ownership.

MicroFinanza Rating 11

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OBS, Serbia

+

+

-

+

+

+

+

+

+

+

+

+

+

6.8%22.9%11.5%

Labor climate: GoodStaff compensation: GoodProfessional development: Excellent

Staff Dec-13 Dec-14 Dec-15284

54.9%240

53.3%215

14.0%

31.1%52.1%

The formal HR policies are exhaustive and cover wages, benefits, working conditions, safety at

work, anti-harrassment safeguards, freedom of association, grievance resolution, whistle blower

policy, disciplinary procedures and possibe sanctions.

A non-discrimination policy for the staff is formalized and covers sex, race, and religion, but does

not cover HIV status, disability or sexual orientation. Thus, the risk of staff discrimination is low.

The CEO also proactively discourages favouritism towards recruiting family members of staff or

related parties.

The existing HR policy complies with the national labor laws.

Female staff in managementFemale members of the BoD

A formal grievance mechanism is in place to allow employees to raise concerns in a confidential

manner if needed. However, the formal grievance system does not seem to be effectively used by

the staff. Employees can also use informal channels to present their complaints.

All employees have a formal employment contract.

ManagementStaff turn-over ratio

Other line and administrative staff

Labor climate

monitoring

Loan officers4.8%

24.7%

35.6%

The gender balance is overall good: the composition of staff is well balanced (female staff over

50% during period of analysis), while female management and BoD members are slightly under

represented (34.9% and 25% respectively).

The staff turn-over rate is slightly lower than the benchmark. Especially when comparing OBS with

NBFIs in Serbia, the peers have been experiencing staff turnover above 17% in the period of

analysis (MixMarket , 2016).

The trend is stable; however, staff turn-over is concentrated in loan officers.

2.1 Social responsibility

towards the staff

Personnel gender

balance

Staff turn-over

Contractual conditions

and benefits

Total staff

The safety conditions for the field staff are good for the context: cash handling in the field is

prohibited and a safety policy is in place (training and equipment are provided to the staff to

mitigate the safety risks).

The institution conducts formal staff satisfaction surveys annually, collecting the staff feedback on

aspects such as the workload, training, communication, participation, and the leadership from

supervisors. The employee satisfaction surveys are conducted anonymously. The results are

analysed and shared with management.

15.9%

Staff leaving for better working conditions or higher salaries in the banking sector are among the

main reasons of turn-over. OBS has also dismissed staff due to underperformance or insufficient

compliance with the bank's regulations.

The HR function calculates the staff turn-over rate, monitors its level over time and its

concentration by staff category. The employees leaving the organization go through an exit

interview and a written analysis of the reasons for staff turn-over is conducted.

2. Client protection and social responsibility

13.0%

Female staff

13.0%14.5%15.6%14.5%14.0%

34.9%25.0%15.3%

The HR policies are available to the staff and uniformly applied in the practice.

Human resource policies

and occupational safety

MicroFinanza Rating 12

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OBS, Serbia

+

+

+

+

+

+

+

+

+

+

+

The sales techniques are not considered to be aggressive, as there is no evidence of cases where

the individual borrowers or guarantors may be put in a situation where they are forced to sign

credit or guarantee contracts.

The context risk factor for client over-indebtedness is medium: the penetration of microfinance

services in the areas of operation and the growth rates of competitors in the past years have been

reasonable, the level of multiple borrowing is intermediate and the information available from the

credit bureau is adequate.

Some specific features of the products design risk to harm clients, as clients borrowing in EUR have

to agree that the foreign exchange risk is upon their responsibility, as per NBS requirement. Also,

the cost of insurance for pensioner loans is incurred to OBS, except for the newly launched

product for pensioners of 75 to 79 years of age, who instead need to abide by a compulsory saving

worth 30% of the disbursed loan amount.

The acceptable pledges of collateral and the guidelines on how collaterals are registered and

valued are fully formalized in policies. When the borrower's assets are sold to repay a delinquent

loan, the assets' value is usually lower or in line with the outstanding loan.

The clients drop out reasons are formally investigated and tracked for a representative share of

exiting clients. Beside managing the individual exit cases, a consolidated analysis is conducted at

the level of the organization and of each branch to identify the main reasons of client drop-out.

Moreover, the concentration and trend of the reasons are specifically reviewed. The analysis is

conducted at least quarterly and reported annually. The method used to categorize the exit

reasons is appropriate to the aim of the analysis.

The management demonstrates a full understanding of the needs and preferences of the different

client segments. Thorough and formal research has been recently collected about the target

clients characteristics, the clients needs for products and delivery channels and the potential

barriers they face. The products and delivery channels are frequently adjusted based on clients'

needs and preferences, as demonstrated by the changes in the new products recently introduced,

such as the retail loan for pensioners of age 75 to 79.

Appropriate product design and delivery: GoodPrevention of over-indebtedness: GoodTransparency: ExcellentResponsible pricing: AdequateFair and respectful treatment: ExcellentPrivacy of client data: ExcellentMechanisms for complaint resolution: Excellent

The loan disbursement is not mainly based on guarantees for any product.

Salaries are based on a transparent salary scale.

2.2 Client protection

Appropriate product

design and delivery

A formal staff performance appraisal is conducted for all employees annually. The performance

results are used for individual development plans, promotions and raises. Career opportunities are

provided with transparent criteria.

Evaluation, training and

development

Prevention of over-

indebtedness

Contractual conditions

and benefits

The staff training is good: the majority of the staff receive effective trainings as appropriate to

their functions at least annually, according to a formal training plan and a dedicated budget. The

access to external trainings, besides internal training, is reasonable. The induction of new staff

covers the essential skills for each position.

Salaries are in line with the microfinance labour market for some of the employees, while the

remuneration of managers and some back office positions is slightly below the market. This was

the main finding of the comparative analysis of OBS salaries against those of other banks in Serbia

in Oct-15. However, because of the strong social mission and different target market compared to

other banks, this difference in salary is reasonable. The salary policy, nonetheless, respects the

minimum wage regulation.

MicroFinanza Rating 13

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OBS, Serbia

+

+

+

+

+

+

+

+

+

+

The system to review and report client data through the credit bureau is very good: the

consultation and sharing of client data is formalized in the credit policy and covers all loans in all

cycles. The credit bureau covers the main formal financial providers which are relevant for the

target market of the organization and the information is updated with an appropriate frequency

(i.e. daily).

