Microlending ProgrammeMicrolending Programme

Aleksejs KanejevsDeputy Head, Programmes’ Development Department

25.04.2013

Microlending ProgrammeMicrolending Programme Overall objective:Overall objective: to improve access to micro loans to micro enterprises and to improve access to micro loans to micro enterprises and

self employed persons for setup and development of business activities self employed persons for setup and development of business activities Support:Support:

• Micro loan Micro loan up to 10 thsd. LVL (17.3 thsd. CHF);• Grant for repayment of the loan Grant for repayment of the loan - 500/750 LVL (867/ 1300 CHF)

Beneficiaries: Beneficiaries: micro enterprises up to 10 employees Budget:Budget: 5.1 mln. LVL (8.9 mln. CHF), of which:

• Micro loans - 4.6 mln. LVL (8.1 mln. CHF) - 80% financed by the Swiss side; 20% - Hipoteku Banka

• Grants – 0.44 mln. LVL (0.77 mln. CHF) – solely financed by the Swiss side Duration: Duration: allocation of loans and grants - until the end of 2013 (disbursement

of grants – until June 2015) Planned results:Planned results: - up to 650 micro businesses supported;- up to 650 micro businesses supported; - up to 900 jobs - up to 900 jobs (both created and saved)

Results Results (as of 23.04.2013)(as of 23.04.2013)

The Programme was launched in September 2011The Programme was launched in September 2011Micro loans:Micro loans:allocated 672672 micro loans for the total amount of 3.9 mln. LVL 3.9 mln. LVL (6.8 mln. CHF), incl.,:

• 656 contracts signed for 3.8 mln. LVL (6.6 mln. CHF), • 641 disbursed for 3.6 mln. LVL (6.2 mln. CHF)

Implementation statusImplementation status:: 83%83% (of the total budget)Grants:Grants:allocated 561561 grant for 382 thsd. LVL (662 thsd. CHF) or 87% of the total budgetdisbursed 23 grants for 15 thsd. LVL (27 thsd. CHF)

Size of MicroloansSize of Microloans

Average loan sizeAverage loan size – 5.9 5.9 thsd. LVL (10.1 thsd. CHF) Micro entreprises request investment and working capital loan mainly. 15% of

loans are for working capital only (no grant available) 20% of loans have been applied for the maximum amount Loans up to 1.5 thsd. LVL (2.6 thsd. CHF) are not widely requested (7%), smallest

loans - 650 LVL/ 1127 CHF (2 cases)

Sectoral BreakdownSectoral Breakdown

Almost half of micro loans are allocated for the projects of agricultureagriculture (cereal, dairy, vegetables, meet production etc.)

28% of loans are provided for services services (tourism, catering, training, accounting, beauty services, repairing etc.)

15% – for trade trade (food, wear, shoes, stationery, flowers, sports inventary etc.)

8% - for manufacturing industry manufacturing industry (mainly: woodworking, food), 5% - forestryforestry

Regional BreakdownRegional Breakdown

The Programme meets its regional targets – micro loans are well balanced in all the regions of Latvia, less demand in Riga region

Micro loans are channeled through Bank branches throughout the whole territory of Latvia (the most active branches in allocating the micro loans are Gulbene (92 loans), Jekabpils (82), Rezekne (78), Daugavpils (68)

A positive feature: micro loans are well demanded also in remote border regions and small sized municipalities, e.g., 8 micro loans are allocated in Rozupe, 7 – Iecava, 6 – Belava

Jobs Created and SavedJobs Created and Saved

Number of jobs: 12411241 – prior to implementaion of business projects (in average 1.9 1.9 per

enterprise) 15721572 – estimated after implementation of business projects (in average 2.42.4)

The Programme foresees 900 jobs created and saved

Project ExampleProject Example

Individual enterprise in Codes county, Bauskas region

Specialized transport services for people Specialized transport services for people with disabilitieswith disabilities

The client has previous experience in social care (worked at assistance service of Order of Malta)

Investment loan – 5 thsd. LVL/ 8.7 thsd. CHF + grant 750 LVL/ 1300 CHF (purchase of specialized microbus equiped with a lift)

