Executive Summary of Evaluation
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EAP FINANCIAL INFRASTRUCTURE DEVELOPMENT PROGRAM
16 October, 2015
James Weaver
15 November, 2015
Hasan Shariar, IFC, hshahriar@ifc.org#16
Sensitive information was removed by author
Project Leader, 10 July, 2016

Background
The Mid-Term Review (MTR) evaluates International Finance Corporation (IFC) East Asia Pacific Financial
Infrastructure Development Program (FIDP) activities and results from January 2012 through the end of
December 2014. The review evaluates FIDP according to the five Development AssistanceCommittee/OECD criteria of relevance, effectiveness, impact, sustainability and efficiency, and provides
recommendations to ensure the accountability of the program to donors and stakeholders, and provides
lessons learned that lead to actionable recommendations.
The MTR covers implementation activities undertaken in the eleven FIDP projects in the table below. All
projects are in the implementation phase except Laos Secured Transactions, which closed in March 2014
with phase 2 now in pre-implementation.
Country

Project
Credit Bureau 2
Cambodia
Secured Transactions
RMS Credit Reporting
China
Rural Secured Transactions
Indonesia
Secured Transactions
Laos
Secured Transactions
Mongolia
Secured Transactions Reform
Pacific Sub-Region Credit Bureaus
Credit Bureau
Phillipines
Secured Transactions
VietnamSecured Transactions 3

FIDP
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FIDP address two key financial infrastructure pillars: credit reporting and secured transactions.
Credit information bureaus reduce the cost and improve the quality and comprehensiveness of credit
information available to financial institutions. The availability of reliable and more comprehensive credit
information opens access to a larger population of previously unserved or underserved individuals andenterprises.
Secured transactions frameworks help a greater number and broader categories of enterprises accesscredit by expanding the range of asset types which they can use as security for loans.
FIDP origins date to early IFC advisory work in China, beginning in 2003 to develop a modern credit bureau
and to develop the legal and regulatory framework enabling movable asset finance. These initial projects
achieved considerable success. A comprehensive credit reporting system was built, covering over 800
million individuals and 18 million enterprises. China’s Credit Reference Center is now the world’s largest
credit reporting service provider. A movables finance industry was created; the share of business loans
in China secured by movable assets grew from 12% in 2004 to 30% in 2012 with a total cumulative valueof financing facilitated during that period of around USD 3.5 trillion.
Before the donor agreement formalizing SECO funding support for IFC EAP advisory services was signed
in December 2011, which effectively launched FIDP through the entire region, IFC assisted in credit bureau
development in China, Vietnam, Laos, the Pacific Sub-Region, and Cambodia, and played a crucial role increating movable financing industries in China and Vietnam. With large scale SECO financial support andcollaboration in project planning and monitoring, as well as smaller contributions from Canada, Japan,
and the European Union, FIDP was expanded into the countries covered by this MTR.

Objectives
The intended change to be brought about through FIDP is stronger private sector growth through expandedbusiness and consumer access to credit. The Micro, Small and Medium size Enterprise (MSME) sector isthe main driver for private sector economic growth throughout the EAP region, and lack of MSME accessto finance is one of the major barriers to private sector development. FIDP design specifically focuses on
broader and increased MSME access to finance in each of the countries in which FIDP projects have been
implemented.
FIDP countries share two key areas of financial infrastructure market failure.


Lack of effective credit reporting is a common barrier to increased access to finance in each of the FIDP
countries, in which no functioning credit bureaus exist or existing bureaus are ineffective.
Banks in the region historically relied on fixed asset collateral such as land or buildings as a prerequisite
to extending credit. Most MSMEs do not have significant amounts of these assets on their balance
sheets, and thus have not been given credit. Bank inability or unwillingness to lend against accounts
receivable, inventory, and movable business equipment greatly limits financing of the MSME sector.
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FIDP addresses both of areas of market failure through the establishment and improvement of credit
bureaus, and the establishment and expansion of movable asset finance as a means of MSME finance.
There are three major activity components in each credit reporting and movable asset financing project:(1) Create or enhance the necessary legal and regulatory enabling environment for the interventions toachieve their objectives(2) In close cooperation with country governments and industry stakeholders, create or strengthen thespecific institutions necessary to achieve project objectives: credit bureaus and their accompanying
reporting structures and tools, and collateral registries integrating movable assets with existing formsof collateral. In many projects this component also includes establishment of web-based services andmay involve the consolidation of multiple existing institutions.
(3) Develop markets and build the necessary stakeholder capacity necessary for the interventions toachieve their objectives, including credit bureau and collateral registry operators, financial institution
managers who will introduce and champion the use of the new FIDP products and services to expand
the range and amount of MSME lending, and the regulatory bodies overseeing involved institutions.
In some secured transaction projects, as in Cambodia and China, the third component is enhanced
through the establishment and initial development of a collateral management industry, which expands
the variety of movable asset-backed lending structures available to lenders and borrowers. In othercountries such as Laos, development of the leasing industry is also part of the overall effort to expand
movable asset lending options available to MSMEs. In China an electronic financing platform is in thepilot stage, facilitating accounts receivable finance throughout the product chains of major firms. In
Cambodia and China, the credit reporting projects include a component to establish financial consumer
protection frameworks, enhancing the quality of the expanded access to finance resulting from the
projects.