The management and Board of Directors' awareness and concern for the risk of client over-

indebtedness is appropriate to the context. Some proxies are used to estimate the client over-

indebtedness risk (e.g. % exclusive clients versus clients with multiple loans). The system used by

the management and BoD to monitor the portfolio quality is good, relying on a complete set of

indicators - PAR, restructured, refinanced and write-off - with an appropriate frequency, and

concentration indicators - ageing, product, etc. -, and a vintage analysis to monitor the portfolio

per client advisor.The internal control verification of the policies to mitigate the risk of client over-indebtedness is

good. The client repayment capacity calculation and thresholds and the debt exposure calculation

and thresholds are verified by the internal control through both a desk review and client visit. The

credit bureau consultation undergo a desk or a client visit verification.

The client repayment analysis is performed for every loan and it is based on a client visit for the

majority of first cycle loans. The simplified process for retail loans does not contribute to the risk

of over-indebtedness, as the key elements of the analysis (i.e. income, expenses, additional loans)

are covered; the simplified analysis is subject to fairly prudential criteria.

The individual cash-flow analysis is good: a reasonable estimate of the client repayment capacity is

calculated through a detailed analysis of the client income, the business and family expenses as

well as liabilities from other sources. However, no specific conservative criteria are applied to

volatile income sources, and the potential obligation of the client as a guarantor is not considered.

The repayment capacity policy is well disseminated and uniformly implemented by the staff. The

training, field mentoring and coaching provided to the junior loan officers by the senior staff and

supervisors maintain an adequate quality of the repayment capacity analysis, considering the staff

growth and turn-over.

The portfolio quality is good and shows a positive trend. Client over-indebtedness may be one of

the factors contributing to late payments, even if not necessarily the main one. The corrective

measures taken to improve the portfolio quality are appropriate.

The staff incentive scheme and the productivity targets value portfolio quality, as much as the

portfolio volume and number of clients, contributing to preventing the risk of over-indebtedness.

The incentive scheme considers not only portfolio quality ratios, but also absolute amounts of

portfolio at risk, partly mitigating the risk of under-estimating the portfolio quality issues given the

current high growth and the consequent large share of young portfolio over the total portfolio.

A loan rescheduling policy exists and it is applied for late clients who have the “willingness” to

repay but not the capacity to repay. The policy formalizes the cases of specific distress under

which clients can be eligible for rescheduling (e.g. death of relative; natural disaster leading to

destruction of asset or production tool; sickness; etc.). Rescheduled loans are approved by

supervisors with a higher level of responsibility (Chief Risk Officer) compared to the original loan.

Rescheduling can also be considered if clients have demonstrated good history of repayment and

request a rescheduling due to business or personal problems. Policies also indicate the option of

reaching informal repayment agreement (i.e. without changing the loan contract) with late clients.

A loan write-off policy is in place, which abides to the NBS regulations. Loan refinancing is also

available as an option for exceptional cases.

The productivity targets and the incentive scheme parameters are reasonable as compared to the

industry benchmark. The variable remuneration (if any) does not exceed 100% of the total

remuneration on average. Targets are not standard for all loan officers, but they are differentiated

according to the experience or area served by loan officers, avoiding excessive pressure for each

specific context.

MicroFinanza Rating 14

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OBS, Serbia

+

+

+

+

+

+

+

+

+

+

+

Source: survey on recent clients. See annex 3 and 4 for more details.

+

+

Opportunity Bank 24%

The savings documentation given to the clients includes interest rates, fees (for account opening,

closing, withdrawals, maintenance and any other operation), withdrawal limits (when applied),

minimum and maximum balances, use of savings in case of credit default.

The insurance product documentation provided to the clients lists the complete information on

the cost and how premiums are collected; specific events and amount of loss covered; length and

term of coverage, and how to file a claim or contact information for making a claim.

The total amount that the client pays for the product is clearly presented to the clients, as required

by the local regulation.

The clients are given a hard copy of the contract and other documents they sign; however, they do

not receive a copy of other documents they sign, such as the consent form to access credit bureau

information or documentation regarding the pledge.

The effective annual interest rate or range of interest rates is disclosed for all loan products, in

accordance with the local regulation.

Avg. annual

percentage

rate (APR)

Average

transparency

index

Transparency

Responsible pricing

Fair and respectful

treatment

The code of conduct indicates the organizational values and standards of professional conduct

that are expected of all employees. The code has been reviewed and approved by the BoD.

The institutional transparency index, obtained as the weighted average of the transparency index

of the different loan products, is high, indicating a small difference in general between the nominal

interest rate disclosed to the clients and the effective interest rate calculated according to the

international standards (MFT methodology).

The communication with the clients is effective: the documentation and oral communication are

in the local language and front line staff receives a training on client communication, including the

techniques that address literacy/financial literacy limitations.

The clients are given adequate time to review the terms and conditions of the product, ask

questions and receive additional information prior to signing contracts: clients take home and

review product documentation including an amortization table and a summary sheet of terms,

conditions and costs prior to sale.

The collection policy describes the specific steps to follow in case of default (after how many days

the FI will take action and what those actions are) and the acceptable and unacceptable collection

strategies (e.g. using violence or humiliating language, calling the client after 8pm).

The price of all the loan products representing more than 25% of the portfolio is in line with the

peer group of the market: the Annual Percentage Rate (APR) is does not deviate more than 15%

from the average APR of the loan products with a similar loan size on the market.

The higher APR level for one or more products compared to the peer group is partly justified by

the higher operating expenses due to the higher penetration in rural or remote areas.

Clients receive clear and full documentation on all costs of the loan products (interest and fees),

fees and conditions for early repayment and for late payments.

Active

clients

Outstanding

portfolioCredit products

Average loan

balance,

Euro

Average loan

balance / GNI

pc

44%

19%

1.00

Micro Personal Loans for Pensioners

(RSD)96.0%

96.0%24% 19.2%43.1%

100%

1,017

2,157

MicroFinanza Rating 15

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OBS, Serbia

+

+

+

+

+

+

+

+

+

+

+

+

Enviromental products: Moderate

Community projects: GoodEnvironmental risk management: Moderate

Community protection policies: Good

The collection culture is not based on the zero tolerance for PAR principle, avoiding to increase the

risk of unethical behaviour in collection due to excessive pressure on the staff. The appropriate

collection culture is demonstrated by the PAR targets set at achievable levels for the areas of

operation, the reasonable PAR levels considered for the incentive scheme, and the gradual impact

of PAR on the incentive scheme (e.g. PAR 5 <15% to have 50% bonus, <10% to have 100% bonus).

The collection practices applied in the field are well monitored: the staff behaviour during

collection is verified during the visits of clients with late payments conducted by quality control.

