1. Charles B. Wendel New Technologies for SME Finance The World Bank December 4, 2002 Financial Institutions Consulting Products and Services with a Proven Track Record for Adding Value in SME Finance

2. 1 Panelists Charles Chemel Director, Strategic and Product Development Standard Bank of South Africa, Limited Klaus Glaubitt Chairman of the Board of Directors Microfinance Bank of Serbia and Montenegro Member of the Board of Directors Micro Enterprise Bank, Kosovo Manuel Montoya Director and General Manager Mibanco, Peru Charles Wendel President, Financial Institutions Consulting, Inc. New York City

3. 2 FIC overview Transaction Current accounts Payroll Bill payments and presentment Debit cards Investments Short-term investments Retirement plans Advisory Business procurement Succession planning Accounting Financing planning Tax Insurance Property and causality group health Group life disability Credit Line of credit Cards Leases Commercial and mortgage Equipment loans Small Business Customer Financial services companies offer banks many products, but…

4. 3 …most small businesses require only a small number Core Non-Core Small Business Product Use

5. 4 U.S. Small Business Profit Distribution Deposits 70-85% Loans 10-15% All Others 5% Small Business Profitability 100% Profitability is largely deposit driven

6. 5 The deposit/loan ratio largely determines the degree of small business ROE 1:12:13:14:15:1 40% 20% 0% Small Business Profitability Bank A Bank B Bank C Source: First Manhattan Consulting Group Deposit-to-loan ratio Small business unit ROE

7. 6 Contribution Relationship Between Contribution and Number of Products No. of products Source: Oxford Information Technology, Ltd. Generally, the more products sold, the greater the profit contribution

8. 7 Small businesses want to have branch access Business Banker Telephone Internet/Online Branch “What Is the Primary Method for Conducting Your Company's Business Banking?”

9. 8 While branch access is key, online users surpass off-line customers in balances and loans outstanding Average Current Account Balances per Customer Average online current account is 2.8 times higher than average current account Similarly, the average loan outstanding form online customers is two times greater than the average ($87,000 vs. $42,000)

10. 9 Online bankers also use more products and register increased satisfaction Average Number of Accounts per Customer Average online customers’ number of accounts is 1.8 times higher than average number of accounts

11. 10 Issues for discussion  What do bankers view as the key products for today and for the future?  Where are the key profit generators?  How are SMEs in the various markets sold and serviced? Primarily by Relationship Managers? Branch Managers?  How effective has Internet banking been so far?