The 22 ProCredit banks are subsidiaries of ProCredit Holding. These institutions share a common mission and corporate values, and focus on providing very small, small and medium-sized enterprises with reliable access to credit and other financial services.
Supporting the businesses that drive economic development
In the countries where we operate, smaller, more informal businesses as well as lower income groups tend to be excluded from the banking sector. These target groups have been neglected because they have been perceived as expensive to serve and economically unattractive. Informal small businesses have been seen as particularly difficult since they do not have the formal financial statements, credit history or collateral that most banks traditionally require to issue a loan. Furthermore, few financial institutions have the capacity to serve these clients well, since this requires well-trained staff who can build long-term relationships with customers.
It is widely understood by economists and development specialists, however, that small businesses are the main engines of growth in developing countries and transition economies. From a political perspective, the middle class that emerges as micro, small and medium-sized enterprises (MSMEs) grow and flourish tends to be a stabilising element in society. These insights led the founders of the ProCredit group to create financial institutions in Eastern Europe, Latin America and Africa that would specialise in serving the target groups of very small and small businesses and ‘ordinary people'. Since the group's formation in 1998, these institutions have grown rapidly, and they now operate through 735 branches and 14,675 employees (as of Dec 31, 2012).
IPC, a Frankfurt-based consulting firm, developed the lending methodology used by the ProCredit group. This methodology is successful because it reflects a profound understanding of the problems and opportunities of very small, small and medium-sized businesses and the realities of their environments. It entails careful analysis of all credit risks with the high degree of standardisation that is essential for efficiency and for outreach to a large number of small borrowers. As of Dec 31, 2012, more than 537, 000 loans with a combined volume of EUR 4.2 billion were outstanding. The average loan amount outstanding was over EUR 7.760. Loan portfolio quality remained high: loans in arrears for more than 90 days amounted to 3.3 % of the total loan portfolio. These statistics demonstrate that small borrowers are indeed creditworthy when the lender uses an appropriate lending methodology.
Building inclusive and transparent financial intermediaries that serve the target group
If a credit institution is to survive over the long term, it will need to be able to access local funding; it cannot rely indefinitely on funding from abroad. ProCredit institutions have benefited greatly from access to funds from abroad, but their major emphasis in terms of funding is on deposit mobilisation in the local markets in which they operate. Although the ProCredit institutions initially received funding support from the international financial institutions in our group of shareholders in the form of loans, today the banks obtain the bulk of their onlending funds from locally mobilised savings deposits. As of Dec 31, 2012, our total deposit volume amounted to almost EUR 3.6 billion, equivalent to 86.6% of our outstanding loan portfolio volume. The substantial growth in deposits which has been achieved in recent years can be attributed to the implementation of deposit facilities and related products that are tailored to the needs of the target group. For example, ProCredit banks typically require no minimum deposit balance, and offer their customers domestic and international transfers, debit and credit cards, documentary services and foreign exchange services.
To increase public confidence in the banking sectors in which they operate, and also to encourage competition in those sectors, ProCredit institutions strive to set new standards in transparency, in business ethics and in risk management and auditing.
The abilities and motivation of our local staff will be the key to our continued success, which is why recruiting the right people, developing their professional skills and integrating them into the existing teams at the individual banks is the main focus of the ProCredit banks and ProCredit Holding. Whether through training opportunities, exchanges between institutions or participation in the ProCredit Academy, we aim to give each and every member of staff the opportunity for personal and professional development in this truly international group.