Clients are protected by a non-discrimination policy.

2.3 Green index and

social responsibility

community

Privacy of client data

Mechanisms for

complaint resolution

The system in place to protect the confidentially and integrity of client information is very good:

the employees cannot download any parts of the database on their computers, the data back-up is

performed daily, the staff in charge of entering the data into the MIS is trained for the task, the

passwords are changed periodically and allow different access levels and client files are kept in a

secure place with limited access (external storage service).

The clients are requested a written consent to share their personal and financial information with

the credit bureaus and (when applicable) insurance companies.

A comprehensive written privacy policy is in place, defining the gathering, processing, use,

distribution and storage of client information. The policy covers current staff and those who leave

the organization.

The clients are effectively informed on how to submit a complaint through a variety of channels:

orientation provided by the staff during or before the loan disbursement, loan documentation,

and in communication materials visible in the branches. The pamphlet that explains the formal

and informal ways clients can complain is particularly effective in informing the clients about this

mechanism.

The induction training of all the staff involved in complaints handling (e.g. loan officers, customer

service officers, branch managers, complaint dedicated staff) includes a session on how the

complaints mechanism works, the role of every position (including the loan officers) in the process

and how to appropriately manage complaints until they are completely resolved (how to handle

complaints and refer them to the appropriate person for investigation and resolution). However,

the role of every position in the process is not covered in full detail.

There is a very good reporting system in place to ensure that all the complaints from the branches

reach the complaints handling staff. The oral and written complaints received at the branches are

recorded in a report describing the type of complaint and its resolution. The report is submitted by

the branches to the staff in charge of handling the complaints at the central level monthly. In

addition, branch and credit office managers have a minimum number of informal complaints they

have to report to the head office every month.

The employee performance evaluations review the ethical behavior, professional conduct and the

quality of interaction with customers of the staff involved dealing directly with clients.

A formal complaint mechanism is in place. The complaint handling system defines that complaints

must be resolved in a timely way (8 days, as per regulation), with a differentiated response

depending on the severity of the complaint. The clients seem to make an active use of the system

and this trend has been increasing.

All staff involved in collection (e.g. loan officers, branch managers and collection staff) receives a

comprehensive training covering the loan recovery procedures and the acceptable debt collections

practices.

MicroFinanza Rating 16

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OBS, Serbia

-

-

-

+

-

--

+

+

Environmental awareness raising activities have not been conducted yet with the staff. However,

the internal environmental risk is reduced thanks to some mechanisms to reduce use of paper.

The institution engages in socially responsible projects that benefit significantly the community,

including donations to schools, training for clients and non-clients, and other involvement of the

staff in community projects. The funds redistributed to the community are identified as a separate

item in the budget development process.

Social responsibility

towards the community

Green index

Green non-financial services such as awareness raising activities on the environmental risks,

training on environmentally-friendly practices, or environmentally-friendly businesses have not

been conducted with the clients in the last 5 years.

The environmental risk of the clients' activities is not evaluated and categorized per level of risk.

The environmental risk is a factor considered in the loan approval decision: the activities with a

high environmental risk are not financed, in compliance with the detailed list of environmentally

risky activities defined in the exclusion list. However, the loan contracts do not include clauses

requiring clients to improve environmental practices.

The environmental strategy has not been formalized so far. The environmental protection goal is

not among the formalized institutional values. The BoD members have not recently participated in

awareness raising activities on environmental regulation, risks and opportunities. There is

currently no specific person in the organization that has been appointed to manage environmental

issues. The institution's environmental practices are not included in the annual report or reports

sent to BoD or the investors.

OBS does not currently collect information on the environmental risk of the clients' activities.

The institution does not provide specific green loan, saving or insurance products.

The exclusion of activities harmful for the community such as terrorism, money-laundering and

child labour from the activities that can be financed is formalized in an exclusion list and internal

policy. The capacity to verify the compliance to the exclusion list/policy is adequate: the type of

activity the clients engage in are generally verified by quality control during the frequent client

visits.

MicroFinanza Rating 17

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OBS, Serbia

+

+

+

+

+

+

+

+

Household Budget Survey 2014, Social Inclusion and Poverty Reduction Unit Government of the Republic of Serbia

Geographical coverage: ExcellentAlignment of the geographical outreach to the mission: Good

Breadth of outreach: AdequateAlignment of the depth of outreach to the mission: Good

Growth in active borrowers

27,87817,093

54,493,5448

20.7%46.2%

55,663,6139

13.3%15.0%

73,216,906

Rural operations

Poverty

100%40.3%59.7%

35.3%64.7%

Serbia, population57%43%

Opportunity BankActive clients

19.2%Outstanding portfolio

22.3%37.8% 32.6%22.4% 18.3%20.6% 26.8%

Total, Opportunity Bank

Total, SerbiaUrbanRural

919.5%

Opportunity Bank

Active borrowersActive saversGross outstanding portfolio, EuroTotal active savings, EuroBranchesGrowth in outstanding portfolio

Dec-14

Jan-15

Dec-15

32,05520,544

Urban operations

3.1%16.2%15.0%

8.9%6.7%

BELGRADECENTRAL SERBIASOUTH SERBIAVOJVODINA

64,973,525

12.2%

Jan-14

Regions of operation

100%

Source:

The breadth of outreach indicated by the number of borrowers compared to the regional

benchmark is adequate.

The number of borrowers is in line with the average of the institution in the country.

The average growth of borrowers in the last 3 years has been good compared to the benchmark

(country and scale).

The average growth of borrowers in the last 3 years shows a positive trend although the growth

pace has been reduced.

Based on the available data, the outreach to households with a relatively low education level is

limited. According to UNESCO data, in 2002 23.9% of Serbians had completed only primary school;

among OBS clientele the share of clients with only primary education is below 1%.

The coverage of rural areas, with a concentration of financially excluded population, is very large.

The share of rural clients is significantly higher than the national average (43% against 60%). This

breakdown clearly illustrates the strategical shift that took place since 2013, when rural operations

represented only 38% of the active clientele.

The breadth of geographical outreach of OBS is very good as its client database shows that its

presence is well established in all Serbian districts.

3.1%

3.1 Area of operation

3.2 Clients reached

Social vulnerability and

household profile

The outreach to areas poorer than the national average is moderate: the share of operations

located in areas with a higher poverty rate than the national average (South Serbia and Vojvodina)

is limited (less than 50% of the outstanding portfolio and active clientele).

