In line with the Fund’s mission, the EFSE DF strongly focuses on measures to improve the micro and small enterprise (MSE) financing capabilities of partner institutions and to assist them in targeting MSE clients with responsible and appropriate products and services in a sustainable manner. Typical individual technical assistance projects involve, for instance:
- Setting up a dedicated MSE division at the head office level, including the development of a long-term strategy, organisational structure, policies, and marketing and sales tools;
- Structuring MSE lending activities at the branch level, including loan officer training;
- Product development, sales training and risk management.
Agricultural and rural finance presents a clear development and economic growth opportunity in the Fund’s partner countries. The sector frequently employs a considerable share of the population, yet financing and investment remain difficult. The Development Facility seeks to address this challenge in several ways, for example:
- Supporting its partner institutions to develop products and services targeted at agricultural and rural clients which meet their needs, where appropriate use technology to improve client proximity, improvement of lending processes and technologies, and providing clear assessments of opportunities in the sector for PLIs which include the whole value chain.
- Conducting studies (e.g. Ukraine and Kosovo) to assess the gaps and opportunities in the sector
- Organising technical workshops, trainings and exposure visits.
- Developing an educational brochure on agri-financial services targets rural SMEs to inform and guide them with regard to financial services offered.
Supporting the financial sector of target countries in ensuring fair, transparent and inclusive access to credit is core to the EFSE DF’s strategy. And educating borrowers to achieve financial empowerment is an important stepping stone in that process.
In this regard, the EFSE DF has developed different financial education brochures which explain the risks of foreign currency loans and highlight the various questions clients should ask before taking out a loan. The target groups for such publications are MSEs and clients who take out mortgage loans.
The mortgage brochure is also explained in a separate video. The brochures exist in eight local languages: the print run of close to 200,000 copies is going to partner lending institutions in eight EFSE partner countries. The EFSE DF has also developed a simple slide chart, which allows micro and mall enterprises (MSEs) and private borrowers to calculate the costs of business or private loans.
Apart from producing its own publications, the EFSE DF has sponsored sector organisations such as the Independent Association of Banks in Ukraine in its financial literacy outreach activities to bank employees, MSEs, schoolchildren, and pensioners. In addition, the EFSE DF has conducted Responsible Finance workshops on topics such as foreign currency exchange risks and consumer protection.
Mobile Financial Services
The EFSE DF supports its partner lending institutions in increasing their outreach and efficiency through branchless services, alternative delivery channels and new technologies. The aim is thereby also to increase the quality of financial services for end clients. So far the EFSE DF has worked on:
- Organising technical workshops where the partner institutions develop ideas for the practical business application of different digital financial services propositions.
- Projects to improve the operational efficiency and MIS of partner institutions.
- Feasibility study for mobile financial services
Local Currency Lending
The EFSE aims increasingly to shield micro and small enterprises – which operate almost exclusively in the local economy – from currency exchange fluctuations that could adversely affect their ability to service debt is an important priority. Providing finance in local currency instead of euros or dollars offers this protection. The DF supports these efforts with research and individual technical assistance, including with a dedicated grant from CIDA/G20 for this purpose.
So far the EFSE DF is:
- Assisting the Fund’s partner lending institutions in developing their local currency lending offers.
- Developing a local currency database in conjunction with TCX/Mantis which enables IFIs, MFIs and commercial banks in the region to deepen their understanding of the risk premium associated with LC, which in turn should lead to optimized pricing of local currency lending and upscaling of local currency lending.
- Conducting a study in Georgia, Armenia and Serbia on the opportunities for EFSE to scale up its local currency lending portfolio in terms of innovation, hedging partnerships or new product development.
- Developing and disseminating a brochure for end borrowers which educates them about the risks of FX versus local currency loans: 40,000 copies disseminated so far.
With access to decent shelter and good quality housing for low income families being part of the Fund’s mission and housing constituting a significant part of the EFSE investment portfolio, the Development Facility supports this topic by:
- Support the Fund’s partner lending institutions in developing and optimising housing finance products and services
- Developing financial education brochures and accompanying movie to inform households about the risks of mortgage loans, disseminated in four countries so far.
- Implementing studies, e.g. in Bosnia & Herzegovina to measure the ‘Impact of EFSE Housing Loans on Energy Efficiency and CO2 Reduction’ (2015) or on the development impact of building sustainable housing finance systems (2006).
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