Analysis
The MTR evaluates each of the five criterion areas using five qualitative levels: excellent, good, adequate,poor, and weak. The table below indicates criteria evaluation findings:

FIDP Evaluation Criteria
Relevance

Excellent

EffectivenessExcellent

ImpactExcellentSustainability

Good

Efficiency

Good

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The overall FIDP assessment is excellent, while there are some minor problems and mixed results
described in the following sections.
Relevance refers to the extent to which project or program objectives are consistent with beneficiary
requirements and country needs, IFC and WBG country strategies and global priorities, and other partnerand donor priorities.
The degree of FIDP relevance is excellent, considering very close alignment between WBG and SECO
priorities and strategies and project objectives, and the strong match between country access to financedevelopment needs and the outputs and impacts of FIDP projects.
FIDP projects closely match WBG EAP strategies for inclusion, private sector growth support,
infrastructure building, and institutional governance. FIDP credit reporting and secured transactions
project outcomes and impacts all contribute directly to greater and broader inclusion and access tofinance as well as associated strengthening of financial sector governance and operation throughimproved risk management and prudent market expansion. Project results are very closely matched to
the IFC focus on financial inclusion and sustainable urbanization.
The strategy and development priority alignments in the two SECO priority countries, Vietnam andIndonesia, with respect to inclusive and sustainable growth, enhancement of SME growth,competitiveness and productivity, and private sector development are particularly strong between
IFC/WBG and SECO. Key shared themes are SME development, inclusive and sustainable growth, andenhancement of competitiveness.
FIDP projects are highly relevant to country development needs and government development priorities.
East Asia Pacific countries face significant challenges to improve financial inclusion.
One factor is relatively poor levels of development: Cambodia, Laos, Mongolia and Vietnam, along withthe five Pacific Sub-Region countries, are IDA borrowing countries with annual GNI per capita of less than
USD 1,215.
The second significant barrier to improving access to finance in the seven FIDP countries and the Pacificgroup of countries is low financial sector development levels. Financial systems and markets in FIDP
countries are relatively undeveloped, or as in the cases of China and Indonesia, unevenly developed,
resulting in unmet market needs or bottlenecks in the development and provision of financial services.
There has been significant progress in terms of individual access to banking services. The World Bank 2014
Global Financial Inclusion Database provides the following relevant indicators. In FIDP countries theaverage proportion of people with an account with a formal financial institution grew from 53% to 67%
from 2011 through 2014, roughly the same growth rate as that for EAP developing countries as a whole.
However, banking products and services remain underutilized, with only 36% of people using saving
products at banks and only 11% borrowing. Of the 11% that borrow, only 8% use the funds for businesspurposes, which would normally be related to family enterprises.
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The level of bank credit provided to enterprises reflects weaker levels of financial sector development
compared to the levels of service and credit provided to individuals. The 2011 IFC Enterprise Finance Gap
Database provides the following important indicators for Informal and Micro, Small and Medium size
Enterprises (IMSMEs). In FIDP countries only 11% of IMSMEs have access to formal financial products andservices, which suggests that FIDP will be important in opening new channels for IMSMEs to obtainneeded credit. In FIDP countries only 9% of IMSMEs borrow from banks, representing vast potential tounlock previously unavailable credit which will stimulate IMSME growth, economic output, and job
creation in both urban and rural areas. About 46% of IMSMEs in FIDP countries indicate that they do nothave a need for formal credit, thus 54% do have a need while less than 9% borrow from formal financial
institutions.
The above factors indicate that FIDP is highly relevant to both IFC/SECO regional and country strategies,
and to country development needs and priorities.
Effectiveness refers to the extent to which project or program objectives were achieved, or are expected
to be achieved, taking into account their relative importance.
The degree to which FIDP effectively achieves goals is excellent. Achievements have been significant fromtwo perspectives.
First, the overall record for achieving specific project results targets has been very strong. In total, for theeleven FIDP projects covered in the MTR, 71% of outputs were at or above year-end 2014 targets, 73% of
outcomes, and 88% of impacts. Excluding Pacific CBs project results, which reflect scheduling errors while
project performance is good, 77% of outputs were at or above targets, 84% of outcomes, and 88% of
impacts. These figures reflect effective program and project design and management.
Second, almost all projects have made important progress towards each of their specific goals, with key
achievements in areas that directly address country development needs and which are crucial to projectsuccess such as recommending and passing enabling laws and regulations, bringing registry and credit
bureau electronic systems to markets, and, in particular, engaging a broad range of market stakeholders
in advancing credit reporting and movable asset finance market development. The following summaries
reflect project achievements.
Cambodia CB2: in the Cambodian market, there is no commercial credit reporting yet, financial consumers
are not well informed or protected, and the Credit Bureau of Cambodia (CBC) has limited data sources.
The project is engaging key government ministries and the central bank to enable access to needed data
sources for commercial reporting and to broaden CBC data sources, and is helping establish a financial
consumer protection regime. Progress is ahead of schedule with strong results.
Cambodia ST: in Cambodia there is weak understanding related to secured transactions law andregulations, the collateral registry is often not accessible and difficult to use, there is little awareness of
movable asset financing, and there is no effective collateral management industry. The project addresses
these needs through extensive outreach and communication activities including in-depth advisory
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services to two banks, registry system upgrade and development of new business strategies and plans
and registry staff capacity building, and development of the collateral management industry through theintroduction of international collateral management firms into the Cambodian market. Progress is aheadof schedule, supported by strong working relationships with government partners and the Cambodianbanking association to address shortcomings in the legal framework and collateral registry and to develop
financial sector capacity.
China RMS CB: With significant achievements already made through preceding projects in the credit
reporting market covering SMEs, the project addresses the credit reporting development needs of rural,
micro and small (RMS) borrowers in the Chinese market while continuing support for expansion of theoverall market. The project is assisting the Credit Reference Center (CRC) to developing specific products
for the RMS market. To support expansion into rural and other underserved markets, the project is also
working with the Peoples’ Bank of China to strengthen the financial consumer protection framework. CRC,