3. Outreach

35.6%

Jan-13

Dec-13

20,56312,916

56,779,84745,540,792

MicroFinanza Rating 18

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OBS, Serbia

+

+

+

+

The outreach to households with vulnerable demographic characteristics is good based on the

data available. The household size is slightly larger than the national (3.22 against 2.88). The

share of clients belonging to the vulnerable senior category (> 60 years old) is significant,

reaching 40% of the total clientele. It's worth mentioning that OBS is the only bank in Serbia

serving pensioners aged up to 79 years old.

The alignment between the type of financed activities and the income generation mission is good:

the share of loans financing income generating activities is high and improving compared to 2013.

The share of clients using the loans for a non income generation purpose (consumption) stands at

25%, against 46% in 2013. The largest share of loans financing consumption is dedicated to the

pensioners segment (as of December 2015, 77% of the Micro-Personal portfolio was disbursed to

pensioners).

The share of self-employed clients is high, above the peer groups and competitors such as

ProCredit, that has chosen to focus on SME rather than micro-entrepreneurs. However all non-

consumption loans are linked to formal and registered activities. The financing of start-up

businesses is allowed by policy but represents a negligible share of the portfolio (136 active loans

as of February 2016).

Financed activities

The outreach to women is adequate based on the available data. The female clients represent only

40% of the total clientele and only 29% of the outstanding portfolio. However these figures should

be put into perspective of the Serbian tradition and habits which do not promote agricultural

household or land ownership by females. A recent survey among agricultural households (96.8% of

them located in villages) that was carried out by Ninamedia on behalf of the Serbian Ministry of

Agriculture, showed that 81.9% of owners of registered agricultural households in Serbia are male,

while official statistics show that only 36% of women in Serbia own land. In addition to this,

according to a recent USAID study (2013), only 26% of businesses in Serbia are female-

owned/managed. It is worth mentioning that in the retail segment, the gender balance is good

(58% of female clients) even if this segment’s weight does not change the overall gender balance

of OBS clientele, an institution that primarily focuses on the agricultural segment.

Dec-15 Gender

Dec-15 Financed activities

71%

60%

29%

40%

Outstanding portfolio

Active clients

Male Female

8%

6%

14%

36%

45% 7%

52%

25%

Outstanding portfolio

Active clients

Trade

Services

Agriculture

Production

Housing

Consumption

Other

MicroFinanza Rating 19

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OBS, Serbia

+

+

+

+

+

+

+

Reliable poverty data are not fully available at the national level and the competitors' performance

on this matter cannot be fully measured, however proxy indicators show that the poverty

outreach is adequate and improving. Following its SPM methodology, OBS closely monitors its

outreach towards clients that are classified as poor, very poor and low income (Micro Personal

Loan segment). Reliable proxy indicators show that during Q4 of 2015, 38% of the active clientele

could be classified as low income (against 34% during Q1 of 2015). In addition, the share of rural

clients climbed from 38% in 2013 to 67% as of Q4 of 2015.

The outreach to households with no house and land ownership is adequate, being in line with the

national benchmark. OBS database registers 66% of borrowers as owners of their house, reflecting

the high participation of rural families in OBS clientele as well as the national trend of house and

apartment ownership. The bulk of loans are backed by soft guarantee. In addition, the loans backed by hard guarantee,

suggests that the majority of clients may not necessarily own a large amount of assets. OBS

accepts a wide range of collateral options, depending on the amount and type of credit product.

The most common security is the promissory note (70% of active clientele) and the guarantor

(23%). Hard collateral is required only for loans above EUR 10,000 and loans with terms above 36

months; only 3% of OBS clientele had to submit this security as of December 2015 (against 4.6% in

2013). OBS is gradually reducing the share of this clientele to focus on smaller needs.

The outreach to the financially excluded seems adequate. According to the latest client

satisfaction survey (November 2015, 131 clients sampled), 99 % of surveyed clients declared the

use of other banks' services mainly for current accounts (ATM, debit and credit card facilities, and

other services that OBS does not currently offer). Although the sample size is too small to

generalize the results to the entire population, the indicator seems to suggest a rather low share

of clients facing barrier to formal financial services. As of now, there is no information on the

number of borrowers with no previous access to loans. Considering the bank priority attributed to

reaching the unbanked population, more data are needed to measure the alignment of the

outreach to the financially excluded with the mission, and identify possible areas for

improvement. Due to the general lack of financial services in the rural areas, it is safe to believe

that most of its unbanked clientele is part of the agricultural portfolio.

Nonetheless, OBS portfolio structure (and in particular the disbursed loan amounts) implies that

the share of clients with previous access to loans in banks and regulated financial institutions is

below the average of the country, suggesting a good outreach to the population excluded from

bank lending services.

Economic poverty

Dwelling and assets

Access to financial

services

Credit and saving size

The outreach to clients without previous access to formal services seems to be in line with the

national average, although formal data on this was not available.

The average loan balance (EUR 2,284, equivalent to 44% of the GNI/pc, against 73% in 2013)

indicates a broad range of segments served, including strata with smaller income, illustrating the

strategic shift.

Dec-15 Collateral

16% 7%

4%

33%

23%

43%

70%

Outstanding portfolio

Active clients

Mortgage

Deposit

Pledge

Guarantor

Client's promissorynote

MicroFinanza Rating 20

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OBS, Serbia

+

+

+

Loan size by product

Loan size

449%263%104%

6%

183%31%65%19%74%48%

0.0%

2,157

Saving size

Individuals A vista FXIndividuals A vista RSDIndividuals Term FXIndividuals Term RSDLegal Entities A vista FXLegal Entities A vista RSD

Average savings

balance, Euro

13,814

Average loan disbursed ($PPP)Average disbursed loan amount, Euro

Micro Business Loans RSDMicro Business Loans EUR

65%

¹ Annual average growth in the last three periods.

34%

Savings balance

per borrower /

GNI pc

73%1%

3,823

3123,552

21%1%

Micro Personal Loans for Pensioners (RSD)Overdraft (for businesses)Home Improvement LoansTotal

52%

15%

Total

Dec-14 Dec-15

Average loan balance, Euro 2,761

Amount of

savings

540%

2,2842,331

¹ Per borrower. ² Last period.

