ProCredit : Impact Report 2023

IMPACT BANKING IN PRACTICE

2023 Impact Report

ABOUT THE IMPACT REPORT PACKAGE 2023

The Impact Report Package 2023 covers all institutions of the ProCredit group and consists of the following documents:

The Impact Report outlines our approach to sustainability, showcases our efforts and assesses our impact performance during the past year. It also highlights our ongoing initiatives and outlook for the future. The new structure revolves around our choice of the five SDGs that are most central to our impact strategy, while also demonstrating alignment with our key material topics.

Our Impact Report Datasheet 2023complements the Impact Report by providing more detailed data. All figures for our regional segments, sources, notes on methodology and reference dates can be found in the datasheet along with information aligned with the EU Taxonomy, signatory frameworks like the UNEP FI - Principles for Responsible Banking, SDG target indicators, and the GRI content index.

ProCredit Holding has reported in accordance with the GRI Standards for the period from 1 January 2023 to 31 December 2023.

Table of contents

About the Impact Report Package 2023	1
Letter from the Management Board	2
The ProCredit group: Who we are	5
A pioneer in development finance	6
Sustainability highlights and developments	7
Our approach to impact	8
SDG 9	Industry, innovation and infrastructure	9
SDG 8	Decent work and economic growth	11
SDG 5	Gender equality	13
SDG 13	Climate action	16
SDG 7	Affordable and clean energy	19
SDGs and material topics	21

1

LETTER FROM THE MANAGEMENT BOARD

Throughout our twenty-five-year history, we in the ProCredit group have always shown a great ability to adapt to ever-changing and often volatile environments. ProCredit's key strength is our people: our carefully selected, well-trained staff and managers feel a strong commitment to the distinctive impact orientation of the group that is palpable at every level. This dedication is manifest in our shared efforts to help SMEs navigate the new challenges they are facing, such as maintaining access to EU markets, coping with regulatory requirements and strengthened financial market formalisation, and adapting to climate and social risks. As we pursue this mission, we wish to play a key role in the transformation of an entire region at a time when the need for European unity to achieve sustained peace and prosperity - and defend human rights - could hardly be more urgent.

Customer deposits grew by a record

EUR 964.7 million

or 15.3% since the beginning of the year, with a strong 50% contribution from the retail segment.

The year 2023 was historic for the ProCredit group in many ways. We dealt successfully with the challenges of 2022, where we witnessed profound human tragedy and financial turmoil arising from the war against Ukraine. Today, the financial, capital and liquidity position of the ProCredit group is stronger than ever. We see notable improvements in profitability and cost efficiency at nearly all of our banks, which validates our approach to sustainable profitability and positive impact orientation. The group's RoE stands at 12.2%, which means we were able to immediately deliver on our new medium-term target set in March 2023. Business has developed positively, especially with respect to deposits, which grew by a record EUR 965 million or 15.3% since the beginning of the year, with a substantial contribution from the strategically important retail segment. Admittedly, credit growth was comparatively moderate at 1.9%. In the context of our new business strategy, we see business development in 2023 as an interim step to prepare for more ambitious growth targets.

Good financial and business results were not the only successes in 2023. In September we finalised the change in ProCredit Holding's legal form to a joint stock corporation. The new structure makes us more agile, leaner and more attractive in the capital market. At the same time, we view this new configuration as the next logical step in our capital market trajectory. We are also pleased about the expansion of our Supervisory Board: besides Rainer Ottenstein,

Key group figures 2023

Statement of financial position

	Dec. 2023
Total assets (EUR m)	9,748.97
Customer loan portfolio (EUR m, gross)	6,226.48
of which business loans	89.9%
of which green loan portfolio	20.4%
Number of business clients	73,614
Share of defaulted loans	2.7%
Customer deposits (EUR m)	7,254.24
Key financial performance indicators
Change in customer loan portfolio	1.9%
Return on average equity	12.2%
Cost income ratio	59.9%
CET 1 ratio	14.3%
Profit of the period (EUR m)	113.37

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Dr H.P.M. (Ben) Knapen, Helen Alexander and Jovanka Joleska Popovska, who are all deeply familiar with the group, the board is now complemented by Berna Ülman, Karin Katerbau, Dr Jan Schroeder-Hohenwarth and Nicholas Tesseyman. Their expertise will be invaluable in supporting and monitoring the progress of the group in light of our new strategic priorities. Not least, we remain grateful to our main shareholders for their long-standing role in building this banking group, which has a unique impact on so many levels and positively affects the lives of so many people.

