The second eib southern african micro and sme

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6 to 10 February 2017, Lusaka, Zambia

About the EIB

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In the spring of 2015, EIB launched a Technical Assistance programme to its Financial Sector Operations in the Southern Africa Region. Two EIB Southern Africa Micro and SME Finance Academies were held under the framework of this programme: February 2016 in Pretoria and February 2017 in Lusaka, Zambia. More than 90 participants from 15 financial institutions in Botswana, Malawi, Mozambique, Zambia, Zimbabwe and South Africa, along with representatives from local and international development partners were present in Lusaka. The academies focused on "distinctive events", such as a two-day Symposium and the "EIB Dialogue Day". This was followed by a twoday Training Academy for the middle management.

Opening Ceremony and Welcomes

Mrs. Irene Loder, Frankfurt Schools' Programme Manager, and Technical Assistance Programme Team Leader, Mr. Rainer Fitz, provided the initial welcoming remarks, with the Academy officically starting with Mr. Carmelo Cocuzza, EIB's Head of the Regional Representation for Southern Africa and Indian Ocean. The Executive Symposium began with a focus on Gender Finance opportunities in Africa.

Focus 1: "New growth opportunities for risk diversification and product innovation: Women in Business Finance as an

Opportunity for Market Development?"

Session 1: Ms. Joanne Thomas Yaccato, Frankfurt School's Senior International Gender Finance, addressed the gender gap in Southern Africa, with a specific focus on the paradox of gender-neutral banking. Session 2: A panel of local women entrepreneurs, Mrs. Tecla Ngwenya, owner of Tecla Lodges and Mrs. Miyanda Maimbo, owner of a farm and former owner of an HR solution company, shared their positive and negative experiences around being women entrepreneurs in Africa. With Ms. Tatiana Pereira, Frankfurt Schools' EIB Southern Africa TA key expert moderating, the panel explored the challenges of access to finance. Key issues raised included SME bank staff is often junior and not qualified or experienced enough to deal with small business. Customer service problems are also not escalated up the chain.


The EIB's Southern Africa Region Technical Assistance Programme

Practical and effective support to the EIB's lines of credit is provided via a Technical Assistance Programme that has the overall objective to promote job creation and maximize the development impact of M/SMEs through enhanced access to funding while the specific objectives of the assignment are providing practical and effective support to the EIB's Global Loan lending operations via a four component approach, namely:

(i) Design and deliver training programmes focusing on Credit Risk Management as well as on Banking and Administrative Risk Management to our financial intermediaries.

(ii) Providing targeted capacity building via consulting interventions for each intermediary.

(iii) Business Development Support for Micro Enterprises & SMEs.

(iv) Cooperation with professional and educational bodies and universities.

The panel discussion became particularly lively at one point, when a local banker provided feedback based on a "banker's point of view". For example, entrepreneurs need to shop for loans with new banks only when their traditional bank refuses their application. Zambia's liquidity issues before last year's elections was given as an explanation as to why so many loan requests were declined.

Session 3: Thomas Yaccato then presented international success stories showcasing how Women in Business initiatives boost business through the implementation of technical assistance programmes.

Session 4: The Women in Business theme concluded with Mr. Eugen Doce, Frankfurt School's Senior Project Manager, presenting how to 1.) acquire gender-segregated data and 2.) Demonstrate the level of sophisticated consumer insight that is available through a gender-based analysis.

Focus 2: "New growth opportunities for risk diversification and product innovation: financial services and technology (FinTech) - Is African FinTech disrupting the existing financial

service providers or shaking up the industry?"

1. The second Focus was introduced by Mr. Rainer Fitz, who presented trends in the development of the FinTech sector over the last decade. The sector developed from "start-ups" selling applications to specialized financial service providers while concurrently, banks were investing in FinTech in order to lower costs through standardising investment, loan decisions and back office processes.

2. Ms. Mwaka Mwamuliima, AB Bank Zambia's Risk Manager presented the view that a financial institution has to prepare internal risk management structurally before adopting new technologies. For a young bank such as AB Bank, (established 2011) a solid risk management framework is crucial so a holistic framework was established with the help of EIB/Frankfurt School. Internal efficiency should be improved with a scoring system and delivery channels extended by digital and agency banking. AB Bank observed that agency/remittance networks in Zambia have a low average monthly turnover of approx. USD 260 per agent. The sustainability of this business model is therefore questionable.