Active

savers

Small Business Loans RSDSmall Business Loans EURBusiness Development Loans EUR

8,028

-74.1%-18.3%

Micro Personal Loans (salary-receiver) EUR -50.6%

44%

4%4.61%0.54%11%

5,470324

7,6602,627

7,1372,4472,688

7,390

Dec-13

55.8%20.4%

100%2,709 100%

24%1%1%

24,621

Micro Personal Loans (salary-receiver) RSD

29%

3,1541,0172,3392,379

0.0%

0.0%0.0%

44%

Micro Agro Loans EURAgro Development Loans EUR

-36.0%54.8%-28.7%39.1%

2,046Micro Agro Loans RSD

Average

loan

balance,

Euro

2,8655,788

10,524

1,348

2,549

-9.7%

Average

loan

balance¹ /

GNI pc

The growth in the average loan balance in the last three periods of analysis has been below the

market trend, indicating a greater focus on less well-off segments of the population.

54.4%58.0%

126.2%233%

The average saving balance per borrower shows that OBS is reaching more low-income types of

segments, compared to 2013. The average savings balance is EUR 3,317 against EUR 5,210 in 2013.

1,623

The analysis of the average loan size by cycle for each product shows a gradual increase along with

the subsequent cycles, adequately reflecting the increasing financial needs of the repeated clients.

Growth in average loan balance¹

Growth in

portfolio share²

13%

MicroFinanza Rating 21

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OBS, Serbia

+

+

-

+

+

+

Variety of types of services: credit, saving, insurance, non-financial: GoodService variety to meet diverse client financial needs: Excellent

Adequacy of credit services: GoodAdequacy of other financial services: AdequateAdequacy of non-financial services: Adequate

The financial products do not present barriers to the access of the main target population, thanks

to the accessible loan and saving size (e.g. small minimum amount), guarantee and requirements

(e.g. soft collateral policy), loan repayment schedules and the savings withdrawal conditions.

Targeting particularly the rural areas, OBS has invested in alternative delivery channels. Tablets are

in use since 2 years while it is expected that within the first half of 2016, pilot preliminary

approvals through Smartphones will be performed. Repayment usually takes place in the premises

of the branches or through other banks, while rural clients have the possibility to use the post

office network, according to payment indications provided in the loan contract. Still, the current

opening hours of the bank can in some cases hamper accessibility for the retail and business

segment but also for the savers.

The overall variety of the types of services provided is very good: credit, saving, insurance and

other financial services (overdraft, payments and currency exchanges). In addition to this, non-

financial services are provided to a share of the clients (educational training). OBS demonstrates

willingness for on-going diversification of its product offer (for instance launching of a new loan

that retroactively covers land purchase). However, the range could be further enhanced with new

products and services or with the extension of already existing ones to new segments (for instance

insurance products, currently available only for pensioners). It is worth mentioning that OBS is

currently negotiating with various stakeholders in order to provide guarantee coverage for

agricultural loans through specific European funds.

The institution is licenced to mobilize savings from the clients and currently offers saving services.

The need for clients to invest in economic opportunities and address life cycle household needs is

adequately met by the products and services offered by OBS. The flexible products characteristics

match very well the need to finance business working capital, finance business investments,

finance agriculture working capital, finance agriculture investments. To a much more marginal

extent, OBS also finances start-up businesses. However, the current offer of products does not

match all possible financial needs which also include finance of life events, finance education,

finance health, etc. The variety of saving products is adequate. OBS currently offers mainly term

and a vista saving products, both in RSD and in EUR and both for private individuals and legal

entities / entrepreneurs.

Although OBS does not provide debit/credit cards to its clients and therefore has no ATM network

in place, it has recently started offering e-banking services to its agricultural clients, mitigating

transaction costs for people based in remote areas. However this service is only used by a

negligible minority of OBS clients, due to the fact that the use of internet remains a rare practice

within this target group. Money transfers and payments are available also for non-OBS clients.

The need for clients to cope with common emergencies is adequately met by the products and

services of the institution. Clients have several acceptable options available to manage shocks in

their cash flows, such as loan rescheduling when appropriate, easily withdrawable savings in case

of emergency. The pensioner borrowers are also covered by life insurance.

Variety of types of

services: credit, saving,

insurance, non-financial

Service variety to meet

diverse client financial

needs

4.2 Adequacy of services

4.1 Variety of services

As mentioned above, insurance services are not yet available for the full range of OBS clientele.

4. Quality of the services

MicroFinanza Rating 22

Page 23: Opportunity Bank, Serbia - MFR · 2018. 11. 12. · Clients at third loan cycle Social Rating Committee: April 2016 Previous Social Rating: A- November 2013 SOCIAL RATING RATIONALE

OBS, Serbia

+

+

+

+

+

+

+

+

Accessibility: service

delivery, time,

procedure, guarantee

The customer service is very good as demonstrated by the very high client satisfaction with the

field staff relationship resulting from the research conducted by the institution. The latest client

satisfaction survey shows that 75% rated the quality of interaction with OBS employees as

excellent.

The loan repayment frequency is well tailored to the most frequent business and household cash-

flow patterns of the target population segments as the clients can choose among several

appropriate repayment frequency options (including grace periods when appropriate). The

repayment of the interest tends to be on a monthly basis for all products, while the repayment of

principle is tailored to the clients’ needs for all types of products except for the retail ones, which

are in any case often secured by the existence of a monthly cash inflow (salary or pension). Those

are also the only products that go without grace period, while for the rest of the credit products,

up to 6 months of grace period can be granted. Terms are overall adequate, even if longer ones

could be considered provided that this is compatible with the available funding.

The loan terms are adequately tailored to the main financial needs of the target population

segments. OBS has recently increased the maximum term amount for retail borrowers, from 6 to 7

years now, in order make monthly instalments more comfortable for clients. However, internal

discussions are ongoing to further explore term flexibility potential, to the benefit of the different

client segments.

The majority of the target clients’ financial needs are well matched by the diverse range of loan

size options available among the different credit products and the different loan cycles. Loan

amounts are adjusted to the targeted clientele, based on the repayment capacity of each client.

The perception of clients tends to be that loan amounts and deposit sizes are tailored to their

needs.

Flexibility: term,

frequency, amount and

service

Client drop-out rate

The convenience of the service delivery channels for the clients is adequate. The coverage of the

branch network throughout Serbia is adequate, however, the branches are often located in the

cities while the target population is increasingly based in the rural parts of Serbia. OBS keeps

exploring technological solutions to address this aspect which is often perceived as a shortcoming

by clients.

The loan disbursement procedure is reasonably fast and simple for the clients: disbursing a loan

takes on average 3 working days. The documents required in case of non-mortgage loans are easy

to collect for clients and the process of filling-up the application form is supported by the filed

staff when needed. There is evidence from the client satisfaction studies conducted by the

institution that the share of clients satisfied with the disbursement procedure is good. In the

November 2015 client satisfaction survey, 57% of the sample assessed the loan disbursement

delay as excellent.