created with the help of IFC in the preceding project, is now the world's largest credit reporting service
provider.
China Rural ST: While the overall secured transactions market in China has expanded on a vast scale, there
remain development needs in the RMS market to achieve balanced and equitable access to finance, andthere is need to develop supporting services such as the collateral management industry and electronic
financing platforms which will help serve the RMS and the overall market. As in the credit reporting
project, this secured transactions project addresses the movable asset financing market throughdevelopment of supporting services. Since project implementation began in November 2012,
achievement of results have been uniquely strong among FIDP projects.
Indonesia ST: While the economy and banking sector in Indonesia are relatively well developed comparedto some other FIDP countries, there remain significant needs to improve balanced access to finance. The
legal and regulatory framework supporting movable asset finance is weak and poorly understood, theFiducial collateral registry functions poorly and is decentralized with 33 offices over the wide geographyof Indonesia, and the financial sector lacks understanding of movable asset finance and capacity to use it.
The project is addressing these needs through assistance to the Ministry of Law and Human Rights toimprove the legal and regulatory infrastructure supporting movable asset finance, to centralize theregistry and to modernize the system and processes to use the registry, and has begun a series of capacity
building activities aimed broadly at the main institutions in the financial sector. There remains a need tofurther define a comprehensive strategy to develop the movables asset financing market.
Laos ST: Access to finance is a significant constraint to private sector development in Laos, with three key
secured transactions development needs to address: weak understanding of and lack of guidance on how
to apply existing law, no functioning collateral registry for movable assets before the project began, andlittle movable asset finance knowledge or practical capacity within the financial sector, in which there wasalmost no movable asset finance before the project. The project helped the Lao government develop an
implementation decree and regulatory rules to support movable asset finance, and assisted the Ministryof Finance to implement a web-based collateral registry system in 2011. Some financial sector capacity
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building activity was initiated through this project, while phase 2, now in pre-implementation, will focus
on market development and capacity building. In support of overall movable asset finance development,
the project assisted the Bank of Lao to enact a decree governing leasing and supported public outreachto promote leasing. This form of finance fits and is productive in the Laotian market.
Mongolia ST: In Mongolia the movable asset market was poorly developed before the project began, withno legal and regulatory framework in place, no centralized collateral registry with the capacity to support
movable asset lending, and very little experience, knowledge, or capacity to use movable asset financewithin the financial sector The project supports to the Ministry of Justice to develop and implement aneffective new Pledge Law, is working with the government to establish a modern, web-based registry, andhas begun to conduct significant market development and capacity building activity including focus on
industries specifically important to Mongolia such as agriculture and development of the supporting
collateral management industry. The project is on track with progress on schedule.
Pacific CBs: In the Pacific region access to credit is a key financial and commercial growth constraint to
individuals and small enterprises. Credit reporting services do not exist in some markets, and areunderdeveloped in others where bureaus have limited coverage. The lack of reliable credit information
also exacerbates over-indebtedness problems, especially where microfinance has grown quickly. The
project addresses these needs through the introduction of new credit bureaus in the Samoan andSolomon Islands markets, and by strengthening the capacity and coverage of three other existing credit
bureaus. After initial implementation delays the project is now progressing well. The Solomon Islands
Credit Bureau was established and technical assistance delivery has begun for the existing credit bureaus
in the project.
Philippines CB: While the Philippines financial markets are relatively well developed, there remain
significant credit reporting services development needs in order to improve balanced and equitable accessto finance in this large market. Before the project there was no centralized credit information systemcovering all categories of borrowers and other financial system users; the Credit information Corporation(CIC) established earlier was not used due to administrative barriers. The project will develop CIC systems
and staff, and centralize information and processes from several existing smaller credit bureaus in orderto create a comprehensive credit reporting entity which will effectively serve market needs and demand.
The project is progressing well and activities, after an initial delay in one element, are on schedule.
Philippines ST: The Philippines banking sector, although generally well developed, does not provide
adequate and balanced access to finance, in particular for smaller enterprises. One of the key reasons is
weak development of the movable asset financing market which could provide a means for banks to lend
to small enterprises with primarily movable assets on their balance sheets. There are problems in theunderlying legal and regulatory framework necessary to establish claims and priority, registration is doneat the local level with 168 separate registry offices, making it impossible to make a collateral registrationinquiry covering large areas, and there is weak understanding of movable asset finance in the financial
sector, inhibiting expansion and consequent improvement in MSME access to finance. The project is
helping to write new regulations to establish clear movables asset collateral framework, will help
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consolidate the separate offices and create a modern web-based registration system by 2017, and targets
50 financial institutions in a program to promote movable asset finance and provide capacity building
across the market. Initial project barriers arose due to lack of understanding with the government
counterpart. However, the project was put back on track when the project team convinced the partnerto collaborate.
Vietnam ST: While the previous project phase successfully improved the legal framework for consolidated
movable asset collateral registration and established a web-based registration system, significant legal
and regulatory framework, registry, and market development needs remain. The project is engaging with
the Ministry of Justice and the National Registration Agency for Secured Transactions (NRAST) to revise
the relevant sections of a new Civil Code, working with NRAST to increase the proportion of web-basedusers, which has remained low, and improve the quality and scope of MIS reports to respond to market
demands, and conducting an extensive public outreach and market development program, including
significant capacity building activities across the financial sector. In addition, the project team is
supporting the development of the leasing industry as support to broader application of movable asset
finance and potential extension to new borrower markets. Exploration of IPR lending through project
outreach and knowledge sharing activities also provides potential for creating even broader access tofinance.
Impact refers to positive and negative long-term effects produced by the project or program, directly or
indirectly, intended or unintended.

