Guinea Mauritania Niger Senegal A Partnership to promote Benin non-interest banking Mali across Africa
Nouakchott, April 16, 2012
This report is solely for the use of intended recipients. No part of it may be circulated, quoted, or reproduced for distribution outside the client organization without prior written approval from TAH. This material was used by TAH during an oral presentation; it is not a complete record of the discussion. Agenda
1. Background & Profile of the Partners
2. Context and Challenges
3. Overall Vision and challenges ahead
4. Strategy Blueprint
5. Hightlights of the turnaround results Background & Rationale For Establishing the Holding
. In 2010, ICD has acquired controlling stakes in Islamic banks of Niger, Guinea and Senegal and secured a license to operate an Islamic Bank in Mauritania (“the Banks”) . Due to the weak market positions of the Banks, ICD invited Bank Asya (Turkey) for setting up a partnership that aims at achieving leadership position and promoting non-interest banking. . Tamweel Africa Holding was established to: . Access to larger market . Achieve operational synergies . Strengthen leadership across the target markets :the “Power of One”. . Build an organization with best practices and processes . Better alignment with the strategic Partner The Partnership capitalize on complementarities to optimize returns…
ICD
. Platform . Operational excellence . Market knowledge . Technical expertise . Brand Name . Systems & best practices . Long term resources . Human resources . Lines of trade financing . International network operations/ SME . Capital development . Capital Current Holding Structure
ICD
60% 40%
Mauritania Guinea Niger Senegal
Overview of ICD Mission and Vision
. The Islamic Corporation for the Development of the . The Vision of ICD is to be a major player in the development of the Private Sector (ICD), is the private sector as a vehicle for economic and social growth, and private sector arm of the prosperity in Islamic countries Islamic Development Bank . The Mission of ICD is to complement the role played by IDB through (IDB), a multilateral development finance . Providing Islamic financial services and products institution . Promoting competition and entrepreneurship in member countries . IDB, headquartered in . Advising governments and businesses Jeddah, Saudi Arabia, is a . Encouraging cross border investments USD 50bn+ bank with 56 member countries mainly located in Asia, Middle East and Africa
. ICD was established in 1999 with an authorized capital of USD 2bn and a membership of 49 countries. It is 50% owned by IDB, 20% by public financial institutions and 30% by the member countries
6 Overview of ICD’s Portfolio
ICD has already leveraged its position in the market to provide USD 1.4bn in financing projects. Investment Status Investments by Geography . ICD is currently funding 162 projects on its own balance sheet and 43 projects through managed funds
. Approved projects amount for USD As of end of 1431H 1,467mn on its balance sheet and USD 540mn through managed Investment by Mode of Financing funds
. ICD has funded projects in 29 countries and is looking forward to expand its investments to other member countries As of end of 1431H
7 Summary Profile of Bank Asya
. Bank ASYA commenced its activities in , 1996 as the sixth private finance house of Turkey.. . The capital has increased from TL 2 million in inception to its current level of TL 900 million TL (circa USD 500 million). . As of December 31st, 2011, Bank Asya posted: . Total Assets above USD 9.6 billion . Total deposit of USD 6.9 billion . Total Loan portfolio of USD 12.7 billion . Net Profit of USD 120.2 million . The main objective of Bank Asya is to spread interest-free finance system to larger masses by using the latest opportunities of technology in accordance with customer-oriented service mentality. . Besides traditional distribution channels, namely branches, Bank Asya aims at offering uninterrupted, rapid and effective service via Online Banking, Alo Asya Telephone Banking, ATM and POS stations . With cumulative non-cash transactions above USD 5.2 billion, Bank Asya is an ideal foreign trade partner in Turkey with its strong presence in the sector and with a large network of over 1000 banks in more than 100 countries. . Bank Asya, the first private finance house in Turkey having ISO 9001 Quality Management System Certification Bank Asya has proven track record in network deployment since its inception in 1996
Number of branches Number of personnel
9 Bank Asya enjoys a leading edge in IT banking solutions…
. Bank Asya was displayed the bank having the most effective performance in "Top 1000 World Banks" list of world-known financial magazine, The Banker. . AsyaCard DIT was awarded for "the Best Cash Displacement Initiative" at "Visa Europe Member Awards" and "the Best New Credit Card Product Launch" at Cards & Payments Awards.
