Microfinance Forum meets in Moldova

mrc_fin15The Moldovan-German Forum on financing small and medium enterprises was held in Chisinau this month. The Forum was jointly organized by the German Ministry of Finance, KfW Entwicklungsbank (German Development Bank) and IDIS Viitorul with the purpose of introducing Moldovan entrepreneurs to Germany’s experience with small and medium business development. At the same time, the Forum served to inform the financial giant KfW about recent microfinance developments in Moldova. Acting through the framework of German Financial Cooperation, KfW has been indirectly working in Moldova since 1999.


Michael Kortenbusch, Managing Director (BFC), has worked in small business lending for years. Today, the clients of his company include EBRD, USAID, IFC, and etc.

The German Ministry of Finance’s Head of Cooperation with Transition Countries, Dr. Markus Neimke, said that small and medium enterprises make up 99.7% of businesses in Germany. They produce 30% of total GDP and generate 6% of total profits. These enterprises also create 60% of all private sector jobs and account for 83% of employees taking professional development courses.´

“The [financial] crisis has demonstrated that small enterprises are more resilient than the larger ones”, Dr Neimke said. He then provided an in-depth explanation of the options for financing enterprises available in Germany, for example in the wine branch.

Octavian Calmac, the Moldovan Deputy Minister of Economy, argued that in addition to their social role, small and medium enterprises play an important role in the economy. During the last year, the income of these enterprises totaled 65 billion lei (USD 5.4 billion), and they accounted for 65% of Moldova’s GDP.

Aurika Doyna, the Deputy Chair of the National Commission on the Financial Market, concurred. “The total volumes of loans granted to Moldovan small and medium enterprises during the first ten months of the current year has reached MDL 1,600 million (USD 133 million)”, he announced.

Viorel Kivriga, an expert with IDIS Viitorul, spoke about the current situation of the Moldovan microfinance market. “By October 2010, the volume of loans granted to small and medium enterprises in national and foreign currency was almost equal. The volume of loans in foreign currency granted to legal entities exceeded the volume of loans in Moldovan lei. Interest rates decreased from 23% at the beginning of 2008 to 16–17% in October 2010 for loans in national currency, and from 15% to less than 10% for loans in foreign currency.” He warned that “the level of interest rates continues to be unacceptably high. Additional, alternative, non-bank sources of small and medium enterprises financing are needed.”

Mr. Kivriga also pointed out common problems in small and medium enterprise financing, including a lack of collateral, the low level of qualifications of entrepreneurs (who often cannot prepare sound business plans), and the low interest of financial organizations in those segments of the national economy that carry a high degree of risk, for example agriculture.

The expert claimed that in the agricultural sector, state support is ephemeral; only 10% of the allocated funds reach the target customers. “Access to external market is limited for most of the enterprises. For example, of the first four companies that were allowed to export wine to Russia, three were run with Russian capital. Another case are the 33 enterprises that were allowed to export crop husbandry production to the Russian Federation,” he noted.

Dumitru Ursu, the Chairman of the Association of Banks of Moldova, presented a review of the Moldovan banking sector. (Because LP provides quite detailed coverage of activities of this sector today, we will focus on other issues here.)

“Credit bureaus do not function,” remarked Kemal Seytveliev, the Director of ProCredit Bank Moldova. Also, “state credit guarantee funds do not operate”. The Director of the Organization for Small and Medium Business Development described the quite extensive practice of guaranteeing of up to 70% of a loan amount, but not more than 300,000 lei (USD 25,000). At the end of the discussion, the experts came to the conclusion that the volume of such a fund should be at least 20 million dollars.

Artur Muntyanu, the director of the company Microinvest, analyzed the microfinance services market. “As of December 31, 2009, 29 such organizations were registered,” he said. Currently their number is already 35. Most of these organizations that work on a national scale focus on consumer lending. The largest player is the company Prime Capital, with a market share of 21.75%. Microinvest (with a share of 17.5%) is in the second position, and Procredit (a non-bank player with a share of 16.7%) is in third place. The total assets of this system at the end of 2008 were 235 million dollar, and in December 2009, they were 157.2 million dollars. At the same time, their own capital was 38.5 million and 39.9 million dollars, their loan portfolios 140.8 million dollars and 110.6 million dollars, and ROA stood at 3.2% and 3.52%, while ROE was 23.87% and 17.29%, respectively.“

Alina Chebotariova, Director of the of the Principal Directorate for Microfinance of NCFM, said that “the number of savings and credit associations (SCAs) has been decreasing during the last five years. At the same time, the number of SCAs’ members is increasing. Currently the number of members is 139,400 compared to 129,000 in 2009. Their loan portfolio was 400 million lei in 2008, 431 million lei by the end of the first three quarters of 2009, and 315.3 million lei (USD 26.3 million) for the same period of 2010. Usually around 10% of these loans are guaranteed.”

Concluding the Moldovan presentations, Raisa Kantemir, the Head of the Directorate of Credit Lines of the Ministry of Finance, reported on how—and which—funds from abroad are attracted for programs financing small and medium businesses.

Financiers like to blame entrepreneurs for incompetence. However, it is not a secret that consulting support to lenders is also not superfluous. Such support to banks and international financial organizations is being provided by the Swiss company Business & Finance Consulting. The founder of the company, Michael Kortenbusch, was general manager of Micro Enterprise Credit din Moldova in 2001–2003. Today, the staff of Business & Finance Consulting comprises 65 employees, who working in the offices of the company in Armenia, Georgia, Moldova, Russia and Tajikistan.

Mr Kortenbusch presented examples of the successful implementation of projects in the areas of lending, internal risk based audit, liquidity management, credit scoring (in particular the system MasterAPS™), due diligence, and market research by his company.

Igor Fomin
Economic Review “Logos-Press”