IFC Bank Advisory Services – MIDDLE EAST & North Africa TRANSFORMATIONAL ROADMAP FOR JLGC Hermann Bender November 25, 2014

World Bank Group commitment to Jordan Assistance to JEDCO on the proposed “MSME Strategy for Jordan” $3M Transition Fund for enhancing governance and strengthening the regulatory and institutional framework for MSMEs in Jordan. Technical partner of private credit bureau selected (IFC) Secured lending law for the establishment of a collateral registry (IFC) Enabling Environment Advisory Services to Financial Institutions Technical assistance to JLGC on strengthening its risk framework and outreach in addition to up scaling its SME Business. Technical assistance to Bank al Etihad on strengthening its SME operations Series of trainings for Ejara Leasing Company on Sustainable Energy Finance Support to MFI: Tamweelcom on risk management and new products Support and Training to MSMEs Supporting Jordan Institute of Directors on building its capacity to advocate improved Corporate Governance standards and rolling out training programs In depth advice to two firms by assessing their corporate governance practices Investment Activities GTFP lines for four commercial banks Loans to three Microfinance institutions Equity and Subordinated Debt Exposures to a commercial bank

JLGC share in country MSME financing < 2% - however there is still an estimated $ 2B financing gap SOURCE: Union of Arab Banks/World Bank Financial Flagship Report 2011; McKinsey-IFC MSME Database 2011

JLGC schemes outreach is lower than most MENA countries programs 33 SOURCE: World Bank-A review of Credit Guarantee Schemes in MENA region

Outreach of Guarantee schemes in benchmark countries   Number of guarantees issued in 2009 Outstanding guarantees in 2009 Average value of guarantees issued in 2009 Number Per million people Amount in US$ Million % GDP in US$ Scaled by GDP per capita Chile 60,000 1,800 1,000 0.6 10,000 1.0 Colombia 200,000 4,440 1,380 13,000 2.4 Hungary 31,000 3100 2,680 1.9 76,500 5.5 India 100,000 100 1300 0.1 10 Korea 200,00 5,000 50,000 5.0 125,000 7.0 Malaysia 14,000 400 2,000 66,000 9.4 Romania 6,600 285 700 0.4 80,000 Taiwan 220,000 8,000 12,000 3.5 3.0 Jordan 245 33 16 0.07 37,700 Average 1,082 80 142 0.32 75,000 SOURCE: World Bank – MENA Flagship Credit Guarantee Schemes

Key messages: JLGC Diagnostic Background: IFC conducted a diagnostic mission followed by submission of detailed recommendations during Q4 2012, identifying a number of areas for potential collaboration Technical Assistance: A detailed technical assistance road-map & project design was submitted and scope agreement was obtained during Q1, 2013. Project kick-off awaits formalization of financing mechanism & legal agreements Current State: JLGC‘s contribution to market SME lending is currently low; multiple areas of deficiencies were identified and benchmarking with best practice schemes was performed Competencies enhancement: Proficiency in 6 key areas of core competencies is required to achieve scale, sustainability and efficiency Organizational implications: The recommendations proposed by IFC require commencement of a “transformation” agenda to achieve desired outcomes

JLGC would need to build strengths in six main areas....... Organization & HR Segmentation Analytics & Systems STRENGHTS Delivery Model Payment Rules Risk Management

Prioritized Areas for Development PHASE ONE: CURRENT SCOPE PHASE TWO Module One: SME Market Demand Research Module Two: Product Development (Segmentation & Delivery) Module Three: Risk Management Module Four: Marketing & Outreach (Delivery Model Enhancement) Module Six: Payment Rules Module Seven: Systems & Analytics Module Eight: Organization & HR Module 5: Implementation Support Will be discussed & scoped after phase I delivery and finalization whilst providing adequate assurance that set key objectives are materialized and impact is being adequately assessed throughout the organization and with relevant stakeholders. Transformation quick wins that would facilitate achieving the key areas’ respective objectives within a limited timeframe as shown in the project roadmap section Objective Objective

Project Status    Completed Ongoing 1 2 3 4 5 Market Research Product Development Risk Management  Marketing Strategy & Outreach Plan Implementation  Nov 2013 Feb 2014 May 2014 July 2014 One year post delivery Timeline Meetings with JLGC team to learn about the current state of operations and to identify opportunities for product development. Meetings with 11 partner banks to understand the lenders’ issues and the variety of business models used by the participating lenders. SME Focus groups to be conducted by market research firm to identify segmentation approach for JLGC and banks. To be completed by early May. Review of existing JLGC products Reference to global guarantee schemes Revise characteristics of current guarantee programs Enhance the quality of JLGC services Advise on current scheme/new products Stay abreast of market development Standardize and automate the credit guarantee application Establish a risk management framework Development of a risk inclusive culture Expert based scorecard for SMEs Based on Module 1 recommendations and outcome from market study. More focus will be on the desired outreach segments (customers, sector, geographies, etc.) Review progress against plan and provide ad hoc consultancy support as needed on site Support the resolution of implementation challenges as required Monitoring & evaluation IFC support IFC deliverables Executive Summary of Opportunities and Findings as a key input to Module 2. (Delivered and approved by Steering Committee) Product Proposition Report. (Draft Report has been submitted to JLGC for review on March 11, 2014) Existing Services Development/Enhancement criteria (Proposed DLP) The following has been delivered and pending approval: SME Risk management framework package SME Banking Product Program based credit manual Risk Scoring Model The following has been delivered and approved: Documented Marketing Strategy Market outreach plan Status update, findings and recommendations summary report for each visit  Ongoing Completed

Portfolio Performance Description FY11 FY13 No. Vol. (In JD) *Guaranteed loans during the year 447 8.1M 719 17M *Outstanding Portfolio 819 14M 1,362 28M Claims paid 16 649,921 7 169,340 * Excluding Real Estate and Personal Loans

Thank you for your attention Hermann Bender November 25, 2014