The level of FIDP impact is excellent. Studies have shown that strengthening credit reporting and movable
asset finance significantly improve the breadth and extent of access to finance and the efficiency withwhich financial products are delivered to individuals and enterprises. FIDP impacts are significant at every
level, from the degree to which projects potentially affect overall bank lending scale and diversity in many
countries, to the way in which FIDP outreach encourages key market decision makers and participants toadopt strategies and practices introduced through FIDP. Key project results measures, such as increases
in inquiries and entities covered and additional finance facilitated for credit reporting projects, and growthin the number of firms using movable asset finance and the consequent increase in financing facilitatedfor secured transactions projects, indicate that impacts have already been significant.
The scale of FIDP impact is put in perspective through a few key figures:• Over 25% of the world’s people live in FIDP countries• Total FIDP financing facilitated through December 2014 was just over USD 5 trilliono Compare: total year-end 2014 outstanding loans of all us banks was roughly USD 11 trilliono Compare: ICBC, the largest bank in the world, had a total loan portfolio of just over USD 1.7
trillion at year-end 2014
• Over one-half million businesses obtained movable asset-based loans as a result of FIDP projects , a
result targeted to grow to over 2.5 million by the end of the projects
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•Over 42 million new individuals and enterprises are covered by credit reporting service providers, aresult targeted to grow to over 113 milliono Compare: 42 million is roughly the population of Argentina
o Compare: 113 million is more than the population of the Philippines.

