"Our role is critical for the development of rural Serbia"

Opportunity Bank Serbia (OBS) is in a league of its own. It has created its own market by financing the rural families that no other Serbian bank dares to finance. “Banks can copy us, but not our people. It’s our culture that differentiates us”, says CEO Vladimir Vukotić.

Feeling the impact of the global financial crisis and facing stiff competition, OBS changed course in 2008. “We were trying too much to be like all the other big banks”, says Vladimir Vukotić, OBS’ CEO. He launched a program to finance subsistence farmers and small agro-producers in the rural areas of Serbia. It was an instant success. Since then, the bank’s sole purpose is to provide financial services – small loans and savings products - to the people and small businesses.

“Mainstream banks don’t see these people as clients, but they also have needs for financial services”, says Vukotić, who has been CEO since 2014, prior serving as COO. “They have no bankable income stream, no credit history, no business plan, and no or few employees. Between 30-40% of the Serbian adult population, around two million people, have no access to finance their business, housing or emergency needs. What if you need to urgently fix your leaking roof or undergo an emergency operation?

“We have created our own market”, says Vukotić. “The country’s other 29 banks, competing for the big clients, will not do what we are doing because transaction costs are high. We drive many kilometers to visit our clients, and the loans are small. You need to meet the client and his or her family. You need to listen to them to judge their solvency.” OBS has 200 loan officers, while all the other banks combined have 1,000. “We hire people for their attitude and drive to contribute to society, and then teach them necessary skills. We are modest and are driven by impact. Banks can copy us, but not our people. It’s our culture that differentiates us.”

One fifth of the loans provided by OBS are under EUR 1,000, and 60% are between EUR 1,000 and 5,000. The micro loans have an effective interest rate between 13% and 25%. This is higher than loans from other banks but is related to a higher transactional cost of up to 9%. The bank also offers savings products; it was the first in the sector to launch a pension product and an education loan.

OBS has also developed internet-based training on how to save, because almost 70% of the population doesn’t have a spare 200 euros in case of an emergency. The bank has launched a savings product that encourages people to save by giving people a generous 12.5% interest rate if they set aside twenty euros per month. By comparison, the highest rate for a one-year deposit in the market is 3.5%.

“Our role is critical to a support of rural communities and predominantly small farmers that live there”, says the proud banker. “This is also recognised by the Central Bank. It has acknowledged the financing of small farmers by our bank as critical, because there is no other bank serving them. For the development of Serbia, it is important that people have access to the financial services. It is the only way for them to fulfill their potential and live a life of purpose and dignity.” In the bank’s vision, all economically active Serbians should have access to universal and structured banking finance by 2025.

Access to affordable quality education

Education is an empowering force in the world. It creates knowledge, builds confidence, and breaks down barriers to opportunity. It equips children with the qualities and skills to shape and build their future. Unfortunately, there are still millions of children across the world who lack access to affordable quality education. This challenge is present in India, especially with children from low-income families.

Varthana aims to overcome this gap by providing short and long-term financing to more than 3,500 affordable private schools. These education institutions enroll children from low-income and lower middle-income households, thereby impacting the lives of an estimated 2.5 million children. The quality of education offered at government schools is often lacking, and many parents want to send their children to an affordable private school. The private schools financed by Varthana charge schools fees between INR 500 – INR 1,500 (USD 7 – USD 22) per month.

Schools typically use Varthana’s loans to improve or expand building infrastructure, such as adding classrooms, or to buy new education materials. In addition to financial services offered to affordable private schools, Varthana offers training to:

• school leaders on financial planning and business growth mainly through the Integrated School Accelerator Program
• teachers on incorporating different teaching methods,
• parents on the importance of increasing their engagement with the school and their children, and, of course,
• students on English and other subjects to improve their academic performance.

Triodos Microfinance Fund has provided a loan to Varthana to further increase its outreach. Fund Manager Femke Bos: “This investment shows that financial inclusion has become more than providing access to basic financial products and services. It also plays a crucial role in addressing other pressing issues, such as access to affordable quality education, which is seen as one of the key pillars to alleviate poverty.”

The topic of education has been given a global platform through the United Nations Sustainable Development Goals (SDGs). One of the goals presented by the United Nations – SDG 4 – is to ensure inclusive and quality education for all and promote lifelong learning.

SME finance in Tanzania

NMB Bank in Tanzania marks the first investment of Triodos Microfinance Fund and Triodos Fair Share Fund in an African bank that has a strong focus on financing small and medium- sized enterprises (SMEs). We sat down with Loelia Kibassa, Senior Manager Business Banking, to talk about financing this sector, which is seen as the economic backbone of Tanzania.

