Planejamento 2005

1
Microfinance in Brazil a commercial bank view
Global Conference on Access to Finance World Bank
Headquarters, Washington, DC May 30-31, 2006
2
Banco ABN AMRO Reals Mission
3
Banco ABN AMRO Reals Model
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Why Microfinance?

• To enhance social and economic development,
  contributing to income generation and
  employment, through one of the Banks Core
  Businesses - credit
• To stimulate empowerment, improving life
  quality of clients and of their neighborhood,
  and to reinforce our positioning in Sustainable
  Development
• To develop a sustainable new business
  opportunity
• To use and apply already existing expertise in
  Microfinance by partnering with a
  field leader Acción International

5
Our Mission
To improve the flow of financial resources in
the country by offering the lower income
population access to credit that will enable the
creation and growth of small businesses,
generating (self) employment and income to make
life projects come true
6
Real Microcrédito a pioneer

• First international commercial bank in
  Microfinance in Brazil
• Initiative developed in-house by
  multidisciplinary team
• First microfinance venture in São Paulo by a
  commercial bank
• Since the beginning of its operations in August
  2002 Real Microcrédito has
• Had a capital allocation of USD 2.2 million
• Made 18,400 loans totaling more than USD 13.5
  million
• Present portfolio of 8,000 clients totaling USD
  5.3 million
• Over 40 of loans below five hundred dollars
• Forty eight percent of loans to women
• Created 90 direct jobs

All data as of March 2006
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Our Operations(1)

• Banco ABN AMRO REAL
• Capital provider (97)
• Funding and booking for lending activities
• Management team provider
• Managerial support (HR, Legal, Accounting,
  Marketing)
• Full infrastructure support
• Access to and units within branch network
• Real Microcrédito (Service company)
• Strategy definition
• Client identification and evaluation
• Hiring of commercial and operational team
• Coordination of credit process from approval
  through collection

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Our Operations(2)

• Lending - Individual or Solidarity Groups
• Working capital
• Fixed asset financing
• Home and business improvement
• Credit agents
• Hired in/outside the communities
• Trained in basic skills (analysis, sales,
  methodology)
• Role from the approval to the final repayment
  of the loan, and business advisory
• Acción International
• Capital provider (3)
• technical assistance partner
• project implementation and portfolio growth
• transfer of methodology

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Challenges and Opportunities

• Challenges
• Overcome skepticism of poor people
• Make microfinance known among
  microbusi- nesses
• Reduce poverty by financing productive
  activities
• Overcome high rate of negative credit records
• Provide adequate financing for the needs of
  microentre- preneurs

• Opportunities
• Develop a sustainable business and a new
  client niche for the bank
• Change the perception of poor people that banks
  and credit are for the rich
• Foster entrepreneurship in poor communities
• Build self esteem and stimulate the poor to
  build their own way out of poverty

10
Key Learning Points

• Personal and business life is totally integrated
  products to meet both
• High financial needs, low trust in banks ,
  competitive environment create reliable
  connections in the communities
• Banks infrastructure is important select those
  aspects that facilitate our operation use
  synergy with branch network
• In the poorer communities solidarity credits are
  more efficient have adequate products for the
  different needs of clients
• Credit agents are key to success from approval
  to final repayment of the loan, over business
  advisory
• High rates of negative credit records set
  flexible rules that do not compromise repayment
• Accions experience cannot be replicated in full
  learn and develop a local model

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Next Steps
2006 - Continue expansion and consolidation in
São Paulo, Campinas and Rio de Janeiro
State 2006 - To reach operational breakeven by
the end of first half 2006 2006 - Develop
indicators to measure social and environmental
impacts on the communities serviced 2006 - Expand
to other metropolitan areas in Brazil (mainly
Northeast) using the banks branches as a
foothold and support 2006/2007 - Development
and implementation of credit scoring and
automation - palmtop - for the microcredit
business