COO WorkshopIntroduction and Overview

July 13, 2012

Agenda

• Saturday –

LO Performance Management (Diego & Bijan)

Review of Village Banking 2.0 procedures and planning of subsequent pilots

Agricultural-Small Group Lending (Anthony)

• Sunday –

Review of Regional Credit Manual Template and implementation planning

• Monday –

Career Path and Training Curriculum (Sergio)

Second semester work plan for Training Managers (Sergio)

Village Banking 2.0Quick Overview

Fundamentals

• Relies on the formalization of existing social relationships.

• Designed to provide the lowest-income entrepreneurs with working capital loans, without requiring collateral or credit history.

• Based on solidarity – the camaraderie, shared interests, needs, and responsibilities – which serves as “collateral” for these loans.

• Minimum eligibility requirements.

• Targets the poorest working entrepreneurs.

• LOs trained to actively create and encourage group solidarity and accountability.

• LOs use illustrated stories and new Meeting Manuals to ensure consistent product presentation.

Product Matrix

Loan amount/client US$ 50-US$ 1,000

1st Cycle loan amount US$ 50-US$ 300

Loan Term 3-12 months

1st Cycle Loan Term Up to 6 months

Group size 9-25

Payment frequencies 28 days

Loan purpose Working/fixed capital or mixed investment

Interest rate (declining), per month 3%-5%

Disbursement fee 3%-5%

Late Payment Fee 50% of interest rate

Time living in community 12 months

Home visit before CC by LO required Yes, for all new clients.

Business Evidences No

Frequency of LO visits to clients Regular group meetings

CM/CTL must be present in credit analysis? CTL must be present in all Approval Meetings.

Premature repayment accepted [Country Specific]

Fee for premature repayment [Country Specific]

Premature Recapitalization accepted [Country Specific]

Interest Rate LevelsIncentives for strong repayment and large groups!

Purpose: to promote good payment behavior and growing group sizes while encouraging the Directiva to fulfill its additional responsibilities.

Requirements:• All new groups receive first loan at Interest Level III• For Level II, a VB must: have repaid previous loan with ≤ 2 late

installments, none being > 7 days late and have ≥ 14 members.• For Level I, a VB must: have repaid previous loan with not ≤ 2

late installments, none being > 7 days late and have ≥ 20 members.

Interest Rate Level # of Group MembersGroup

Interest RateDirectiva

Interest Rate

I 20-25 3.5% 2 %

II 14-19 4.5% 3 %

III 9-13 5% 4 %

Client RatingsEstablishing maximum loan sizes

Function:• Ratings provide a ceiling for personal loan increases per cycle.

How they are calculated:• Ratings are based on clients’ personal repayment quality/behavior as tracked in

the FINCA MIS. • Note: Clients can only improve their rate by one level per cycle. Moreover, VB

Members reserve the right to approve lower – but not higher – loan amounts.

Client Rating Nr of Late Installments* Max. Loan Increase

AA ≤ 1 30%

A ≤ 2 10%

B ≤ 3 Same or lower amount

C > 4 No refinancing

*If one quota is late for >7 days, then next lower level applies and no improvement of client rating in that cycle is possible

Current PilotsHaiti and Nicaragua forging the way!

Haiti• Hired 9 new Loan Officers.• Conducting Pilot in the Jacmel Branch.• Training began Monday, July 9th!

Nicaragua• Retrained 4 experienced Loan Officers and hired 4 new

ones!• Retrained 2 experienced Supervisors!• Conducting Pilot in the Bello Horizonte and the

Chinandega Branches.• Already formed 18 groups!

Upcoming VB 2.0 PilotsPlanned Implementation for Q4 2012 and Q1 2013

Q4 2012• October – begin pilot in Guatemala and Honduras• November – begin pilot in Ecuador

Q1 2013• El Salvador

The Credit Department Manual Template

Background

• Based on Azerbaijan Lending Manual and other documents from Eurasia

• Reviewed and edited by team made up of regional COOs, Internal Control, and HUB staff

• Includes all relevant credit department policies and procedures

• Serves as a regional template, to be adjusted to fit each countries needs – adjustments will be approved by HUB before implementation

Implementation Plan3 Step Process to Full Implementation

Agricultural Group Lending Update

AG-SGL UpdateCurrent Situation & 6 month plan

As of May 2012:• Current Portfolio: $305,057• Clients: 745 clients

• Average Loan: $381• 13 LOs; 2 Product

Managers

AG-SGL Timeline