Download Microfinance Institutions in Bosnia, Colombia and Nicaragua: What

15 April 2010
Microfinance Institutions in Bosnia, Colombia and
Nicaragua: What Key Trends Mean for the Future?
Sandra Hamilton
Associate Director, Fitch Ratings London
Santiago Muñoz
Associate Director, Fitch Ratings Colombia
Rene Medrano
Director, Fitch Centroamérica
Agenda – Bosnia & Herzegovina
Setting the Scene
Looking Beyond “PAR30”
Roads to Recovery?
Setting the Scene
Banking Sector ─ % Growth
Real GDP Change
Total Assets (BAMm)
25
20
15
10
5
0
34%
2010
forecast
2009
6%
-1%
2011
forecast
Slovenia
1.0
2007
2008
2009
Microfinance Sectora ─ % Growth
Gross Loans (BAMm)
29%
1.0
85%
-18%
0.8
0.6
0.4
0.2
0.0
-7.7
Croatia
-0.5
-5.8
Bosnia
4.0
Herzegovina
Bulgaria
2007
2008
2009
-0.5
0.0
-3.0
-5.0
12 AMFI members
Source: Fitch Sovereign Data Comparator – December 2009, IMF, CBBA, AMFI, Fitch
a
2
Looking Beyond “PAR30”
Microfinance Sectora
(%)
Loan loss reserves
PAR30
Annualised write off rates
10
8.3%
8
6
4
2
2.6%
1.0%
0
2007
2008
2009
a
12 AMFI members
Source: Fitch Sovereign Data Comparator – December 2009, IMF, cbba, AMFI, Fitch
3
Roads to Recovery?
> Full impact of crisis not yet fed through to results
> Asset quality deterioration likely to peak during
2010
> Transformation remains a key issue
> Funding apparently forthcoming, but what are
the sources of new capital?
4
Agenda - Colombia
Background
Impact on MFIs
Economic Conditions and Key Indicators
What Did we Observe in 2009 and What to Expect in 2010
Other Trends
Background
> Previous history of very good performance, even under stress
scenario
–
During Colombia’s financial crisis of 1999, MFIs displayed less severe asset
quality deterioration and better performance than the financial system
> Recent credit boom had an impact on past due loans and
profitability of MFIs during 2008
–
Colombia experienced a credit boom from 2004 to 2007, particularly in
consumer loans, reaching real annual growth rates above 40%
–
Banks expanded to new market segments and increased their credit card
clientele
–
Banks identified MFIs debtors as an objective market for consumer credits
–
Intense competition among financial institutions relaxed credit policies
> Government urged banks to promote microfinance loans
6 6
Impact on MFIs
> High indebtedness of MFIs debtors, in many cases above their
financial capacity
> International financial crisis generated an economic recession in
Colombia
– Increasing unemployment and reducing domestic demand
– Workers international remittances were affected
> The above lowered MFIs debtors payment capacity
> Banks were more efficient in their recovery of past due loans
7
Economic Conditions
Real GDP Growth
Loans/GDP
(%)
(%)
8
35
7
30
6
25
5
20
4
15
3
10
2
1
5
0
0
2005
2006
2007
2008
Source: Banco de la Republica
(Colombia's Central Bank)
2009
2005
2006
2007
2008
2009
Source: Banco de la Republica,
Financial Superintendency of Colombia
8
Real Loan Growth
Commercial
Consumer
Mortgage
Microcredit
Total
(%)
50
40
30
20
10
0
-10
2005
2006
2007
2008
2009
Source: Financial Superintendency of Colombia, Fitch Colombia
9
Past Due Loans
PAR > 30 days
Microcredit
Past Due Loan Growth
Total
Microcredit
(%)
Total
(%)
7
60
6
50
5
40
4
30
3
20
2
10
1
0
0
-10
2005
2006
2007
2008
2009
2005
2006
2007
2008
2009
Source: Financial Superintendency of Colombia,
Fitch Colombia
10
What Did we Observe in 2009 and What to Expect in
2010
> Increasing importance of microcredit in Colombia, but still remains
marginal (2009: 2.5% of total loans)
> Credit policy changes have been apparently effective
–
Microcredit loans continue to grow (+24%) and asset quality deterioration
appears to be under control (PaR > 30 is at 4%).
–
Past due loans have continued to grow but at a decreasing rate
(2009: 16% vs 2008: 37%)
> Profitability stabilized and recovered for some MFIs
(ROE of 10%-15%)
–
650bp reduction in reference interest rate benefited funding costs
> However, in 2010 we expect margins to be pressured as interest
rate caps decrease and funding costs find a floor
> Competition for resources should increase as the economy recovers
11
Other Trends
> Strongest MFIs have recently transformed into banks
– Oct 2008 - Bancamia (BBVA Foundation, WWB Bogota and WWB
Medellin)
– 2010 - WWB Colombia is in the process of becoming a bank
> New Players
– Feb 2008 - Banco ProCredit Colombia
– Nov 2009 - Grameen Aval (NGO)
> Increased competition from some banks and other more formal
players
– Banks (Banco de Bogota, BCSC)
– Cooperatives
12 12
Agenda - Nicaragua
Background
Key Figures
What Went Wrong?
What’s Next?
Background
> During the last years MFIs benefited from a relatively stable
domestic environment
> MFIs enjoyed unprecedented growth
> Abundant funding
> Widespread international recognition as a development tool
(HIPIC)
> MFIs important players within financial system
> Attractive return on equity (ie 2-20%)
> Strong financial figures
14
Key Figures (I)
Gross loans
PaR > 30
(USDm)
600
(%)
6
32%
500
5
37%
400
300
7%
4
51%
3
200
2
100
1
0
0
2005
2006
2007
2008
2005
2006
2007
2008
Source: Fitch
15
Key Figures (II)
Total borrowing
ROE
(USDm)
(%)
500
25
53%
400
20
300
200
2%
29%
61%
15
100
0
10
2005
2006
2007
2008
2005
2006
2007
2008
Source: Fitch
16
International
Domestic
What Went Wrong?
Political Risk
>
>
No Pago (No Payment) Movement
Moratorium Act
Domestic
Economic
Conditions
>
>
>
>
>
>
Small and dependent economy
GDP 2009: -1%
Drop in domestic trade
Unemployment
Incomplete market infrastructure
Sector expanded at historically high growth rates
Global
Financial
Crisis
>
>
>
Funding shortages
Drop in remittances
Lower prices for key exports
Source: Fitch
17
What's Next?
> Net income will remain under pressure as delinquency ratios
remain high
> Limited access to new funding
> Political risk persists
> Moratorium Act: “In limbo”
> Business viability TBD
> Moratorium Act sets dangerous precedent. What is next?
18
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