Claudia Schmerler - Maleki Conferences GmbH

Africa Business Week – Finance in Africa
Access to Finance for SMEs in Africa
Case Study – Democratic Republic of Congo (DRC)
Frankfurt, 23 May 2012
Claudia Schmerler
KfW - Senior Financial Sector Economist

DRC in Brief
A challenging country to live in
Population: 70.9 million
Independence: 1960 from Belgium
Area: 2.345.410 km² (~ about 1/4th of Europe)
Life expectancy (2009): 48 years
Literacy rate (2009): 67%
GDP per capita (2010): $300
% of population living below 1,25 USD (2010): 60%
Human Development Index (2011): Rank 187 of 187
• (Post) Conflict Country with ongoing conflicts in
Eastern Congo and controversial domestic policies;
• DRC’s foreign debt relief of USD 10,8 billion by the
Paris Club of Donor Countries in 2010;
• Growing but vulnerable economy due to high
dependencies on mining and foreign aid;
• Significant shadow economy with informal business
organizations and transactions;
• Financial system severely underdeveloped: focus
on payment and transfer service to corporate and
government clients in urban areas.

MSME Finance in DRC
Information and capacity deficits on both supply and demand side
● Many Financial Institutions (FIs) claim to be interested to expend into the
MSME sector but lack information on and confidence in MSMEs
● When dealing with MSMEs, FIs mainly seek to increase their deposits rather
than lending to them
● Lending methodologies not adapted to MSMEs – banks are only used to
finance short term loans (overdrafts); credit esp. to finance investment is an
unusual or even unknown product for FIs
● Situation is exaggerated by limited internal capacities (blurred strategies,
challenging HR management, …), little competition (little innovation pressure,
no credit cost analysis, …) and sometimes lack of professionalism
(disregarding confidentiality of client data, ... )
● Many MSMEs operate informally, even formal companies often have a
double book keeping system, one real and one for the state in which turnover
is underestimated

MSME Finance in DRC
Information and capacity deficits on both supply and demand side
● Many companies manage several business activities in parallel,
management capacities are often rudimentary (little
market/client/competitor analysis, monopolised decision making, …)
● Family pressure is often the reason why entrepreneurs satisfy the demand of
the bigger family using the turnover of the company, instead of reinvesting
the funds
● FIs perception that MSMEs are afraid of them or of loans cannot has not
been confirmed by interviews, but overall image of FIs by MSMEs is rather
negative (strict credit conditions, …)
● Challenging business environment (political instability, deficient judicial
system, inadequate infrastructure, corruption, dealings with tax agents that
show up with bizarre fines, …)
● Inadequate financial infrastructure (low supervisory capacity, dysfunctional
credit bureau, no deposit insurance system, irresponsible finance practises,
…)

KfW in DRC
A comprehensive approach to financial sector development
Micro
Meso
Macro
● ProCredit Bank Congo (equity / greenfielding)
● Advans Bank Congo (equity / greenfielding)
● FINCA Congo (loan / growth finance)
● Credit Bureau (grant)
● Deposit Protection Scheme (grant)
● National fund to refinance & provide TA to MSME service providers
(equity)
● Microfinance Association (grant)
● Several information sharing facilities (grant)
→ MSME Access to Finance Forum (=conference / fair for MSMEs and FIs)
→ Radio Show for Entrepreneurs
→ World Savings Day
→ Finance of several publically available studies
→ Responsible Finance Workshop
● Support to central bank in drafting relevant legislation / regulation (TA
grant)
● Policy dialogue (time)

KfW in DRC
Project Example on Micro Level: ProCredit Bank Congo
= Greenfielding full fledged commercial bank focusing on (M)SMEs and general public
● Founded in 2005 by ProCredit Holding, IPC, DOEN, IFC, BIO and KfW
● 17 Branches in 3 Provinces
● Average Loan Size: ~ 7.000 USD
● Market leader in savings mobilisation
● Innovative Player in DRC putting pressure on other FIs, e.g
● Good loan origination and monitoring procedures
● Technology based cost reductions (first ATMs, mobile banking)
● First bank to offer saving accounts to poorer clients with zero costs
● Setting responsible finance and transparency standards
● Website: www.procredit.cd

KfW in DRC
Project Example on Meso Level: (Re)establishment of Credit Bureau
= (Re)establishment of Credit Bureau to reduce information gaps and asymmetries
● FIs lack information on clients solvency, this contributes to credit rationing (very low
financial intermediation) and inappropriate allocation (NPLs estimated as high as 18%)
● Clients that do receive loans, often borrow from more than one FIs
● Existing credit bureau only covers large corporate loans and does not work properly
● KfW mandated by the Congolese Central Bank to set up new Credit Bureau as Public
Private Partnership:
● Central Bank = owner of the Credit Bureau
● Professional private company = operational manager of the Credit Bureau
● Website: www.bcc.cd
Credit Bureau

KfW in DRC
Project Example on Meso Level: Establishment of national debt fund
= National fund providing senior and subordinated debt and technical assistance to
(potential) MSME service providers
● FIs institutions that do want to downscale (banks) or upscale (MFIs) to the MSME market
lack (longer term) funds and know-how
● FBM founded in 2007 by World Bank, UNDP, UNCDF and KfW
● Committed funds: 20 mln USD
● Professional fund management by Frankfurt School of Management and Finance
● Website: www.fpm.cd

KfW in DRC
Project Example on Meso Level: World Savings Day
= information campaign to increase financial awareness esp. on the relevance of savings
amongst the youth
● Organised for the first time in 2011, annual repetition envisaged
● Promoters: Central Bank together Ministry of Education
● Participants: 10 Congolese Financial Institutions and more than 100 schools and
universities
● 17.000 Students & Children received basic financial education
● 9.000 savings accounts were opened within 14 days after the event!

Thank you for
your attention!
Contact KfW:
Claudia Schmerler
Competence Center Financial Sector Development /Global Funds
Tel + 49 69 7431 3980
Fax + 49 69 7431 3498
Claudia.schmerler@kfw.de
www.kfw.de