The types guarantees required are generally available to the target population and their value is

appropriate to the credit risk of the loans disbursed. There is evidence from the client satisfaction

studies conducted by the institution that the guarantee does not represent a significant challenge

for the clients. In the November 2015 client satisfaction survey, 42% of the sample assessed the

loan conditions (among which guarantee policy but not only) between good and excellent.

The client drop-out rate (calculated with MFR formula) is below the majority of the peer groups

considered (please check benchmark chart) although it remains improvable. The trend in the client

drop-out rate is rather stable over the last 3 years. The client drop-out calculated with the formula

used by OBS is lower. However the breakdown by business line reveals that the agro segment is

the most exposed to drop out, a trend that is currently under observation.

MicroFinanza Rating 23

Page 24: Opportunity Bank, Serbia - MFR · 2018. 11. 12. · Clients at third loan cycle Social Rating Committee: April 2016 Previous Social Rating: A- November 2013 SOCIAL RATING RATIONALE

OBS, Serbia

+

+

-

+

+

Dec-15

14.8%

Target clients leaving for other financial institutions with more diverse and appropriate products

and services (credit cards, ATMs, etc.) is among the reasons of client drop-out. Still, the price

component remains the major weakness of OBS offer, when compared to the one of the

commercial banks.

57%

24%

10%9%

22%

Jan-13 Jan-14 Jan-15

Dec-13 Dec-14

24.1%

The target segments' needs to build savings and manage their cash-flow are adequately met by the

saving services offered by the institution thanks to the diversified saving size options and the

flexible savings withdrawal conditions (periodic and objective-related for saving plans,

immediately accessible for general saving accounts). However, the delivery channels are not well

tailored to the needs of the target population (ATMs, smart cards / prepaid cards, not available).

Still, OBS offers e-banking for some specific segments. The client satisfaction research conducted

by the institution does not specifically address the savings services currently offered.

The target segments' needs to protect from business and household shocks are partly met by the

insurance services offered by the institution. The insurance product currently available for

pensioner borrowers is adequate, all costs being borne to its full extent by the bank. OBS could

enlarge its indirect insurance product offer to other segments as well. No market research to

collect the client feedback on the insurance service has been conducted so far.

The quality and relevance for the target population segments of the non-financial services is good.

The services are well designed to reduce the vulnerability of clients and increase their capability to

take advantage of economic opportunities.

The offer of non-financial services is not yet substantial, covering less than 50% of the clients.

Appropriateness of

financial services other

than credit

Loans in second cycle

Loans in third cycleLoans in > third cycle

28%

Client drop-out

Client drop-out ratioClient exit rate (Opportunity Bank)

Loans in first cycle

Variety and

appropriateness of non

financial services

MicroFinanza Rating 24

Page 25: Opportunity Bank, Serbia - MFR · 2018. 11. 12. · Clients at third loan cycle Social Rating Committee: April 2016 Previous Social Rating: A- November 2013 SOCIAL RATING RATIONALE

OBS, Serbia

Social rating

✓ Social performance management

✓ Client protection

✓ Outreach

✓ Quality of the services

1 Define and Monitor Social Goals1a The institution has a strategy to achieve its social goals1b The MFI collects, reports, and ensures the accuracy of client-level social data2 Ensure Board, Management, Employee Commitment to Social Goals2a Members of the Board of Directors are committed to the mission2b Board of Directors holds the institution accountable to its mission2c Senior management sets and oversees the strategy for achieving its social goals.2d Employees are recruited and evaluated based on social and financial performance3 Treat Clients Responsibly3a The MFI avoids client over-indebtedness.3b The MFI communicates clear, sufficient and timely information to the clients.3c The MFI treats their clients fairly and respectfully.3d The institution respects the privacy of client data.3e The MFI has timely and responsive mechanisms for complaints resolution.4: Design Services and Channels That Meet Clients’ Needs4a The MFI understands the needs and preferences of different types of clients.4b The MFI designs products and delivery channels avoiding clients harm.4c The MFI products and delivery channels are designed to benefit clients5 Treat Employees Responsibly5a The MFI policies protects employees and create a supportive working environment.5b Employment terms are transparent and training is provided to the employees5c The institution monitors employee satisfaction and turnover.6 Balance Financial and Social Performance6a Growth is sustainable for market conditions, allowing for high service quality6b The financing structure is appropriate to a double bottom line MFI6c Pursuit of profits does not undermine the sustainability or client well-being6d The senior managers compensation is appropriate to a double bottom line MFIG Green microfinanceGa The institution addresses environmental issues through a formalized strategy.Gb The institution manages its environmental risks.Gc The institution fosters green opportunities.

Implementation: high; intermediate; low.

ll

ll

ll

Intermediatell

Goodlll

lll

*Correspondence map between the USSPM and the Social Rating: annex 1 of the Social Rating Methodology

(www.microfinanzarating.com)

lll

5 Fair and respectful treatment6 Privacy of client data7 Mechanisms for complaint resolution

Social Rating general opinion on the Client Protection Certification

Client Protection Certification

Social Rating gives an indicator of the efforts

required to achieve certification.

Social Rating is not a certification, but it can be combined with a

certification with MicroFinanza Rating, a licensed certifier.

lll

Goodll

Effort required

Annex 1 - Universal Standards and Client Protection Certification

Universal Standards of Social

Performance managementSocial Rating demonstrates the

implementation to the USSPM*.

ModerateModerateModerateMedium

ModerateModerateModerate

1 Appropriate product design and delivery2 Prevention of over-indebtedness3 Transparency4 Responsible pricing

lll

lll

l

ll

l

Implementation

ll

lll

Goodlll

Universal Standards of Social Performance management validated by Social RatingIntermediate

lll

ll

Goodll

ll

lll

lll

Poor

ll

MicroFinanza Rating 25

Page 26: Opportunity Bank, Serbia - MFR · 2018. 11. 12. · Clients at third loan cycle Social Rating Committee: April 2016 Previous Social Rating: A- November 2013 SOCIAL RATING RATIONALE

OBS, Serbia

15.0%

32,05520,544

21.5%Portfolio yield

43.6%2,627

35.3%64.7%

23.6%Average annual percentage rate (APR)

Dec-15

Annex 2 – Social Indicators

Active clientsActive borrowersActive saversGrowth in active borrowers

13.3%Growth in outstanding portfolio

15.3%34.9%54.9%

CLIENT PROTECTION AND SOCIAL RESPONSIBILITY

OUTREACH

96.0%11.8%

14.0%2.5%

3.4%PAR30

Female staffFemale staff in managementStaff turn-over ratio¹

Average transparency indexOperating expense ratio

Return on Equity (ROE)Return on Assets (ROA)

100.0%Individual methodology, portfolioUrban coverage, portfolioRural coverage, portfolioAgriculture, portfolioAgriculture, clientsFemale clients, portfolioFemale clients 40.4%

45.3%35.6%29.1%

Average loan balance, Euro 2,157

Clients at third loan cycleLoans in > third cycle

Average balance per borrower / GNI pcAverage disbursed loan amount, Euro²Average loan disbursed ($PPP)Average saving balance, Euro

¹Calculated with average number of staff. ²Calculated with average exchange rateSources: MIS.