3. The session continued with short presentations by Mr. James Chona, owner of KwikFin and Mr. Marcus Achiuma, a Fintech Entrepreneur. They showcased product innovation with their products and company growth potential. Mr. Chona's KwikFin Mobile specializes loans through mobile based on the client's salary and limit set by the employer. Instead of negotiating an advance with the HR office, the employee receives funds that are loaded on the mobile money account. There is a flat service charge of 15% (non-financial institution interest rates cannot be charged). The current portfolio has 3.000 clients with a total of 2.5 Billion Kwachas. The company's growth constraint is obtaining more funding. The business is funded 100% by the shareholders.

Mr. Achiuma's fintech company offers technology and software assistance, such as receiving payments, invoicing etc. Launching these applications is capital intensive so the company is moving towards becoming a service provider to banks, for example, selling bank products as an agent.

Mr. Zerubabel Kwebiiha, FSD-Zambia Expert, provided information about new trends in innovation in Zambia. He stated that banks are interested in FinTech, but there is a need to create partnerships with software providers. The start-up scene would need e.g. an incubator at a university. Mr. Achiuma suggested that bankers explain what they need and the university would find solutions. This would be more efficient and faster than the present situation. Banks should also offer internships for students.

Various questions were related to the Central Banks' reaction to FinTech companies. East Mobile money has garnered high outreach and volumes in Africa. These companies are not subjected to the same regulatory standards as banks. Zambia and Mozambique requires these companies to have an operating license to operate but the bankers shared concern that regulators are reacting rather dealing with this new reality proactively.

Another banker shared that agency banking is complementary to existing bank infrastructure. The first client meeting occurs in the branch and the client signs KYC form enabling other channels, such as internet banking and agents, to be used.

This discussion led to a decision to organize a stakeholder workshop in Lusaka with the view to profile the offer and the demand in the Zambian Fintech sector and to propose how to best collaborate to make use of Fintech solutions.

Mr. Zipani Sinkala, a lecturer in the Computer Science Department of the University of Zambia, spoke on the relevance of the technical education students receive at university as it pertains to market demands. There is now a graduate business school that offers "going to market" programmes.

Focus 3 "Entrepreneurship"

1. Mr. Carmelo Cocuzza, EIB Head of Regional Representation Southern Africa and Indian Ocean gave a brief presentation on "Boost Africa" to kick of the second day. This is an EIB, AfDB and EU initiative supporting the development of "start-ups" to spur entrepreneurial potential through a holistic approach that includes access to finance through venture capital funds, business development services and capacity buildings as well as supporting the entrepreneurship research ecosystem.


2. Mr. John McGrath, Imani Development, Expert, and Mr. Rocky Sombe, a local owner of several franchises, presented entrepreneurial successes and financing challenges in Malawi and Zambia over the last several decades. Both had started businesses as university students and had experienced business wins and failures, Their take away message was banks never followed up after the businesses served their obligations so banks are missing out on business. Question and answer period focused on Mr. Sambe's experiences with franchises. He said that one needs to have a solid business plan developed together with the company and that FNB has a specialised desk that supports franchisees of their business partners. The fee has to be paid on turnover but the gross margins in a market like Zambia are much higher than in other sectors. He also said that it certainly helps to be taken serious as a business owner, but that banks' decisions are based on facts, not personal relations. He never shopped around for banking products but negotiated with his bank based on offers that he had seen in the market.

3. A participatory discussion around Entrepreneurship Support Programmes And The Role Of Financial Institutions was moderated by Mr. Windu Matoka, Frankfurt School TA to the EIB Lending Operations Southern Africa Expert. The following business models were presented:

? Ms. Anna Kangombe, Business Finance Solutions, Associate Consultant, presented the Business Model of Bank Windhoek that cooperates with a business development services provider on capacity building of its MSME customers.

? Mr. Eugen Doce, Senior Project Manager, Frankfurt School, presented an online tool for self-assessment of entrepreneurial skills.

