STRENGTHENING

IDBG’S

PARTNERSHIP

WITH LAC

FINANCIAL

INTERMEDIARIES

FELABAN 50th Annual Meeting

Presented by:

Roland Michelitsch

Buenos Aires, November 2016

What is the IDB Group (IDBG)

– Leading source of

development finance for LAC

– +$100B in assets, AAA rated

issuer, even during LAC crises

– $10-13B/year in loans, grants

and knowledge products

– Largest technical assistance

source in LAC (+$1B grants)

– Innovation lab supporting

fintechs and digital economy

– Independent evaluation

office for the IDBG

– Works for Board of

Directors

– Recently reorganized to

include all private sector

operations of IDBG

– $2B extra capital; cumulative

approvals of $34B over the

next 10 years

1959 1985 1993 1999

How IDBG works with FIs

Public ($9.5B)

IDBGPrivate ($7.6B)

2TFIs50+

90%+ US$ Senior loans/Countercyclical support

LAC FI

800+

1TFIs 200+45% of assets

Relevant borrowers

Products (2006-2015): total $17 billion

What DFIs do with FIs

Eight DFIs quadrupled volumes Tend to work with same FIs

IFC, IDBG, CAF with 80% of funding

Total $66 billion

% of IDBG clients working with other DFIs (Based on survey of 120 FIs)

Why DFIs work with FIs

Private Sector Credit still lagging High Interest Rate Spreads

Firm size

Reach

Use

Access to finance: constrained for smaller firms

• Portfolio review (466)

• Interviews (200+)

• Focus groups (16)

• DFI benchmarking (8)

• FI Survey (120+)

Inputs

Market Segments:

SME

Trade finance

Housing finance

Leasing & factoring

Green lending

Cross-cutting issues:

A2F country profiles

FI client surveys

DFI benchmarking

Investment Officer surveys

Env. & social safeguards

Background papers

Evaluation of IDBG’s work with FIs

English: www.iadb.org/evaluation/FIEspañol: www.iadb.org/evaluacion/IF

Sustainably increase access to finance for relevant borrowers by strengthening our partnership with FIs

Objective Main Report

All reports publicly available

Findings fall in three areas

Positive feedback from IDBG-clients

Loan Tenors Interest Rates Covenants

Technical Support Reputational Boost Strategic Partner

Based on FI survey of 120 (of 235) FIs

Which DFIs were rated best by clients?

Link products to key A2F barriers

SME barriers Trade Finance barriers

5. Client informality

6. Regulatory environment

7. Financial infrastructure

8. Fiscal crowding out

1. FI funding constraints

2. FI risk perceptions

3. FI client know-how

4. FI market competition

Typical A2F barriers (country specific)

Move from lists to portfolio growth

• Reputation risk to both IDBG and FIs

• Options: whole FIs, relevant portfolio, or use of proceeds

Environmental and Social Safeguards

Now: Lists of final borrowers Preferred: Increase in FI’s Relevant Portfolio

Address key FI priorities

Factors driving FIs Priority segments

Key areas of contribution Feedback on IDBG’s Technical Assistance

• Use FI definitions, systems

• Reward access to finance

growth, not lending volumes

• Find ways to finance TA

• Reward long term

performance

Metrics

Enhance incentives for results

FI-criteria for SMEs

• Explore incentivizing FIs through loan terms

• Promote CFO-business area interaction within FIs

• Partner to develop new standardized products

• Help ”sell” economic case

Cooperation

Levels of separation of SME department from CEO

Elements of IDBG’s FI Action Plan

1. Develop an IDBG-wide strategy for working with FIs,with criteria for FI selection, terms and use of instruments

2. Address A2F barriers while still responding to demand by better integrating FI work into IDBG Country Strategies

3. Generate value other than from just lending spreads by actively developing new products with FIs as partners

4. Strengthen the monitoring of the results that matter and better align incentives between IDBG and FI partners

5. Review & strengthen E&S safeguards to effectively mitigate risks and help build capacity in LAC

Roland Michelitsch

Alejandro Soriano

English: www.iadb.org/evaluation/FI

Español: www.iadb.org/evaluacion/IF