Client drop-out ratioQUALITY OF THE SERVICES

7,6602,709

24%10%9%

MicroFinanza Rating 26

Page 27: Opportunity Bank, Serbia - MFR · 2018. 11. 12. · Clients at third loan cycle Social Rating Committee: April 2016 Previous Social Rating: A- November 2013 SOCIAL RATING RATIONALE

OBS, Serbia

Mandatory savings

Declining balance Declining balance Declining balance Declining balance Declining balance

18.0% 18.0% 18.0% 12.0% 11.0%

24.0% 26.0% 24.0% 22.0% 20.0%

3% from

disbursed loan

2%-3% from

disbursed loan

3% from disbursed

loan

1-2.5% from

disbursed loan

0.5-2% from

disbursed loan

EUR 200K

Currency

Max. interest rate

Type of interest

Min. interest rate

Commissions

RSD EUR EUR

3 3 3 3 3

12 60

RSD 250K EUR 500

Min. maturity (months)

Max. maturity (months)

Individual Individual

Annex 3 – Financial Products

EUR 10K RSD 3,500K EUR 30K

Credit products /1

Lending methodology

Micro Business

Loans RSD

Micro Business

Loans EUR

Small Business

Loans RSD

Small Business

Loans EUR

Business

Development Loans

EUR

Individual

RSD 1,201K EUR 10K

Repayment frequency

Grace period (months)

Collateral

No No No No No

BOE, pledge,

guarantor (private

or legal entity),

mortgage,

deposit.

BOE, pledge,

guarantor (private or

legal entity),

mortgage, deposit.

max. 6 max. 6

BOE, pledge,

guarantor (private

or legal entity),

mortgage,

deposit.

BOE, pledge,

guarantor (private

or legal entity),

mortgage,

deposit.

BOE, pledge,

guarantor (private

or legal entity),

mortgage, deposit.

12 84 96

monthly monthly monthly monthly monthly

EUR 30K

RSD 1,200K

max. 3 max. 6

Individual Individual

RSD EUR

Min. amount

Max. amount

max. 3

MicroFinanza Rating 27

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OBS, Serbia

Grace period (months) max. 6 max. 6 max. 6 0 0

Collateral

BOE, pledge,

guarantor (private

or legal entity),

mortgage,

deposit.

BOE, pledge,

guarantor (private

or legal entity),

mortgage,

deposit.

BOE, pledge,

guarantor (private

or legal entity),

mortgage, deposit.

BOE, salary with

hold instrument,

guarantor (private

individual / legal

entity), credit

insurance.

Mandatory savings

No, only if deposit

is a partial or the

only security

instrument.

No, only if deposit

is a partial or the

only security

instrument.

No, only if deposit

is a partial or the

only security

instrument.

NoMin 30% of loan

amount

BOE, salary with

hold

instrument,

min. 30%

deposit; credit

insurance,

guarantor, lien

on the vehicle.

Min. maturity (months) 3 3 6 6 6

Max. maturity (months) 24 60

60 months, or 96

months for farm

land loans

84 120

Repayment frequency

monthly, or

quarterly,

semiannualy

monthly, or

quarterly,

semiannualy

monthly, or

quarterly,

semiannualy

Monthly Monthly

Commissions 0-3%. 0-3%.1 - 2% from

disbursed loan

0 - 2%, max up to

RSD 29,900 RSD

Disbursement fee -

fixed

0 - 2% Disbursement

fee - fixed

Min. amount RSD 50K EUR 500 EUR 10K RSD 20K EUR 200

Max. amount RSD 1,000K EUR 10K EUR 200K RSD 600K EUR 30K

RSD RSD EUR

Type of interest Declining balance Declining balance Declining balance Declining balance Declining balance

Min. interest rate 22.5% 16.0% 12.0% 18.0% 3.0%

Max. interest rate 28.0% 26.0% 20.0% 30.0% 20.0%

Currency RSD EUR

Credit products /2Micro Agro Loans

RSD

Micro Agro Loans

EUR

Agro

Development

Loans EUR

Micro Personal

Loans (salary-

receiver) RSD

Micro Personal Loans

(salary-receiver) EUR

Lending methodology Individual Individual Individual Individual Individual

MicroFinanza Rating 28

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OBS, Serbia

Mandatory savings

No, with

exception for 75+

years old

pensioners where

30% savings is

obligatory

No No

Grace period (months) 0 0 0

Collateral

BOE, pension with

hold instrument

(PWHI), credit

insurance,

guarantor private

individual.

BOE, pledge,

guarantor (private

or legal entity),

mortgage,

deposit, security

instruments.

BOE, pledge,

guarantor (private

or legal entity),

mortgage, deposit,

security

instruments.

Min. maturity (months) 6 3 3

Max. maturity (months) 84 12 12

Repayment frequency Monthly Monthly Monthly

Commissions

0 - 2%, max up to

RSD 29,900 RSD

Disbursement fee -

fixed

0-1.5% from

disbursed loan

0-1.5% from

disbursed loan

Min. amount RSD 20K RSD 50K RSD 50K

Max. amount RSD 600K EUR 30K EUR 30K

Type of interest Declining balance Flat Flat

Min. interest rate 17.95% 24.0% 24.0%

Max. interest rate 28.00% 28.0% 28.0%

Credit products /3

Micro Personal

Loans for

Pensioners (RSD)

Overdraft (for

businesses)

Home

Improvement

Loans

Lending methodology Individual Individual Individual

Currency RSD RSD RSD

MicroFinanza Rating 29

Page 30: Opportunity Bank, Serbia - MFR · 2018. 11. 12. · Clients at third loan cycle Social Rating Committee: April 2016 Previous Social Rating: A- November 2013 SOCIAL RATING RATIONALE