From the perspective of the amount of new credit facilitated in FIDP country economies, the Cambodia
Credit bureau project has an extraordinary effect, with a targeted amount of facilitated financerepresenting around 35 % of total 2013 bank lending to the private sector in the country; add the securedtransactions project and the figure grows to almost 39%. Other countries with relatively high levels offinancing produced include Vietnam, at 22%, and China at almost 18%.

The level of impact is strongly driven by the success of the China projects, which have already vastly
exceeded financing facilitated impact targets. The Laos ST project exceeded financing facilitated target,
although the amount is small in the context of overall FIDP amounts. The Vietnam ST project is also wellalong the way to exceeding outcome and impact targets. The Cambodia CB2 project, still at an early stageof the implementation period, has already exceeded targets for increased coverage and financing
facilitated. Early achievement of impact targets is a strong signal that the eventual impacts will besignificant, as impacts are commonly expected towards the end of implementation periods. Given theseseveral projects with promising early results, in the opinion of the reviewer overall long-term FIDP effects
and impacts can be expected to be excellent.
Sustainability refers to the likely extent of continuation of benefits from a project or program after
assistance has been completed.
Key sustainability factors fall into three categories: (i) country macroeconomic and governance strength,(ii) willingness, capacity, and interest of project counterpart leaders and of market players to adopt
project models, and (iii) progress to date as a possible indicator of future performance and overall client
buy-in.
The overall level of FIDP sustainability is good. Outcome and impact achievement through December
2014 was strong, suggesting that institutions and markets affected by FIDP credit reporting and securedtransactions projects are already developing well. Financial infrastructure is naturally sustained where
there is value to the market and commercial incentives for maintaining systems, procedures, and market
practices resulting from the project. Sustained project benefits will follow successful commercializationof the legal infrastructure, institutions and practices established by the project. However, long-term risks
to sustainability, described below, exist and adverse events or conditions could develop which affectsustainability.

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The overall probability that FIDP outcomes and impacts will be sustainable is good. On an aggregate basis
the targeted level of additional financing made available to MSMEs has already been far exceeded,
indicating a strong overall level of market demand for enhanced credit bureau products and services andincreased movables asset financing in the region. Other outcome measures are also strong in many
countries, indicating the degree to which benefits are valued and are being commercialized. However,there are issues and implementation problems in some projects, such that overall strong FIDP benefits
sustainability entails some weak points.
Projects for which the likelihood is excellent that outcomes and impacts will be sustained in the long-term
include China RMS CB and China Rural ST. Results have been exceedingly strong and macroeconomic risks
are minimized by the size and good condition of the Chinese economy.
Projects for which the likelihood is good that outcomes and impacts will be sustained in the long-term
include Cambodia CB2, Cambodia ST, Mongolia ST, Philippines CB, Philippines ST, and Vietnam ST3. These
projects are on track and performing well or very well, but macroeconomic risks affect the probability that
benefits are sustainable in the long-term.
Projects for which the likelihood is adequate that outcomes and impacts will be sustained in the longterm include Indonesia ST, Laos ST and Pacific CBs. The Laos and Pacific macroeconomic environments are
significantly vulnerable, and the Indonesia ST project has not yet identified a strong strategy with which
to develop the movables asset finance market.
Efficiency refers to the extent to which resources/inputs (funds, expertise, time, etc.) are economicallyconverted to results. Risk assessment and management are also included as an efficiency factor in theevaluation framework.
The degree to which FIDP projects achieve efficiency, broadly defined to include risk management, isgood. The level of efficiency in FIDP use of financial and human resources is excellent, due in part to FIDP
capacity to deploy global experts over all projects through the planning and implementation periods,
coupled with efficient teamwork with country project teams thoroughly knowledgeable regarding
country needs and effective approaches to work. However, with respect to risk identification, in theopinion of the reviewer there are macroeconomic risks associated with small and vulnerable economies
which are not fully reflected in project documentation. These risks reflect reasonably possible conditions
that would likely adversely impact project long-term benefits and sustainability. Aside from the need tomore fully consider such risks, overall FIDP risk management processes are good.