A key sector for economic development “SMEs are vital for our economy”, explains Loelia Kibassa. “They create productive employment and contribute to raising the standard of living in many Tanzanian households. Furthermore, they spur economic activities. You can see them as a wellspring for the larger firms of the future - more and more large firms started as SMEs before they grew larger.”

What is an SME? According to the Tanzanian government’s SME Development Policy (2002), SMEs are formalized undertakings employing between five and 99 people, with capital investments of less than TZS 800 million (EUR 300,000). Loelia Kibassa: “In addition to this categorisation, NMB Bank defines this market as composed of enterprises eligible for credit facilities between TZS 50 million (EUR 18,000) and TZS 1.5 billion (EUR 550,000), and a business turnover that does not exceed TZS 10 billion (EUR 3.5 million).” Looking at the current SME portfolio at NMB, it becomes clear that the bank focuses on the lower end of this sector. “Around 70% of the 3,000+ SMEs that we finance are typically family owned businesses that employ some staff to assist in running the businesses. The average loan these businesses take out amounts to around TZS 130 million (EUR 48,000).” Entrepreneurs use NMB Bank loans for working capital, fixed asset purchases or to buy equipment, for example.

The importance of a vibrant SME sector for a national economy is widely acknowledged and seen as critical in pushing the socioeconomic development agenda of a country further. According to the World Bank most formal jobs are generated by SMEs in emerging economies. They also create four out of five new positions, and formal SMEs contribute up to 40% of national income (GDP).

The challenges for NMB Bank

Loelia Kibassa outlines some of the challenges that NMB Bank faces when meeting the financial needs of the SMEs. “There is often a lack of proper business records, there is sometimes not sufficient collateral to cover the amount requested in line with the overall risk to the lender and the bank’s policy, and not every entrepreneur has the management skills to run and further develop their business. Multiple borrowing by some entrepreneurs has also been identified as a challenge, especially in big cities”.

NMB Bank addresses these challenges in multiple ways. Loelia Kibassa: “First of all, we make sure we are very close to our customers, so that we are able to select the challenges which need resolving. Building relationships is critical for customer retention and new acquisition. That’s why our Relationship Managers are so important.” With over 200 bricks- and-mortar branches, more than 700 ATMs and over 6,000 banking agents (Wakalas), NMB Bank has the largest network in the country, with a presence in every region. This network serves a client base of more than two million retail clients and helps NMB to build up a close relationship with SME customers.

Over time, NMB Bank has established a solid system to assess potential SME clients

A dual impact: a livelihood for taxi drivers and a cleaner environment

More than 300,000 taxis are a permanent feature in Lima, the capital of Peru. They offer a quick and affordable way to get around. However, the taxi sector faces two challenges. Firstly, taxi drivers have limited access to the finance to buy a car. Secondly, most of the current taxi fleet consists of older, polluting cars - 30% of the taxis are over 15 years old and need to be replaced according to municipal regulations. Financial institution Acceso Crediticio (Acceso) addresses both these challenges. How? By providing loans for taxis that are powered by more environmentally friendly compressed natural gas (CNG).

Underserved sector

The majority of Acceso’s clients are independent taxi drivers, living on low incomes with limited options to own their vehicles. The taxi financing market in Peru is largely ignored by most financial institutions. The few that do operate are focused on financing the purchase of new cars by wealthier clients.

Alejandro Solis, Regional Manager Latin America at Triodos Investment Management: “70% of Acceso’s clients do not have accounts at other financial institutions and 20% are borrowing for the first time. This shows the important role Acceso plays in providing access to finance for underserved groups.”

Dual impact

CNG-based vehicles also provide a cleaner and more efficient alternative to fossil fuel-powered taxis. Alejandro Solis: “Acceso directly contributes to a reduction in the number of polluting cars in Lima, and lower CO2 emissions because CNG-based vehicles emit 25% less CO2 compared to vehicles running on diesel.”

One-stop shop

Acceso provides more than just finance. It is part of a group of companies that offer complementary services including one-stop shops where clients can get additional products and services attached to the loan, such as car maintenance services and taxi insurance. Alejandro Solis: “Pioneering this kind of finance and services means Acceso is an innovative player in Peru’s financial sector and provides a good example for its peers to follow.”

Acceso served almost 15,000 clients by the end of 2017. The loan provided by Triodos Microfinance Fund and Triodos Fair Share Fund will enable Acceso to reach many more people in the future and contribute to a cleaner air in Lima.