As a further mark of success for 2023, the bank in Ukraine achieved, despite all odds, remarkable deposit growth of EUR 98 million or 15.9%, underlining the confidence in our institution and our strong positioning in that market. The bank's solid result for the year, with an RoE of 28%, indicates that a portion of the allowances established in 2022 were set at a cautious level and also that the portfolio continues to be managed very professionally. In addition, we would like to congratulate our Ukrainian colleagues for attaining EDGE Green Building certification for their head office, the first building in the entire country to receive this distinction.

In Kosovo, we inaugurated our solar park, ProEnergy, which will generate clean energy for close to 500 households and thereby contribute to the clean development of the region. ProCredit Bank Ecuador became the first bank in the group to publish its very own Impact Report, with a

particular focus on gender diversity. In another first, in 2023 we quantified the positive impact of our banking activities in terms of both the number of women-led SMEs supported and the general employment of women through our SME clients. On this basis, we defined our first Gender Action Plan to strengthen and structure our support for women empowerment. In addition, ProCredit was asked to represent the Finance Leadership Group on Plastic in the third Intergovernmental Negotiating Committee, at which the UN member states worked to develop an internationally binding instrument to end plastic pollution. These are just some of the many success stories illustrating that 2023 was also a successful year for our group from the perspective of impact orientation.

The good results achieved in 2023 provide a strong tailwind for the future. We will continue to bolster our business development and maintain sustainable profitability levels through our updated business strategy, which aims to significantly grow our business in the SME and retail segments, to increase our banks' presence in the market, and to enhance our positive impact through scale and innovation. To achieve this, we will further streamline lending processes by vesting our banks with more decision- making power, which will make us more agile and better able to serve a wider range of SME clients. We also want to expand our positioning for private customers by offering services to the broader population in our markets and providing them with our full range of banking services. At

the same time, we want to set an example in our markets as a responsible lender, one that bases lending decisions on the repayment capacity of borrowers and charges prudent, transparent interest rates while promoting a culture of saving and financial responsibility. In order to drive these initiatives forward, we will invest heavily in our people, IT and marketing. With expanded presence, our goals in the medium term are to broaden our impact, improve cost efficiency and provide a sustainable return on equity of around 13%-14% for our investors.

We strongly believe that what makes ProCredit unique and what justifies our existence in a world of thousands of banks and financial institutions is our never-ending

We defined our first

Gender Action Plan

to strengthen and structure our support for women empowerment.

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reflection on the impact of our actions and operations	real action and engagement with our clients. To achieve
on the environment. Furthermore, we are convinced	our net-zero commitment, we have already identified
that our impact orientation seamlessly complements our	the clients in our portfolio who contribute most to our
business approach, which is why we will continue to set	Scope 3 emissions. Going forward, we will support them
standards for ESG topics in the future as well. Here, we	in their efforts to accurately measure their CO2 emissions,
have ambitious targets for the future, such as achieving	set specific emission reduction targets in accordance
net-zero emissions for our loan portfolio overall. In	with SBTi standards, and navigate the green transition
our countries of operation, we will continue	with our tailored banking services and expertise in green
to drive the ESG transition - not	investments. Additionally, we will continue to work on
just on paper, but through	reducing our Scope 1 and 2 emissions, increase the
	share of green loans in our portfolio, and invest in
	comprehensive ESG training for all our staff.

2024 will inevitably be influenced by the precarious security situation in Europe and the Middle East. We remain hopeful, however, that the European continent will continue to converge on a political level in light of these crises and are encouraged by the fact that almost all our countries of operation have EU candidacy status.

Once again, we would like to express our sincere thanks to our employees, whose dedication and motivation were crucial to the very good results achieved this year. Their unwavering commitment to doing the right thing characterises how we work together for the common good of the banks and our clients alike in the spirit of our impact orientation.