FIDP use of financial and human resources is excellent. One of the key approaches used to conservebudget resources is the use of IFC global experts and regional management whose expertise, experience,and fixed costs are spread over the entire FIDP project portfolio. IFC staff missions frequently cover
several projects, improving efficiency. The composition of IFC program and project management, country
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teams, and the global expert team, has remained remarkably constant from program inception throughDecember 2014, creating further operating efficiencies.
From the perspective of FIDP overall, extremely high levels of outcomes and impacts are expected to beachieved with the project budgets. Based upon project targets, for every USD of FIDP budget expenditure,over 155,400 of new financing facilitated is expected to be created and 16 new entities will be covered bycredit bureaus. Only USD 4 is required in project budget investment to involve one new enterprise in
movable asset finance. These values reflect remarkably high efficiency, driven in large part by the
economies of scale created by the China projects which achieve massive results by virtue of both market
size and successful project implementation.
Excluding the two China projects provides a perspective on program efficiency without the benefit of thesize of the China markets. Efficiency is much reduced but remains excellent. Almost USD 5,000 in new
finance facilitated is expected to be created for every USD spent, 3 new entities are covered by credit
bureaus with resulting enhanced access to finance, and only USD 8 in project expenditures is required tobring a new enterprise borrower into the movable asset fiancé market.
With respect to risk identification and management, in the opinion of the reviewer there are significant
macroeconomic risks associated with small and vulnerable economies which are not fully reflected inproject documentation. These risks reflect possible conditions that could adversely impact eventual
project long-term effects. Economic problems or decelerations in these economies would have asignificant probability of either delaying or reducing the achievement of targeted project impacts anddesired long-term effects.

Conclusions and Recommendations
Reviewer Observations and Lessons Learned

The FIDP approach of broadly developing markets, rather than focusing only on an institution or asingle product or service, leads to comprehensive and deep impacts as well as a strong foundation forsustainability. FIDP uses this approach for developing movable asset financing markets where
factoring, leasing, and the collateral management industries are brought into the program in addition
to bank sector work. In credit reporting projects FIDP is selectively developing consumer protection
frameworks that complement and reinforce financial inclusion. In the future, FIDP plans to target
development of the second-level credit reporting industry sub-sector providing specialized credit
information, which will deepen and expand the market. Focus on a single institution constitutes weak
approach, and can lead to the kind of failures that IFC has been asked to resolve such as previous
credit bureau work in Cambodia (done by another donor).

FIDP projects are planned and implemented in the context of a dynamic environment of developing
markets, uncertain and fluid political backgrounds, evolving partner priorities, and the disruptions
created by FIDP interventions which transform institutions and markets in the long term. This requires
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flexibility in the way projects are implemented and essential partner relationships are developed andmanaged. It also requires constant work to adapt in order to achieve objectives. Changes in projectapproaches and tools are constructive parts of this constant adaption process.


Public-private partnerships can provide an ideal credit bureau institutional structure, withgovernment providing the necessary enabling environment and the private sector, normally financial
institutions and credit bureau operators, providing technical and managerial expertise as owners anddevelopers. The credit bureau structures in Cambodia and in the Philippines are two good models.



In the past, bankers in developing Asian economies generally placed little trust or value in borrower
accounts receivable or inventory compared to fixed assets. Further, they view common legal systemweaknesses related to foreclosure as compounding risks to the point that it can be initially difficult toconvince them to accept movable asset financing as a profitable business model. The FIDP team andthe reviewer view these issues as a “banking culture” barrier which has been difficult to break throughin some countries. During field trip bank interviews the reviewer noted resistance in some places tothe adoption of movable asset lending. The reviewer concurs with the FIDP team that changes in
lending cultures must be effected along with delivery of the capacity building and other market
development activities necessary for movable asset financing to expand significantly. This would
require a greater focus on financial sector work as well as attention to activities designed to change
attitudes at the top levels of financial institution strategy, policy and decision making.