10 Current Context
Geographic footprint as of 16 March 2012 Entered pre-2009 Mauritania Entered in 2010 ▪ 1 Main branch To be entered in 2012 ▪ 3 new branch Potential option considered post 2011 in 2012 Senegal Niger ▪ Main market Mauritania ▪ 1 branch ▪ 6 branches Mali Niger ▪ 3 new branches ▪ 12 new branches Senegal Gambia planned in 2011 planned in 2011 Guinea Gambia Benin ▪ Discussions for potential entry Guinea ▪ 2 branches ▪ 3 new branches planned in 2011 Mali ▪ License to be acquired ▪ EUR 15 million capital committed ▪ No branch & no operation Benin ▪ License to be acquired ▪ No branch & no operation Tamweel is looking to quickly establish itself as a regional player Current Context
XX% Muslim as % of total population … having unsatisfied appetite for non-interest Sizable Muslim population in these countries … banking products
Muslim population 2010, Millions Percent of respondents
Senegal 12.3 96% Would choose 40.0 Islamic bank Niger 15.6 98%
Guinea 8.7 84% Would choose 14.0 conventional bank Mauritania 3.3 99% Half would even choose Mali 12.3 92% non-interest bank if prices Is indifferent 46.0 and services Benin 2.3 25% are the same
SOURCE: Global Insight; Customer survey; Wikipedia McKinsey & Company | 12 Tamweel has grown through its corporate banking franchise via Partners relationships & support
2008 2009 2010 2011
AssetsTamweel 1, m USD 431 255 133 141 138 57 298 41 199 97
Net Income1, m 40-50% of USD corporate profit are from IDB referrals 10.0 Due to losses 6.4 5.5 in Niger 2.8 1.3 Series 5.1 7.2 -2.2 0.1 -2.1
ROA, % 3.9 -1.5 2.5 2.6
Branches, # 3 7 9 27
BIN & BIM & BIG BIS Aspirations and core values of Tamweel Group
Mission - Values Visions – aspirations for the Group
1 Achieve reference regional Assets Create significant value for the 1,000-1,500 I bank position in West Africa – X 4-6 shareholders top 2 to top 5 position in each 255 country Top 10 Top 3 Promote non-interest banking in West-Africa, as a key II 2 Deliver good metrics for contributor to socio-economic shareholders (aligned on inter- ROE top quartile development national player in the market), at both Group and country level
III Fully uphold non-interest banking principles and rules 3 Create a universal bank with broad retail and corporate footprints
Provide customers with IV competitive and quality services 4 Leverage synergies with shareholders in a 3 way partnership, at Group and country level
V Create a values and performance driven organization 5 Talent management and cultural transformation as key ingredients for success
Create an appealing work climate VI 6 Create strong brand image, associated with quality, competitiveness, to attract top talent1 innovation, social responsibility and Islamic-compliance Tamweel focus on building its UNIVERSAL banking ‘target business model’ in Senegal first…
Horizon 2 & 3: Conquer West-Africa by Horizon 1: Implement ‘target business model’ and full roll out of strategy and ‘target business model’ use an opportunistic approach in other countries in existing/ new markets
2011 - 2013 2013 - onward
▪ Position Tamweel as regional universal bank ▪ Full roll-out of target business model across markets using Senegal as reference case and ‘centre of ▪ Develop Tanweel around a standard “business excellence’ and operating model” – Replicate implemented and refined Senegal – Countries with similar fundamentals (clients, model in other markets competitors, regulation) – Implementation team supports the full rollout – Need to build a scalable model (small size of – Senegal ‘champions’ in key areas (e.g., product, markets) to be competitive distribution) support other countries make the transition ▪ Build and implement Tamweel’s target business model in Senegal ▪ New entered countries follow the target business model with modifications for local conditions ▪ In parallel, build the Holding company –and critical capabilities/ functions (e,g. IT, HR, risk …)
▪ Capture opportunistically the regional opportunity – Establish presence in priority countries – Focus on serving key corporate clients (e.g. regional clients, synergies IDB, prime corporate) – Focus on serving affluent retail clients – Do not expand mass retail franchise (max 2-3 branches) before Horizon 2 Align product portfolio to non-interest banking principles and then provide offering based on 3 key axis…
I Alignment with II non-interest Targeted catching up with the ▪ Important services are missing in Tamweel’s banking value competition … portfolio compared to the top competitors, in proposition particular credit card and e-banking ▪ Transform current products into non- interest products
▪ Offer range of non- interest products III .. Focusing on satisfying ▪ “No brainers” : Transfers/ remittances, that fits market critical customer needs … savings and current accounts, cards are the relative conditions basic covered needs of the customers and needs ▪ Selective offering : Housing loans, insurance, quick loans and e-banking are the most desired / not satisfied products by customers
IV … and offering differentiating ▪ Enrich current product portfolio with innovative yet simple solutions solutions on critical products (e.g. remittances) ▪ Also potential for differentiation can be observed in the market (e.g. overdraft, insurance, quick loans) Roll out of universal bank model upon implementation of target business and operating model in Senegal
2011 2012 2013 2014
Core Senegal geography
Upon the achievement of key milestones (to be defined for each workstream – IT, ops, distribution, products, HR) Niger Other existing locations Guinea
Mauritania
Mali New locations (other Benin attractive countries) Gambia
Step 1 : Focus on the « low hanging fruits » : focus on corporate and synergies
Step 2 : Launch roll out of target business model (including fine-tune to local/ country specifics)
Step 3 : target business model in place
Establish presence 2010 - 2014 Focus
Identify growth opportunities in adjacent Achieve superior territories: Mali, Benin, returns through Gambia well selected Mauritania clients Mali
Niger
Senegal
Guinea Benin
Operating
Improve branding and customers: • New logos To be launched • New branch design • Several clients referred by ICD & bank Asya Major initiatives : 2011-2014
Rationale Status
Define a sound business model Assignment completed by Mc Kinsey Strategy Project Ensure standardized processes across the BUs Implementation is ongoing
Be equipped with high standard IT system Path solution has been selected Ensure good quality service to customers Mauritania has gone live, New IT System Ensure Sharia compliance Senegal will go live in April Proactively launch innovative products Ensure quality reporting and control Other BU will follow
Network Ensure good branding & market perception New branch layout has been designed deployment Enlarge network coverage Inner land network coverage has started
A Steering Committee on Islamization of Product Need to transform conventional products into Banking Products has been established Innovation Islamic products in order to serve Islamic A Product development Manager is sensitive clients being hired
Attract and retain high talents HR audit is being conducted Define comprehensive performance mgt HR Reform Action team is on place Become a Reference Employee .. Image improving is leading to better perception..
