Financial Services Regulatory Reform
The current regulatory environment limits the ability of commercial banks, and, to some extends, non-banking financial institutions. Specifically, the "legislative reform" would envisage the following issues, among many others:
- improvement of banking legislative framework which inhibit the banks' willing to issue long term loans and of moderate size;
- attracting long term resources in Moldovan financial system;
- ways for insuring the financial resources;
- development of the legislation that would allow for the creation of Credit Bureau(s); etc.
To address these and other financial services regulatory issues, BIZPRO/Moldova, through its strategic partner Moldovan Banks Association, initiated and supports the Financial Services Working Group, composed of representatives of leading financial institutions, SMEs, government officials, etc. The working group serves to develop legislative proposals, in the financial services area, review and comment on legislation, and ensure financial services issues being addressed from "grass roots" and regional level to national level - National Working Group.
Development of new bank products for SME's
Currently there is a significant gap between the SMEs' funding needs and the portfolio of products and services offered on the local financial market.
Financial product development continues to be the main focus on the BIZPRO agenda of cooperation with interested commercial banks as a key input in facilitating SME's access to finance. Currently, the implementation of a series of new financial products and modern banking techniques is underway at Moldova-Agroindbank, Mobiasbank, Fincombank, Moldinconbank.
Moldova Agroindbank, has created a Domestic Factoring product, which even though under the pilot test phase, has already yielded tangible results - a contract with a European bulk supplier Metro Cash &Carry.
Another two banking products are considered for implementation such as leasing by Mobiasbank, and Credit Scoring by Fincombank and Moldindconbank
The Leasing Product, while not a completely new product for Moldova, has not grown as it should due to legal constraints and restricted use limited to car purchases. Recently, Mobiasbank supported by BIZPRO has undertaken a market research to assess the existing environment. The research discovered good prospects for funding acquisitions by SMEs of equipment and production machinery through financial leasing.
Credit Scoring, is an innovative banking technology, allowing for initial screening of SMEs applying for credits. It assesses the applicant companies based on some criteria selected individually by the beneficiary bank. New banking software technology for credit scoring is now operational at Moldova-Agroindbank, and is being implemented by Mobiasbank, Fincombank and Moldindconbank.
Loan Portfolio Guarantee Program (LPGP)
In the area of Financial Services Development, BIZPRO provides the services of the Guarantee Monitoring Unit under the DCA LPG component of the program.
USAID started to implement the Loan Portfolio Guarantee facility (LPG) for Moldovan commercial banks since 2000. This project aims to encourage commercial banks to extend credits to micro enterprises, small businesses and farms. Commercial banks' risks are covered by USAID in the proportion of 50% of the value of the loans granted within this Program.
At the beginning, the MSED LPG Program, having a five years guarantee facility of $2.5 mln, was developed for 3 local commercial banks - Moldova Agroindbank, Victoriabank and Fincombank. Within this program the guarantee is provided through the loans granted in national and US $ currencies.
Building on the success of the existing guarantee program USAID has extended the guarantee facility in the total amount of $11.5 mln within the DCA LPG Program: at the end of 2003 four new financial institutions - Mobiasbanca, Moldindconbank, Banca Sociala and the Rural Finance Corporation - became partners and in September 2004, two new additional Guarantee Agreements were signed with Moldova Agroindbank and Victoriabank. In this Program the guarantee is given through the loans granted in national, US $ and Euro currencies.
Since initiation of the LPG Program, from June 2000 until March 2005 more than 1070 loans in the total amount of over $17 mln were disbursed using the USAID guarantee facility.
According to the results of conducted LPG impact assessment, the Guarantee Program reached the target group and had a positive impact:
- LPG mitigated lenders perception of borrowers' risk: increased loan access of first time and start-up borrowers as well as of businesses from riskier spheres [agriculture];
- The FIs attitude regarding SMEs lending has been improved;
- A long term partnership has been established between FIs and LPG clients.