In particular for secured transactions development, full potential impacts cannot be achieved without
intensive financial sector capacity building beginning at the executive and manager level. The needto change “banking culture” should be initially addressed through a combination of senior bankexecutive activities and high quality advocacy work at the industry level. This must be followed byreal and comprehensive market development work involving a full range of advocacy, peer sharing,and capacity building activities.



The regional approach used in FIDP works very effectively. There is knowledge, idea, and experiencecross-fertilization among country projects through the significant involvement of global experts andthe FIDP program leader, as well as through project activities providing venues for clients to directly
learn from one another about the experience of other countries. In addition to regional activities
organized by FIDP with specific objectives for specific individuals or groups, activities in conjunction
with APEC have become increasingly productive for advocacy and outreach. A second dimension ofcross-fertilization is created through the teamwork among different disciplines and among the moreexperienced and relatively new IFC staff members. The result is an environment where everyone has
particular expertise, and possibly experience, to contribute, and where such contributions are made.

As banking sectors learn about and adopt movable asset finance as a way to expand business, there
appears to be an evolutionary pattern in which banks first use movable asset financing for only theirPage 12 of 16

best customers, which tend to be medium sized enterprises or larger, and take movable asset
collateral in addition to the traditional fixed asset collateral such as land and buildings. From a risk
management perspective this is a prudent approach. In addition to providing more collateral (ageneral banking rule with few exceptions: take all the collateral you can get) and better knowledge ofborrower operating cycles, it gives the banks experience with movable asset collateral lending while
maintaining risk profiles they are comfortable with. As banks grow comfortable with the movable
asset financing element of these loan packages they will grow more willing to accept movable assets
as the sole collateral and, through this process, gradually lend to smaller enterprises with only
movable assets to offer.


The combination of strong local country team quality and specialized global and regional expert
capacity is a key determinant to project success. Both are necessary.

Country macroeconomic risks could significantly affect long-term project outcomes and impacts, andbe better articulated in project documents and more substantially reflected in terms of their potential
impacts. These risks are particularly relevant given the vulnerabilities in many FIDP country
economies coupled with an uncertain medium-term outlook for healthy global growth and stability.

Recommendations
Recommendations have been divided into those which could, in principle, be considered and adapted for
implementation in the near term, and those which would be better considered and developed over the
medium and long term. The categories do not imply priority, rather, practical aspects related to possible
development and adoption.
Recommendations for near-term consideration
Applied to both credit reporting and movable asset finance projects, development of special
approaches to private and government senior executive advocacy activities and capacity building,such as visits to other EAP region institutions, attendance at regional or global conferences, meetings
with relevant senior counterparts in other countries, etc, could be productive.

With the exception of the Chinese banking sector, the reviewer does not see sufficient value inpromoting intellectual property rights lending, especially in problematic banking sectors where theintroduction and expansion of even basic movable asset financing faces challenges. The Vietnamesebanking sector, for example, is under considerable pressure due to sector restructuring andconsolidation, governance reform and privatization, and a bad loan problem that is certainly muchworse than acknowledged. The combination of these factors likely dominates senior executive
attention as well as working level managers receiving instructions from executives tasked withsurviving these pressures. While the idea of introducing intellectual property rights lending is logicaland promising, the timing is generally not ideal in the opinion of the reviewer. IPR lending warrants
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eventual development as an element of movable asset finance, and could be introduced in later
phases.
Country macroeconomic risks should be more fully reflected in project documents and their potential
impacts given more consequence. The weaknesses of small, under diversified, vulnerable economies
such as those of Laos, Cambodia, Mongolia and the Pacific country group present significant risks toachievement of long-term impact objectives and sustainability. Macroeconomic risks and theirpotential effects on financial and commercial sector growth and development appear to be worth
consideration in light of regional and global economic issues.

For early stage interventions in an economy, qualitative targets such as the approval of a law or
regulation or the establishment of a credit bureau are more important than quantitative targets. It is
not realistic to set ambitious targets, for example the number of MSMEs reached, in the early stageof a project.

In the current project design and planning process, results targets are precisely set in the Project Plan,
before beginning the implementation period. Results targets can then be reasonably modified during
the first year of implementation, after which a more involved approval process is necessary for making
changes. The reviewer suggests consideration of an approach to setting results targets which mightallow for better informed target setting. Rather than setting precisely quantified detailed targets at
the Project Plan stage, guidance targets could be agreed upon which reflect the same reasoning andknowledge that would be applied in setting precise targets, then precise targets could be set out in thesecond Supervision Report which reflect learning and progress through the first year of
implementation. Guidance targets could be expressed as “base case” expectations or as narrow ranges
around base case expectations. The average project implementation plus post-implementation period
is 6.3 years. Thus under a process applying guidance targets to begin implementation, the precise
results targets would be set roughly 15% of the way through the overall period in which results are
expected to be achieved, and before the late-implementation period during which outcomes andimpacts can begin to be rapidly achieved. The lag might be worth the opportunity to structure andquantify targets based upon a better understanding of project dynamics and counterparty
expectations.

