MicroBank

The Social Bank of “la Caixa”

Facilitating the access to microfinance

Conference on Microfinance in Europe
Brussels - November 10, 2010
 “la Caixa” Savings Bank

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MicroBank was created in 2007 as part of the
“la Caixa” Group

The “la Caixa” Group:

A leading financial group in retail banking in Spain, committed
to people’s economic and social integration

• The world’s largest savings bank

• Universal banking model with multi-channel management
A benchmark
financial • Retail banking leader in Spain. 10% market share
institution • Leader in quality of service
• Robust risk profile. Default rate below industry average
• Great financial strength: liquidity and solvency

• Managed by Criteria Caixa Corp (79.5% stake)

The largest
investment portfolio • Diversified portfolio: services (68%) and
in Spain financial business (32%)
• International expansion vehicle

• €500 million invested in Community Projects in 2010, 25%

Social
of the Group’s recurring profit
commitment
• Budget maintained in recent years

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 Community Projects: the most contemporary value

The soul of
“la Caixa

Budget (MM €)
500 500 500

400
Budget 2010

Social Programmes 356 71%

Environmental & Science Prog. 62 12%

Cultural Programmes 55 11%

Education and Research Prog. 27 6%

2007 2008 2009 2010

We have maintained the budget 2nd European foundation

for the third year in a row 5th Global foundation

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 MicroBank, 3 years promoting microcredit

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 MicroBank: a strategic venture

MicroBank
 MicroBank was set up to channel “la Caixa”’s “social banking”
business. The aim was to promote this work through a single
financial institution in the group that acts based on the
parameters of specialisation, strictness and sustainability
appropriate to a banking institution.

 MicroBank is registered in the Bank of Spain Register of Banks,

and consequently we are under the Spanish banking legislation
and we have to fulfill all the requirements and formalities
established by the Bank of Spain.

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 MicroBank: a strategic venture

Strategy

 Setting up MicroBank has given specific legal personality to a strategic

challenge that “la Caixa” is undertaking.

Advantages of this decision:

 It makes it easier to serve a population segment with limited resources and
to develop specially-adapted products and services.
 It allows our business to be identified better.
 It makes it easier to assess the business being managed and its
sustainability

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 MicroBank: a strategic venture

Start of business

Sole shareholder, investing

€79.8 million of capital &
reserves

Provides and will provide the

financing needed to cover the
needs arising from the bank’s
growth

June 2007
It is being set up at a time of special need and
social sensitivity

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 MicroBank: 3 years promoting microcredit

MicroBank, a bank whose activity is:

FINANCIAL • Microcredit loans for businesses and families

• Promotes:
• Productive activity
SOCIALLY-MINDED
• Job creation
• Personal and family development

• 87,061 loans granted, 545,6 million euros

• With a default rate of 1,63%
SUSTAINABLE • With the support of European Institutions

*Data at 31/10/2010

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 How does it carry out its business?

417 Partner Institutions

86 Non-profit organisations
3 Regional Governments
Support network: 231 Town/City Councils
5,233 75 Public organisations
“la Caixa” branches 12 Universities
10 Other

Microloans with
Lending products: microcredit Liability products
security

For businesses For families • Savings Book • “la Caixa”

• Current Account pawnshop
Financial Social Family
Microcredit Microcredit Microcredit • Debit Card • 12,518 customers
• €28 million
outstanding
No collateral provided  Honour Credit balance

• Support from the “la Caixa” branch network facilitates expansion

• Strict risk models appropriate to a financial institution
• Full cost allocation (staff, operating costs, etc.)

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 And with the support of more than 400 partners

… representing a significant contribution

Distributed throughout the national territory…
to MicroBank

• … of different types:
• Knowledge about potential beneficiaries
universities, town/city councils, NGOs,
entrepreneur associations, etc.

• … aimed at different collectives • Advisory services for project implementation

and validation
young people, unemployed, entrepreneurs,
self-employed, women, etc.

Examples of partner institutions

Ministry for Equality, which promotes the participation of women in

economic and social life

Local development agency of Barcelona City Council, which promotes

employment and quality, forward-looking companies.

