usaid-tijara overall presentation
TRANSCRIPT
USAID-Tijara Provincial Economic Growth Program
Regulatory and Institutional Challenges for Transformation –
A Discussion on Way Forward
October 16 – 17, 2011
Inclusive Financial Services Stakeholder Conference 2011
Service 25%
Production 3%
Trade 45.8%
Agribusiness 4.5%
Home Improvemen
t 20.8%
Business loan
74%
Iraqi Microfinance at a Glance: Building
Sustainable MFIs
(August
2011) Outreach Indicator
12 Number of Microfinance Institutions
105 Number of Branches/Offices
85,287 Number of Active Borrowers
124,311,186 Gross Loan Portfolio (US$)
19% Percentage of Female Borrowers
1,458 Average Loan Size (US$)
1.3% PAR (30)
321,415 Number of Loans Disbursed Since Inception
749,476,123 Loans Disbursed Since Inception (US$)
2
Mic
rofin
an
ce In
du
stry
Ou
trea
ch
Number of outstanding loans (active loans) by province
Value of outstanding loans Total
Percentage in total amount of outstanding loans
Iraqi Microfinance at a Glance:
Geographic Coverage
Breakdown by Province
3
MACRO: Enabling Environment
MACRO:
Enabling
Environment
MESO: Industry
Infrastructure
MICRO: Building
Sustainable MFIs
• Build Partnerships with Iraqi Government’s NGO Office
and CBI
• Facilitate enabling environment for transformation of
NGO MFIs to Regulated NBFIs
• Engage the other donors and stakeholders in the MF
industry building efforts
• Establish & support Iraqi Microfinance Industry Network
• Promote industry transparency, accountability & visibility
• Support Innovation: New Products, Diverse Collateral
Options, Alternative Collaterals
• Further develop the Iraqi MF sector's capacity through
innovative training products, improving the trainers’
capacity and outsourcing training function
• Increase scale, scope and sustainability of MFIs
• Strengthen performance monitoring & evaluation
• Facilitate external & internal audits
• Establish robust governance systems
• Deliver demand driven trainings
• Support transformation to NBFIs
• Develop roadmap for institutional sustainability through
operational assessments and strategic business plans
Strategic Interventions at different levels: Macro, Meso and Micro
8
Current Legal Status of Microfinance
Institutions • All MFIs were originally registered as NGOs under
the NGO CPA Order 45
– International NGOs: 2
– Iraqi NGOs: 10
• The NGO Law (2010) requires all MFIs to re-register
• All MFIs have applied for re-registration
• Three MFIs have received re-registration certificates
Options for the New MFIs
• The Iraqi NGO Law (2010)
• The NGO Law (2011) in the Iraqi Kurdistan
Region
• MSME Finance Companies Ordinance
(Ordinance 3 of 2010)
Iraqi NGO Law: Opportunities
• MFIs registered with Iraqi NGO Directorate as Non-Government Organizations
• Three founding members (including maximum 25% foreigners resident in Iraq)
• No minimum capital required
Simplified Registration Procedures
• General Assembly
• Board of Directors
• Board sub-committees may be formed under the by-laws
• Board members should meet basic criteria defined in NGO law and NGO’s bylaws
Emphasis on Corporate Governance
Iraqi NGO Law: Opportunities
• Yearly financial report to NGO Directorate including a detailed description of the sources of the NGO’s funds and financial transactions
• Program Report of the NGO's activities including a briefing on the projects implemented by NGO during the year
• Annual audit
Focus on Transparency
Iraqi NGO Law: Opportunities
• NGO MFIs required to pay all taxes, VAT and custom duties
• NGOs registered under Iraqi Kurdistan NGO law are exempted from taxes and customs duties
• Public Utility NGOs are exempt from tax, but rules not clear
Inconsistency in Taxation Rules
Iraqi NGO Law: Challenges
Iraqi NGO Law: Other Challenges
• Re-registration process taking longer than
expected
• NGO Directorate staff needs better
understanding of microfinance best practices
• NGO Directorate needs to build capacity to
supervise MFI sector
Implementation of Iraqi NGO Law:
Recommendations
• Exempt Iraqi NGOs (including MFIs) from taxes
• Expedite re-registration process for NGO MFIs under
the new law
• Establish linkages with CBI to supervise NGO MFIs
• Capacity building to understand microfinance best
practices
SME Finance Companies Ordinance:
Opportunities
• Lower Capital Requirement
• LLCs: 1 billion IQD (USD 0.850M)
• JSCs: 2 billion IQD (USD 1.700M)
• Grants from donors permitted with prior approval
from Ministry of Planning
• Ability to raise debt and equity investments from Iraqi
and international markets
• Licensed and supervised by CBI
SME Finance Companies Ordinance:
Challenges
• SME-FCs required to charge “Concessionary
Interest Rates” from borrowers
• SME-FCs cannot borrow more than 300% of the paid
up capital from Iraqi and international banks/financial
institutions
• Non-resident directors not allowed on the Board
• NGOs’ ability to become shareholder in an SME-FC
not clear
SME Finance Companies Ordinance:
Recommendations
• Licensing procedures need clarity
• References to “Concessionary Interest Rates” should
be removed
• Leverage ratio should be increased
• Non-resident directors should be permitted
• NGOs should be allowed to become the
shareholders
New CBI regulations needed to facilitate
deposit taking NBFIs
Banks:
Capital (by 2014): $214M
Deposit-Taking NBFIs:
Legislation Recommended
MSME FCs:
LLCs: $0.85 M
JSCs: $1.70M
NGO MFIs
No Capital Requirement
For more information, please contact:
Muhammad Junaid
Team Leader, Sustainable Microfinance Component
USAID-Tijara
THANK YOU
or visit
www.imfi.org