? Prof. Pinalo Chifwanakeni, Vice Chancellor of University of Lusaka spoke about whether Can Entrepreneurship be Taught?

? Mr. Bert van Manen, Frankfurt School TA to the EIB Lending Operations Southern Africa Key Expert and Mr. Nsangu Siwale, Frankfurt School TA to the EIB Lending Operations Southern Africa Expert presented training of entrepreneurs in cooperation with Business Associations.

The different Q&A session resulted in the following discussions: Bank Windhoek established a membership programme for MSMEs. It identifies challenged areas the bank needs to address with the customer. The object of this business development service is to support growth opportunities of SMEs. The bank is the stakeholder using BFS as the consultant with SMEs being the beneficiaries. SMEs have access to different types of support (e.g. linking them to partners). The goal is to have a declining default ratios, along with long term relationships with entrepreneurs and to increase the SME portfolio of the bank. The bank pays for 6 months of training with a potential of extension of another 6 months. The SMEs can continue the training but will need to pay for it, which most do. Regional presence remains a challenge as only 4 of the 14 regions are covered. This is a business model that


requires onsite visits. SMEs have observed high staff turnover is detrimental to the success of this program.

EIB's Carmelo Cocuzza asked what other banks have implemented such a program and who would be willing to do so. BancABC Zambia said that there are several programmes existing in the market. Capitalbank Botswana sponsors a similar programme and Moza Banco have a cooperation with BDS under EIB/Frankfurt School. AB Bank educate clients through advisory services.

During the discussion it was also mentioned that there is a certain passiveness of micro entrepreneurs to graduate to SME level that causes barriers and challenges.

Looking at SMEs, an entrepreneurial online selfassessment tools were discussed as way that SMEs can self-diagnose strengths and weaknesses. The assessment is adapted to each country and the business owner's results are compared to a country-wide average. In the frame of the TA programme, Frankfurt School could assist approved financial institutions to implement a tool, if there is a demand. One suggestion that was well-received was to develop a mobile version of the application.

BancABC Zambia identified this tool as a way to prescreen SMEs, but the "online communication costs" would need to decrease. AB Bank informed that their group started using a SME evaluation tool in 2005 but that it does not exist anymore. The demand needs to be market-driven and not driven by donors who need to report results in 2-3 years to justify support.

The Vice Chancellor of University Lusaka's speech pointedly noted the prevailing attitude should not be that SMEs owe money to the banks, but rather banks owe to the SME sector to fund development.

All courses of the University include an element of "entrepreneurship" as every activity in life has a business aspect. Unilus set up an "exchange program" of sorts where MBA students from Zambia and Israel travelled to each other's country to explore entrepreneurship in a difficult environment.

The Vice Chancellor was in agreement with the joining of German and Zambian experience.

4. The next session gave voice to the bankers' view. There was agreement that SME's biggest challenge was record keeping, lack of necessary documents lack of collateral, and the slow decisionmaking by banks around loans. ZCSMBA indicated there is improvement and MSMEs are able to supply proper documentation. Participants were aware of SMEs "two

sets of books" phenomenon: one for the tax authority and another for the banker. One bank shared that they prepare financial data together with the customer so there are no surprises. It also serves as a valuable education opportunity for the entrepreneur. The bankers generally agreed that financial education is critical with both micro- and macro factors of the business being understood by both banker and entrepreneur. Differing expectations of banks and entrepreneurs presents a challenge in the region. Not only the entrepreneurs but also the financial institutions have their challenges. Regulated financial institutions have more than constraints to support SMEs than Business Angels who can act based on different criteria. However there are still too few Business Angels operating in the region.

5. A "World Caf?" on Entrepreneurship provided an opportunity for participants to comment on the different topics which was followed by a wrap-up of the day's sessions.

Key Expert Tatiana Pereira hosted the topic, Sustainable Entrepreneurship Training ? How To Do It? The three groups brainstormed and offered the following ideas:

? Set up in house training facilities as a revenue center;

? Establish partnerships with Business Associations, Chambers of Commerce and Universities;

? Provide needs assessment and participant screening with a defined target;

? Customer cost sharing; ? BDS suppliers to create partnerships with banks to

support training; ? Create benefits for training participants such as

business clubs;


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