OBS, Serbia

No No

50% of accrued

interest until the

moment of early

withhdrawal

50% of accrued

interest until the

moment of early

withhdrawal

No

Interest payment

frequencyMonthly Monthly

The Interest is

accrued on

monthly,

quarterly, half -

yearly, annualy

level or at expiry

of the deposit

(depends on the

term)

The Interest is

accrued on

monthly,

quarterly, half -

yearly, annualy

level or at expiry

of the deposit

(depends on the

term)

Monthly

Anticipated withdrawal

penalty

Unlimited Unlimited RSD 10K EUR 50 Unlimited

Term (months) Unlimited Unlimited3,6,12,24,25,36,60

months

3,6,12,24,25,36,48

,60 monthsUnlimited

Min. accepted balance,

Euro

4.5% 9.0% 5.6% 11.0% 0.0%

Min. interest rate

Saving products /1Individuals A vista

FX

Individuals A vista

RSD

Individuals Term

FX

Individuals Term

RSD

Legal Entities A vista

FX

Currency EUR RSD EUR RSD EUR

Max. interest rate

0.0% 0.0% 0.3% 3.0% 0.0%

No commissions

15% interest

income tax (State

tax)

No commissions No commissionsCommissions

15% interest

income tax (State

tax)

MicroFinanza Rating 30

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OBS, Serbia

Anticipated withdrawal

penaltyNo

50% of accrued

interest until the

moment of early

withhdrawal

50% of accrued

interest until the

moment of early

withhdrawal

Interest payment

frequencyMonthly

The Interest is

accrued on

monthly,

quarterly, half -

yearly, annualy

level or at expiry

of the deposit

(depends on the

term)

The Interest is

accrued on

monthly,

quarterly, half -

yearly, annualy

level or at expiry

of the deposit

(depends on the

term)

Min. accepted balance,

EuroUnlimited EUR 5K RSD 100K

Term (months) Unlimited6,12,25,36,60

months

1,3,6,12,24,25,36,

48,60 months

Min. interest rate 0.0% 0.8% 2.5%

Max. interest rate 32.0% 6.0% 10.4%

Commissions No commissions No commissions No commissions

Saving products /2Legal Entities A

vista RSD

Legal Entities

Term FX

Legal Entities

Term RSD

Currency RSD EUR RSD

MicroFinanza Rating 31

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OBS, Serbia

Quality of the services

Amount disbursed during the period / Number of loans disbursed during the

period

Average loan balanceOutstanding portfolio (end of period) / Number of active borrowers (end of

period)

Average disbursed loan amount

Average loan disbursed ($PPP) Amount disbursed in local currency * $PPP conversion factor

Outreach

Provision expense ratio

Portfolio yield

Avg. annual percentage rate (APR)

Average transparency index

(Adjusted financial revenues + Other operating revenues) / (Adjusted financial

expenses + Adjusted loan loss provision expenses + Adjusted operating

expenses)

Number of active borrowers (clients) / Number of staff

Number of active borrowers / Number of loan officers

Number of groups / Number of loan officers

Operating expenses / Average gross outstanding portfolio

Interest and fee expenses on funding liabilities / Average gross outstanding

portfolio

Loan loss provision expenses / Average gross outstanding portfolio

Interest and fee revenues on loan portfolio / Average gross outstanding portfolio

Loan loss reserve / Portfolio at risk >30 days

Interest and fee expenses on funding liabilities / Average funding liabilities

Total liabilities / Total equity

Average top 3 management compensations / Average bottom 3 field staff

compensations

Staff turn-over ratio

LO productivity (groups)Operating expense ratio

Funding expense ratio

Restructured portfolio

Return on Equity (ROE)Return on Assets (ROA)Adjusted Return on Equity (AROE)Adjusted Return on Assets (AROA)

Oper. Self-sufficiency (OSS)

Fin. Self-sufficiency (FSS)

Staff productivity (borrow.)LO productivity (borrow.)

Debt/Equity ratio

Management/field staff compensation

PAR 30

Write-off ratio

Risk coverage ratio

Annex 4 - Definition of Indicators and Statistics

Outstanding balance on loans with arrears > 30 days / Gross outstanding

portfolio

Value of loans written-off during the period / Average gross outstanding

portfolio

Social Performance Management system

Client protection and social responsibility

Adjusted net income / Average equity

Adjusted net income / Average assets

(Financial revenues + Other operating revenues) / (Financial expenses +

Provision expenses + Operating expenses)

Staff who left during the period / Average staff at in the period

Includes interest rate, method of interest calculation, commissions, taxes,

mandatory savings (see MicroFinance Transparency tool)

The annual Percentage Rate (APR) of the institution is the average APR of all the

products weighted by the percentage of number of loans by product.

Nominal interest rate / Annual Percentage Rate

The transparency index of the institution is the average transparency index of all

the products weighted by the percentage of number of loans by product

Total gross outstanding rescheduled and/or refinanced portfolio / Gross

outstanding portfolio

Net income / Average equity

Net income / Average assets

Cost of funds ratio

MicroFinanza Rating 32

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OBS, Serbia

Client drop-out ratio

(number of active clients at the beginning of the period + number of new (first

time) clients entering during the period – clients written-off during the period –

number of active clients at the end of the period) / (number of active clients at

the beginning of the period)

MicroFinanza Rating 33

Page 34: Opportunity Bank, Serbia - MFR · 2018. 11. 12. · Clients at third loan cycle Social Rating Committee: April 2016 Previous Social Rating: A- November 2013 SOCIAL RATING RATIONALE

OBS, Serbia

More information: www.mf-rating.com

Medium risk of mission drift

Annex 5 – Social Rating Scale

Partial alignment to the social mission

Definition

Excellent social performance management and client protection systems.

High likelihood of achieving the social mission.

Good social performance management and client protection systems.

Social mission likely to be achieved.

Adequate social performance management and client protection systems.

The information used in the social rating has been partly provided by the evaluated institution and partly collected during the

meetings with the head executives, the staff and the clients of the institution. The analysis is based on internal MIS data and

other official sources. MicroFinanza Rating cannot guarantee the reliability and integrity of the information, as it does not

conduct auditing exercises, and therefore does not bear responsibility for any mistake or omission coming from the use of

such information. The social rating has to be considered as an external and independent opinion and it has not to be

considered as a recommendation to realize investments in a specific institution.

Poor social performance management and client protection systems.

Risk of mission drift.

Grade

SAA

SA

SBB

SB

SC

SD

The modifiers “+” and “-” which can be added to the rating grade indicate small relative differences within each rating category.

Weak social performance management and client protection systems.

Satisfactory alignment to the social mission.

Moderate social performance management and client protection systems.

MicroFinanza Rating 34