Recommendations for medium and long-term consideration
Include the creation and development of local capacities and local market institutions such as
collateral management companies, supply chain finance platforms, etc, in project design andimplementation in order to strengthen sustainability.

Given the sustained, substantial, and complex efforts required to achieve financial sector capacity
building and overall market development results, it might be productive if someone from within the
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FIDP or global expert team, or an outside expert integrated into FIDP planning and implementation,
could assume an FIDP market development expert or coordinator role. While the expertise necessary
to plan, design, and conduct these activities already exists within the FIDP management and global
expert structure, the person in this role could more fully assess country needs, makerecommendations to apply approaches and employ methods and activities that prove most successful
across the FIDP geography, and in particular monitor and assess ongoing results in such a way thatmarket development strategies and activities could be modified as needed in a timely manner in awell-managed, program-wide process.
During MTR field visits clients almost always requested a greater amount of intensive capacity building,which could be delivered as a component of overall market development. Regular inclusion of Trainingof Trainers within financial institution partners as well as within institutions participating regularly in
IFC seminars could also enhance the rate at which, and the extent to which, movable asset financing is
accepted and adopted. Project design could also incorporate checks to determine the rate at which
institutions are absorbing and using movable asset finance.

In the approach to introducing movable asset lending and convincing bankers to enter or expand themovable asset finance market, it could be productive to anticipate that bankers will first use movable
asset collateral with their strongest larger customers and in conjunction with taking traditional fixed
asset collateral. In-depth advisory programs could incorporate a first step where institutions
intentionally apply this mixed approach, making it easier to begin with larger borrowers to build
movable asset lending skills and experience and to eventually begin accept movable asset collateralwith smaller borrowers. The mixed approach could be generally and formally incorporated into
financial sector capacity building and overall market development strategy.



Focusing on Vietnam:
The Vietnam ST project is making very strong progress despite the challenges of anunderdeveloped and troubled financial sector. Barring political or economic shocks, project
objectives and targets will likely soon be exceeded. We can look at addressing needs further into
the future. The FIDP country team has a particularly close and productive working relationshipwith Vietnam Bankers’ Association (VNBA) and FIDP has successfully developed an influential
working relationship with APEC. VNBA has historically had a substantial working involvement withAPEC financial sector capacity building programs. It would be interesting to explore possibilities
for joint regional outreach activities organized through APEC and involving VNBA, thus
substantially strengthening an important local institution through the development of local
capacity to continue to promote and support movable asset lending market development in thelong-term. Regional peer learning would also be enhanced, advancing program objectives.

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Focusing on Indonesia:
While working relationships with key partners have been strengthened and meaningful progress
made in legal and regulatory environment improvement and registry integration andcentralization, the Indonesia ST project is at a point where strategy development is needed to
expand the movable asset financing market. Initial focus is on financial sector capacity building
delivered broadly across the banking sector. This could constitute the core element of a morecomprehensive strategy for overall market development, which could possibly include areas suchas supporting services, for example the collateral management industry, non-bank financial
institutions, for example leasing companies, and development of movable asset finance products
adapted to important Indonesian sectors such as agriculture (as is being done in Mongolia andCambodia). While banking sector engagement with this project poses challenges, a strategy to
expand the movable asset financing market could employ peer pressure to influence and moveopinions, as was done in the Philippines when government partners were brought into APEC
activities, creating pressure in a high-level environment which eventually achieved results. Is
there an APEC – based financial institutions group the country team could leverage in order toinduce senior Indonesian financial institution executives to reinvigorate growth in movable asset
financing?

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The views expressed in this publication are those of its authors and do not necessarily reflect the views of the wider institution. Some of theinformation used in this document may come from publicly available sources such as company websites and publications. The Lessons ofExperience series does not represent a commitment by IFC to require projects it finances to take certain or all of the actions specified in thispublication. Instead, any issues arising in an IFC-financed project will be evaluated and addressed in the context of the particular circumstancesof the project.

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