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 Providing opportunities for micro-entrepreneurs …

MICROCREDIT FOR BUSINESSES

Business microcredit Purpose of microcredit for businesses

For micro-entrepreneurs and the self

employed to build or expand Business
their business expansion

Amount up to €25,000
% financed up to 100%
Guarantee No collateral*
Period 5 years

Requirements:
Business plan so a feasibility study
can be conducted Start-up

12 * Guarantees may be provided

 … and opportunity coverage for families

MICROCREDIT FOR FAMILIES

Family microcredit Purpose of microcredits for families

Education and
For people with a yearly income of less Other health
than €18,000 and with family needs,
allowing them to get through Disability
difficult times
Housing

Amount up to €25,000
Family
Guarantee Without collateral needs
Period 6 years

Transport

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 MicroBank: Current customer profiles

% Microloans by beneficiary’s employment situation

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 MicroBank: Current customer profile

% Microloans by entrepreneurs’ country of origin

SPAIN

SOUTH AMERICA

REST OF EUROPE

ASIA & OCEANIA

NORTH AMERICA

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 MicroBank: Current customer profile

% Microloans by age group

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 MicroBank: Current customer profile

% Microloans by gender

WOMEN MEN

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 MicroBank: Statistical information about the portfolio

Data on 31 October 2010

87,061 microloans granted, worth a total of

€545.6 million. 61,177 of these loans, worth
€305.7 million, are still in the portfolio.

New products and services are increasingly being added.

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 Ensuring the project’s sustainability

LOW DEFAULT RATES

Microbank default and coverage

September 2010, in percentages and millions of Euros

MicroBank

Default rate (proportion of outstanding portfolio) 1.63%

Bad debts (proportion of the loan portfolio) 3.36%

Coverage rate 203%

Insolvency funds: 10.4

Of which generic 7.4

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 Collaboration with European institutions

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 Microbank enjoys the support of European institutions

European Investment Fund Council of Europe Development Bank

• European Investment Fund (EIF): a

European Union institution that
focuses on financing SMEs Council of Europe Development Bank
(CEB): the institution that develops
• The agreement is part of the EU’s
the Council of Europe’s policy of
Competitiveness & Innovation
solidarity
Programme (CIP)

Purpose: Credit facility

Purpose: Bad debt cover Transactions covered: Social, financial and
Transactions covered: Social and financial family microcredit
microcredit Term: 8 years (2008-2016)
Term: 4 years (2008-2011) 8 years (2009-2017)
Maximum guaranteed: 18,000,000€ Amount: €80 million

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 European institutions

SUPPORT FROM EUROPEAN INSTITUTIONS

IS A DECISIVE FACTOR IN…

… MICROBANK’S … It enables us to increase the size of our business

GROWTH… volume and facilitates rapid development of it.

… It makes up for the higher cost of managing these

… ITS
operations by partially covering the effect of bad
SUSTAINABILITY…
debts, which makes this business sustainable.

… AND GREATER
… It enable us to carry out a strategy to rapidly
SCOPE FOR ITS
expand our business.
BUSINESS…

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 Social impact of MicroBank’s activity

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 Social impact of MicroBank activity

…ALSO, FROM A SOCIAL POINT OF VIEW,

THE MICROCREDITS GRANTED...

… they help the following people and companies find

financing: micro-companies, small businesses and
self-employed individuals, who generally find it
… PROMOTE hard to raise financing through traditional channels.
FINANCIAL
INCLUSION… ...they make it possible to meet the needs of
financially-excluded groups (the unemployed,
young people, women, etc.)

… CONTRIBUTE TO ...MicroBank is estimated to have contributed to

CREATE creating 25,000 jobs in three years.
EMPLOYMENT…

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 Social impact of microcredits

ACCORDING TO A STUDY CARRIED OUT BY ESADE, 5 OUT OF 6 PROJECTS

FINANCED BY MICROBANK ARE STILL IN OPERATION

16,259 SUCCESSFUL
CONTRIBUTION TO JOB CREATION
FINANCED PROJECTS

Businesses Business with

that are still in 1 employee
operation
Business with
2 employees

Others Business with 3

or more
employees

84% of businesses financed with a MicroBank is estimated to have

microloan are still in operation contributed to creating 25,000 jobs

25 Source: ESADE “Analysis of the impact of Microbank microloans”

 Lessons learned

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 Lessons Learned

Sustainability is a must and not an option

1. Sustainability is a basic requirement to grow and reach potential demand.

Specialisation
Carrying out a highly specialised activity in microfinance allows improving efficiency in
2. management and makes sustainable an activity that has a social impact and that the rest of
the banking system generally rejects due to the lack of profitability.

Financing viable projects

3. Granting microcredits must be based on the viability of business projects, as well as the
entrepreneur’s capacity to carry them out. In order to assess these projects is necessary to
apply banking models based on rigor and specifically adapted to our target.

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 Thank you very much
www.microbanklacaixa.es

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