Rabobank - AFRACA

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Rabobank - AFRACA. Commercial Approach to Addressing Risk and Cost in Rural Service Delivery in Africa Kampala, 7th June 2005. NFX or Netherlands Financial Exchange.
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Rabobank - AFRACACommercial Approach to Addressing Risk and Cost in Rural Service Delivery in Africa Kampala, 7th June 2005NFX or Netherlands Financial Exchange
  • Association of Netherlands Commercial Banks for support to financial sector development in South and East: focus on Technical Assistance in pre-competitive phase
  • Matchmaking and fostering partnerships between The South and The Netherlands
  • Cooperative Rabobank (1)
  • Largest bank in the Dutch market; largest share in SME, farms and retail clients
  • Only private commercial bank with triple AAA status in the world
  • Cooperative in structure and philosophy with members' liability
  • Origins in agriculture and rural enterprises, but
  • Cooperative Rabobank (2)
  • Now largest agribusiness bank in the world with over 200 international branches, largely in developed economies and NICs (none in Africa !)
  • Total assets Euro 475 billion; net profit Euro 1.5 billion
  • Rabobank Development Programme
  • Rabo Financial Institutions Development BV: participations (e.g. Tanzania National Microfinance Bank), with country and FI focus
  • RIAS: consultancy arm, emerging markets
  • Rabobank Foundation with grants, sub-commercial credit facilities, technical assistance, small participations, co-operative focus, operating in South and former socialist states
  • Vision and mission of (rural) MFI
  • Clearly defined with focus on institutional sustainability: national/regional economic goals (like poverty alleviating) should be secondary
  • Shared by the stakeholders in MFI (co-operative structure = supportive)
  • Customer relationship as central
  • Credit methodology (1)
  • Select (potentially) viable business customers only
  • Adopt individual approach, but optimise scale
  • Standardisation in products, in procedures by sub-sector / line of production
  • Match loan conditions to (business) cash flow, but do not forget family upkeep expenditure
  • Credit methodology (2)
  • Pro-active borrower monitoring; field inspections
  • Terms and conditions reflect market approach
  • Transparent and quick decision taking and easy disbursement procedures
  • Regulation and supervision can support but mayalso obstructVocational Training, Business Development and Administration
  • Should be available and accessible for entrepreneurs at acceptable conditions, but
  • Should not be dependable on MFI service
  • Strive for strategic alliances with service suppliers (NGOs, Government agencies, private corporations, training institutes)
  • Risk mitigation (1)
  • Selection of customers on basis of years in business, quality of (business) management, quality of keeping accounts / presentation of financial information, standing in community, profitability of business
  • Build on local solidarity, peer pressure
  • From loan protection to family insurance
  • Design MIS with very recent information and immediate signalling
  • Know your customer and know your customer's profitability for the FI
  • Risk mitigation (2)
  • Involve local expertise through member-bases and local advisory committees
  • Build on supply chains, contract production, quality controls
  • Collateral is a last-resort mechanism (the more so due to many impediments in legality, enforceability, weak and slow judiciary system, bureaucracy etc.)
  • Regulation and supervision can support but mayalso obstructCosts efficiency
  • Local deposits as prime source of low-cost funding
  • Seek long term funding.
  • Standardise products with simple terms and conditions
  • Apply up-to-date front and back-office technology
  • Ensure volume in transactions to reduce transaction costs
  • Expand product range through cross selling (insurance)
  • Use knowledge and insights in local situation through client advisory committees
  • Conclusions
  • Aim at full-fledged financial institutions (or strategic alliances) - no specialised agricultural banks !
  • Aim at broad customer base - no single focus on low-income clients; widening outreach
  • Aim at larger customer base: deepening penetration as well as serving large clients
  • Rabobank - AFRACACommercial Approach to Addressing Risk and Cost in Rural Service Delivery in Africa Kampala, 7th June 2005It is time for the
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