Old branches New branches
visual Confused identity and Simple, design brand is clear and confused modern design; Old branches clear visual identity
“Banderole s”
Quality of Professional building not design optimal Targeted catching up with the competition … BIS – 2009-2011 Summarized Performance
Evolution of Deposits (Euro) Evolution of Credits (Euro)
200,000,000 350,000,000 180,000,000 300,000,000 160,000,000 140,000,000 250,000,000 120,000,000 200,000,000 100,000,000 150,000,000 80,000,000
60,000,000 100,000,000 40,000,000 50,000,000 20,000,000 0 0 2009 2010 2011 2009 2010 2011
Current deposits Term deposits Cash Credits Non-Cash Credits
. Current deposits and term deposits have increased with a CAGR of 66% and 104% respectively . Cash credit and non-cash credit have increased with a CAGR of 111% and 400% respectively BIS – 2009-2011 Summarized Performance
Evolution Total Assets (Euro) Evolution of Equity & Net Profit (Euro)
300,000,000 30,000,000 250,000,000 25,000,000
200,000,000 20,000,000
150,000,000 15,000,000
100,000,000 10,000,000
50,000,000 5,000,000
0 2009 2010 2011 0 2009 2010 2011 Total Assets Shareholder's Equity Net Profit
. Total assets has increased with a CAGR of 87% . Equity and Net Profit have increased with a CAGR of 103% and 1837% respectively BIS – 2009-2011 Summarized Performance
Evolution of NPL & Provisions Evolution of ROE & ROC (Euro) 80.00%
70.00% 12,000,000 60.00% 10,000,000 50.00% 8,000,000 40.00%
6,000,000 30.00%
4,000,000 20.00%
2,000,000 10.00%
0 0.00% 2009 2010 2011 2009 2010 2011 ROC 2.00% 19.64% 48.30% NPL Provisions ROE 1.03% 13.56% 25.65%
. The ratios (NPL/cash credit) and NPL/Provisions have declined with a CAGR of 53% and 12% respectively . ROE and ROC have increased with a CAGR of 650% and 514% respectively BIS – 2009-2011 Summarized Performance
Evolution of Provisions Related to NPL (Euro)
6,000,000
5,000,000
4,000,000
3,000,000
2,000,000
1,000,000
0 2009 2010 2011 Total New Management 0 97,356 45,139 142,495 Old Management 1,613,676 1,742,682 2,379,432 5,735,790
. Performance in Senegal has been shrunken by heavy heritage . A cumulative amount of Euro 5.7 million has been provisioned for NPL related to transactions that took place before November 2009 Effect of the Turnaround Strategy - Case of BIS
Evolution of BIS Market Share 2009 - 2011
7.74%
3.01%
1.75%
2009 2010 2011
Source : Central Bank Statistics Development of Capital Market – Senegal Sukuk
6. Loyers JLM Claims Manager Government Of Senegal (ICD/Citi) (BIS)
5. Mise en location 4. Produit 6. Paiement 1. Acquisition du droit réel sur de du Sukuk de loyers l’actif identifie (par bail )* l’actif identifie**
Depositary Securitizition Fund Management Company Claims (FCTC) (BOAD TITRISATION) (BIS)
2.Sukuk Issuance 3. Produit 7 .Répartition des loyers du Sukuk entre investisseurs
Investors SUKUK AL-IJARA
Regulators (CREMPF/Central Bank)
. The proposed structure reconciles prevailing regulatory framework and non- interest banking principles . This is a the first Sukuk planned to be issued in Africa Key underlying enabling factors
. The Blessing of Allah . Strong support from the Board of Directors and the Partners . Significant turnover growth mainly in Senegal and Niger . Commitment to deliver from the management and the staff (center and business units) and adherence to cor . Elimination of «value destroyers» mainly NPL . Leveraging on Bank Asya’s expertise mainly on IT and trade finance . Leveraging on IDB’s Group mainly ICIEC to secure leadership position on trade finance THANK YOU