Lastly, we would like to thank Sandrine Massiani for her passionate work as a member of the Management Board of ProCredit Holding. Her selfless dedication to the group leaves behind an important legacy that will continue to shape our approach to staff and our impact orientation for many years to come.

Frankfurt am Main, March 2024

We will support our clients in their efforts to accurately measure their CO2 emissions, set specific emission reduction targets, and navigate the green transition through our tailored banking services.

Until then, we see ourselves as an effective ambassador of the "European Idea" and as an important link between European institutions and the SME sectors in our markets.

Hubert Spechtenhauser

on behalf of the Management Board of ProCredit Holding

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THE PROCREDIT GROUP: WHO WE ARE

Structure of the ProCredit group

ProCredit Holding AG

		12 ProCredit banks
Quipu GmbH -	ProCredit Academy GmbH -
IT service provider				training centre

Our countries of operation

	South Eastern and
	Eastern Europe
	(Albania, Bosnia and Herzegovina,
South America	Bulgaria, Georgia, Kosovo,
(Ecuador)	Moldova, North Macedonia,
Romania, Serbia, Ukraine)

Our mission

We strive to be the leading SME bank in our markets, following sustainable and impact-oriented banking practices. In doing so, we want to generate long-term sustainable returns and create positive impact in the economies and societies where we work.

Germany

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A PIONEER IN DEVELOPMENT FINANCE

	Establishment of
	ProCredit as a
	BANKING GROUP
ORIGIN	and consolidation
of ownership
ProCredit with IPC:
in ProCredit Holding
Supporting
downscaling of
financial institutions
in developing
countries to provide
micro loans to the
unbanked

Opening of the ProCredit academies

GREEN LOANS

granted for energy efficiency and renewable energy investments

ENVIRONMENTAL EXCLUSION LIST introduced group-widein the banks' Code of Conduct

											Network of
									EV CHARGING
							STATIONS installed
				LISTING					Joined the
				of ProCredit Holding					NET-ZERO
				shares on Frankfurt					BANKING
				Stock Exchange					ALLIANCE
				and first ESG RATING
											Joined the
											UN GLOBAL
											COMPACT

Published OUR RESPONSE

ON FORCED LABOUR ALLEGATIONS related to photovoltaic panel production in Xinjiang

Report on GHG emissions associated with the loan portfolio, following

PARTNERSHIP FOR CARBON ACCOUNTING FINANCIALS (PCAF)

1980

1997-1998

2003-2006

2008-2014

2015-2017

2018-2020

2021-2022

2023

FIRST MICRO-
FINANCE BANK
in Bosnia and
Herzegovina
founded as	MSME FINANCE
a greenfield
Shift of focus from
investment
micro lending to
Founding of IMI	"Hausbank" for SMEs
(now ProCredit
Holding)

Introduction of a group-wide

ENVIRONMENTAL MANAGEMENT approach, policy and governance structure

BANKING LICENCE IN GERMANY Implementation of German regulatory standards, supervised by German banking authorities

ProCredit institutions certified

under ISO 14001, EMAS and EDGE

Introduction of our

PLASTIC STRATEGY

GREEN BOND placement with the IFC for

green investments by SMEs

PROCREDIT DIRECT

Digital banking approach for private clients fully implemented

Commissioning of PROENERGY, our own 3MWp PV plant in Kosovo

Defining of emission reduction targets in accordance with

SCIENCE BASED TARGETS INITIATIVE (SBTi)

Conversion from KGaA to AG

Introduction of our INCLUSIVE FINANCE concept, with a focus on gender equity

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SUSTAINABILITY HIGHLIGHTS AND DEVELOPMENTS

INTERNAL

ENVIRONMENTAL

INDICATORS

61%

electric and hybrid

plug-in cars in car fleet

7.4%

decrease in

energy consumption per employee

6 premisescertified by EDGE

7.8%

decrease in indoor water consumption per employee

GREEN LENDING

9,439

total number of green loans

EUR 1,268.3m

total green loan portfolio

20.4%

of green loans

in total portfolio

191.9ktCO2

emissions avoided through RE projects

CLIENTS

total number of

business loan clients:

32,244

23%

of clients are

from the

agriculture sector

13%

of clients are from the production and

manufacturing sectors

JOBS SUPPORTED

THROUGH OUR

BUSINESS CLIENTS

193,344

total employment (estimated number)

42%

female

employment

15-25y7%

youth

employment

EMPLOYEES

3,951

total number of employees

54%

female representation in

middle management

114

hours of training

per employee

annual investment

in employee training

EUR 9.4m

Status of our targets as of 2023

Sustainability standards and memberships

20% green loans by 2023	Achieved in 2022 and updated to 25% for the medium term.
Carbon neutrality in	In 2023, we commissioned our 3 MWp PV plant in Kosovo, which avoids nearly 3,500 tCO2
annually and was crucial for achieving our carbon neutrality goal.
our own operations by 2023	In addition, in line with the Paris Climate Agreement, we developed a full plan to achieve
	net-zero emissions by 2050.
Maintain and further	This objective is continuous and transversal to all impact areas,
increase staff competence	pertaining to all operations rather than a stand-alone goal.

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OUR APPROACH TO IMPACT

We believe that our banks can generate significant positive impact by promoting sustainable economic development in our countries of operation. By financing micro, small and medium-sized enterprises, we support growth, innovation and job creation in South Eastern and Eastern European emerging economies. Moreover, our emphasis on green finance allows the reduction of greenhouse gas emissions and lowers pollution in otherwise very carbon-intensive countries. Through our focus on agriculture, we also promote rural development and sustainable food security. In addition, our unique digital- first approach to retail banking enables us to provide high-quality, convenient and transparent services to the broader population.

Sustainability has a broad agenda and many objectives. We chose in this report to focus on five main Sustainable Development Goals associated with job creation, diversity and inclusion, green energy and climate action. However, our previously established material topics, based on a wider selection of SDGs,

remain­ crucial to our business model.

Social impact

Sustainability

at ProCredit

Environmental impact

Jobs and

investment

Diversity and

inclusion

Green

energy

Climate

action

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INDUSTRY,

INNOVATION AND ENTERPRISES AT THE CORE OF OUR BUSINESS MODEL

INFRASTRUCTURE

At ProCredit, we support micro, small and medium-sized ­enterprises (MSMEs) that meet stringent environmental, social and governance (ESG) standards and have the greatest potential to create wealth, employment and opportunities in our markets of operation.

Our business model is focused on providing financial services to innovative companies with a high degree of formalisation

Context in our countries: CO2 emissions per unit of manufacturing value added (kgCO2/2015 USD)

and digitalisation. Around a quarter of our business portfolio is dedicated to financing the productive sectors, with industry playing the most important role, and our focus on investment loans provides the basis for long-term capital formation and hence higher economic growth.

Our lending activities particularly support investments in green technologies: 26% of our investment loans are classified as "green", with a strong emphasis on renewable energy, energy efficiency and sustainable agriculture.

Our total business loan portfolio by sector (%)

Other

8%

3%

6%

Georgia

North 0.96

Macedonia

0.83

Kosovo

0.71

Germany

0.13

Our business loan portfolio by loan purpose

Albania

1.23

Ukraine

2.99

Reference year: 2020

ProCredit provides a bridge between the more developed economies in Western Europe, particularly Germany, and those in South Eastern and Eastern Europe, well beyond the provision of financing. Among other services, we offer international­ money transfers, which allow secure, fast and low­ -costcross-border payments, centralised treasury for companies with operations in multiple jurisdictions, and payment of import-export guarantees, promoting the flow of goods not only from east to west, but also interregionally.

Green investment categories

5%

Total business loan portfolio: EUR 5,597 million

Working

capital 36% loans

64%

Investment loans

Green share in investment loans

26%

Environmentally friendly projects

• Waste management
• Environmental services
• Sustainable suppliers
• Organic farming and certified production

Renewable energy

• Photovoltaic systems
• Hydropower plants
• Wind power systems
• Geothermal systems
• Biomass plants

Energy efficiency

• Production machinery and equipment
• Green buildings
• Heating and cooling equipment
• LED or other
  efficient lighting systems

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