Project Example Project Example (2)(2)

Enterprise in Gailisu county, Bauskas region

Family business (mother and 2 sons)

Planting, processing and Planting, processing and distribution of cucumbers, cabbage, distribution of cucumbers, cabbage, tomato tomato (distribution through a retail chain, catering companies)

Loan for investment and working capital – 8.2 thsd LVL/ 14.2 thsd. CHF + grant 750 LVL/ 1300 CHF (renovation of product packing premises)

Project Example Project Example (3)(3)

Enterprise in Ventspils Female owned business (education in

music pedagogy and business management)

Production of singing toy bears Production of singing toy bears (components come from abroad while the 7 lullabies are recorded by the owner of enterprise)

Distribution through toy shops (plans to start exporting to Baltic countries and Scandinavia)

Working capital loan – 5 thsd LVL/ 8.7 thsd. CHF (purchase of relatively large stock of components in order to cut production costs)

PublicityPublicity Advertisement campaigns Advertisement campaigns (banners in the (banners in the

business newspaper «Dienas Bizness», 2012)business newspaper «Dienas Bizness», 2012) BillboardsBillboards (30 places in Riga, Aug./Sept. 2012) (30 places in Riga, Aug./Sept. 2012) Press release Press release on achievements (Sept.2012)on achievements (Sept.2012) Regular information on conditions of the Regular information on conditions of the

programmeprogramme ( (www.hipo.lv; leaflets in the ; leaflets in the premises of the branches)premises of the branches)

Dissemination of information in events Dissemination of information in events (seminars / conferences organized by other (seminars / conferences organized by other institutions)institutions)

Short film Short film (arranged by the Swiss Embassy, to be (arranged by the Swiss Embassy, to be presented at the Annual Swiss Ambassadors presented at the Annual Swiss Ambassadors Meeting in Bern, 31.05.2013)Meeting in Bern, 31.05.2013)

PerspectivesPerspectives

The funds available will be allocated by July, 2013The funds available will be allocated by July, 2013Re-allocation from the Latvian – Swiss Cooperation Programme:Re-allocation from the Latvian – Swiss Cooperation Programme: In May, 2013 the Bank will allocate additional 99 thsd. CHF in the Loan Fund as Bank’s co-financing and submit Advance Reimbursement Request for additional 444 thsd. CHFAdditional funding (543 thsd. CHF) allows to continue allocation of Additional funding (543 thsd. CHF) allows to continue allocation of micro loans / grants in July/August, 2013 micro loans / grants in July/August, 2013 (at least 50 more micro projects to be financed)Afterwards new micro loans will be provided from repayments only Afterwards new micro loans will be provided from repayments only (no allocation of grants)20142014 – – disbursement of allocated grants disbursement of allocated grants; monitoring of projects etc.; monitoring of projects etc.

ConclusionsConclusionsIn the frame of previous and current micro lending programmes the Bank has already In the frame of previous and current micro lending programmes the Bank has already

supported more than 1000 micro businessessupported more than 1000 micro businesses!!The Bank has obtained competence and gathered experience in micro lending obtained competence and gathered experience in micro lending process process and in examination of needs of micro enterprisesThe presence of regional branches has ensured availability to be near the clients availability to be near the clients – micro enterprises throughout the countryIn the frame of current programme micro loans are permanently well demanded, micro loans are permanently well demanded, including remote border regions and small sized municipality including remote border regions and small sized municipality (thus the programme positively contributes to the socio-economic needs: creation or maintanence of jobs; development of economic activities; increase of incomes)Commercial banks are relucatant to deal with microloan segment Commercial banks are relucatant to deal with microloan segment (relatively high administrative costs; additional bureaucracy related to programmes, special reporting req. etc.). Also non-bank lending towards micro businesses (e.g., credit unions) is not developed yet

The Microlending Programme should be continued in the future years!The Microlending Programme should be continued in the future years!

Thank you!Thank you!

Aleksejs.Kanejevs@hipo.lv+371 6777 4091+371 6777 4091