1. Microfinance Group 1 International Microfinance Regulation and Supervision Meeting Salvador June 1 st 2005 Bob Annibale Global Director Citigroup Microfinance Group

2. Microfinance Group 2 How we define Microfinance? Microfinance is the provision of a broad range of financial services to poor and low-income people who do not have access to formal financial services such as: - deposits - loans - payment services - money transfers - insurance Microfinance services are provided by three types of sources: 1. Regulated financial institutions, such as banks, credit unions, consumer finance companies, postal savings banks and cooperatives 2. Nongovernmental organizations (NGOs) 3. Informal sources such as money lenders, shopkeepers, and “traditional” savings groups

3. Microfinance Group 3 Poverty and Microfinance “Poor people borrow some of the time but save all of the time” Very Poor People who have few (if any) assets – very limited chances to earn money credit savings Entrepreneurial Poor Self Employed Poor Laboring Poor Very Poor The Poverty Pyramid Entrepreneurial Poor People who are slightly below the poverty line. Laboring Poor Farm laborers, domestics and unemployed workers Self-Employed Poor Poor people who are meeting their basic needs by running microbusinesses *Source: FINCA’s Poverty Pyramid insurance

4. Microfinance Group 4 Citigroup Microfinance Group –Expanding Access to Financial Services Credit Remittances Savings Insurance The Citigroup Microfinance Group works with MFIs as clients and partners to expand access to financial services and products to the “unbanked” who are not currently reached by the formal financial sector. The Citigroup Microfinance Group reports to the CEOs of Citigroup’s Global Consumer Group and its Corporate and Investment Bank Multi-Product/Multi-business and geographic coverage.

5. Microfinance Group 5 Banking the sector  Cash Management  Treasury  Investment Services  Agencies Partnering with the sector and Individuals  Loan partnerships  Remittances  Savings  Insurance Strategic Partners and Products Funding the Sector  Lending products  Bond Issues  SBLC backed finances/Funds  Securitizations Multilaterals/Bilaterals Regulators  International Finance Corp (IFC)  Overseas Private Investment Corporation (OPIC)  Inter-American Development Bank (IDB)  Asian Development Bank (ADB)  (CGAP  Central Banks/Min. of Finance Working with Networks  Women’s World Banking  Opportunity International  Accion  FINCA  The Microfinance Network  Grameen Rating Agencies  Standard & Poor’s  Fitch  Microrate  M-CRIL  Moody’s

6. Microfinance Group 6  14 Consumer Sofoles (Consumer Finance companies) such as Credito Familiar and Compartamos  71 MFIs: Include Sociedades Financieras populares, Asociaciones Civiles and one Sofol. Approved by the Ministry of Economy  680 cajas and cooperatives: Organized in Federations and Confederations Working Age Population SOFOLES BANKS A B C+ 15 MM C 10 MM D,E 40 MM MFI’S C- 5MM CAJAS AND COOPERATIVES Market Profile – Mexico

7. Microfinance Group 7 Compartamos – Banamex (Citigroup) Partnership Cash Management: –Over 45,000 women in rural communities cash loan checks in Banamex every 16 weeks –Compartamos customers make over 33,000 deposits per month at Banamex branches to service debt. For most of them, it is the first experience in a bank. Savings: –42,000 microsavers (Compartamos clients) are already saving in Banamex Financing –Banamex arranged: Two private placement bonds issued in 2002 and 2003 The first investment grade bond for an MFI in 2004 Banamex clean credit line enhanced by OPIC Insurance –Microinsurance product with Seguros Banamex to be launched Compartamos is Mexico’s leading MFI with over 330,000 clients, mostly rural self-employed women, and a balance sheet of over $110MM

8. Microfinance Group 8 Working Women’s Forum – Citibank India Entered into a loan agency partnership: WWF originates and services microloans to entrepreneurs Citi India funds and assumes all credit risk on loans Citi India reimburses WWF for agreed servicing expenses Results to date: Disbursed over 10,000 loans with an average size of under $75 and tenure of 10 months Low NCLs to date and only arrears relate to tsunami-impacted clients All loan data is held within Citibank India’s credit MIS Program will be increased in number of loans and branches reached WWF program will be replicated with other partners Working Women’s Forum WWF is a cooperative bank with 700,00 women members in 15 branches in three states in India.

9. Microfinance Group 9 Scalable, Replicable…Partnerships Leverage Citigroup relationships and existing Corporate knowledge of the sector – long history of working philanthropically in microfinance  Citigroup to work with leading microfinance institutions and networks to pilot, partner and to gain experience – collaboration  Initiatives to be scalable and replicable  Initiatives to be cost-effective and commercially sustainable  Initiatives to have measurable results – “double bottom line”  Microfinance initiatives and activities in Mexico, India, Peru, Ecuador, Kenya, Uganda, Bangladesh, etc….Brazil

10. Microfinance Group 10 Brazil – Observations on expanding access to microfinance Brazil’s microfinance institutions are relatively small NGOs operating in a large market and country The banking sector in Brazil has been consolidating--well capitalized and liquid, excellent technology, and with extensive branch networks Banco do Brasil and Caixa Economica networks - Banco do Nordeste experience Commercial banks have launched programs – Unibanco, Bradesco (postal banking) Extensive consumer credit from banks, consumer finance companies, credit unions, stores, credit cards, ‘post-dated checks’----formal and informal installment financing Emergence of some niche players in microfinance and SME sectors, Lemon Bank Incentives to date to use reserves for micro-enterprise lending has resulted in modest expansion of access to financial services to micro-entrepreneurs and the ‘unbanked’ Recent regulatory (reserves) incentives for banks to lend to micro-entrepreneurs Significant growth opportunities in Brazil for expanding access to financial services leveraging the banking sector (commercial, public and credit unions) Collaboration with the MFI and NGOs with specialized skills and community access and trust will broaden the scope and range of communities reached