1 central asia micro finance alliance december, 2006

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1 CENTRAL ASIA MICRO FINANCE ALLIANCE December, 2006

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Page 1: 1 CENTRAL ASIA MICRO FINANCE ALLIANCE December, 2006

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CENTRAL ASIA MICRO FINANCE ALLIANCE

December, 2006

Page 2: 1 CENTRAL ASIA MICRO FINANCE ALLIANCE December, 2006

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CENTRAL ASIA MICRO FINANCE ALLIANCE

USAID funded 3-year project,

continuation of CAMFA I project.

Objective:

• To increase the range and enhance the outreach of financial services to micro and small businesses, especially in rural and isolated regions of Kyrgyzstan.

Page 3: 1 CENTRAL ASIA MICRO FINANCE ALLIANCE December, 2006

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CAMFA II: 3 COMPONENTS

I: Continue support the development of 4 Microfinance Associations in Central Asia region

II: Continue support of Frontiers, a wholesale lender for small and very small financial institutions in Central Asia

III: Promote Agricultural Finance in Kyrgyzstan

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COMPONENT I

To increase the capacity and sustainability of national Microfinance Associations (MFAs).

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COMPONENT I

MFA Capacity building

Improve the policy and regulatory environment for microfinance

Increase availability of microfinance training and specialized technical assistance

Support standards development and increased financial transparency

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COMPONENT I

PARTNERS:

• AMFOK – Kazakhstan (May 2004)

• AMFOT – Tajikistan (Feb 2005)

• MTA – Uzbekistan (July 2005)

• AMFI – Kyrgyzstan (Dec 2005)

• Regional Network (July 2006)

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COMPONENT ISUPPORT TO MFAS FOR:

Lobby government

Gain access to new technical approaches

Best practice information in Russian

Hands-on experience at best practice MFIs

New information technologies and support

Networking and sharing regional experiences

Reporting to the MixMarket

Social impact tools and research

Commercial financing options

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COMPONENT IMFA CAPACITY BUILDING

• Improving Governance

• Strategic planning / Operations

• Membership driven service delivery

• Increased MFA Financial Sustainability

• Human Resource Development

• Enhanced External Relations

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COMPONENT I

COUNTRY SPECIFIC ACTIVITIES

• Credit Bureau in Tajikistan

• Legal assistance to MFI in Uzbekistan

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COMPONENT I

ACHIEVEMENTS:• MF law in Uzbekistan (Sept’06)

• Tax benefits for MFIs in Uzbekistan (Jan’06)

• Loan size cap for MFIs in Kazakhstan (Nov’06)

• MFI Reporting to NBT in Tajikistan (Apr’06)

• MF midterm strategy participation in Kyrgyzstan

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COMPONENT I

REGIONAL NETWORK

• Regional MOU between the 4 MFAs in May 2006

• AMFOT – in 2007 will take the responsibility for regional coordination hub

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COMPONENT I

REGIONAL NETWORK

• Coordination of activities

• Information sharing

• Trainings

• Donor/ commercial funding

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COMPONENT II

FRONTIERS SUPPORT

• To increase MFI access to wholesale lending

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COMPONENT II

Institutional development of Frontiers

Facilitate expansion of Frontiers loan portfolio and outreach to MFIs in Central Asia region.

Continue diversification of Frontiers’s sources of funds through increased leveraging of its capital.

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COMPONENT III

Expanding Ag Financial Services:

• TA and mini-grants to MFI, CU, Ag Coop. and commercial banks for innovative products and new lending methodologies

• Rural Finance window at Frontiers

(on-lending fund)

OBJECTIVE: Improving access to demand driven and sustainable rural and agricultural

financial services

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COMPONENT III

Two main motivations

• Agriculture sector remains a leading economic sector for Kyrgyzstan; main exporter and major employer

• Improved financial markets can accelerate agricultural and rural growth, increasing food security, poverty reduction and conflict resolution

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COMPONENT III

Specialized technical assistance services Small grants programDisseminate best practices in rural financeAccess to credit through FrontiersSupport pilot activities for innovative financial services

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COMPONENT III• Lending for agricultural production • Lending for animal husbandry• Lending for agro-processing, that operate in rural

areas• Fixed Asset purchases for farm equipment and

agricultural processing (including leasing)• Loans that support improved technologies for

handling, storage and marketing of agricultural products

• Loans that support rural enterprises for competitive packaging and labeling and branding of products

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COMPONENT IIIChallenges and Opportunities in Rural Financial Market

• High transactions costs for lenders and borrowers

• High risks faced by borrowers and savers due to natural disasters and limited tools to manage risks

• Lack of reliable information

• Lack of adequate collateral

• Inhospitable legal and regulatory framework

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COMPONENT III

Key Assumptions• Improving economic opportunities in rural areas

leads to improvement in agricultural productivity

• The financial services should be tailored specifically to rural households, rural enterprises and Ag. sector

• Need to improve the ability of existing financial institutions to deliver appropriate rural

and Ag. Financial services

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COMPONENT IIIServing clients at a distance - managing high transaction costsManagement loans at a distance - decentralization of loan approval authority Ag lending specific:

• Seasonality of agricultural production• Loan terms structured around cash flow and crop

cycles• Loan application assessments require substantial

knowledge of local crops, crop prices, yields and farming methods

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COMPONENT III

Dealing with risks in rural financial services

Need for non-conventional lending methodologies

Alternative (creative) collateral and term conditions

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• RURAL FINANCE: Financial services used in rural areas by people of all income levels

• AGRICULTURAL FINANCE: Financing of agriculture-related activities, from production to market

• MICROFINANCE: Financial services for poor and low-income people

Rural

Micro

Agricultural

Financial Markets

Financial Services in Rural Areas

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COMPONENT III

TA for Financial intermediaries for new product development, cash flow lending, savings, etc.

Building long term capacity by TA and incentives to increase the provision of agricultural finance services

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COMPONENT III

• TA to selected financial institutions: competitive system based on commitment and potential for increased outreach

• Policy and regulatory reforms

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Financial Sector ChallengesElevated perceptions of risk, based on past negative experiences

Weak systems of land titling, collateral laws and judiciaries

Long time process for accepting innovative loan products and practices

Information imbalance

Need for donor effort coordination

Page 27: 1 CENTRAL ASIA MICRO FINANCE ALLIANCE December, 2006

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Thank you!

ACDI/VOCA KyrgyzstanBishkek, 720011

55, Suyunbaeva StreetTel: (996 312) 68-16-08, 68-15-57

Fax: (996 312) 68-17-21E-mail: [email protected]

Web cite: www.acdivoca.org