KMB Bank (KMB or the bank) is owned by: European Bank for Reconstruction and Development (35%); Soros Economic Development Fund (35%); Deutsche Investitions – Und Entwicklungsgesellschaft Mbh (22%), and Stichting Triodos-Doen, a Dutch publicly-owned development institution (8%). EBRD’s financial support as the shareholder and lender has been a key factor to the development of the bank.

The project involves a US$3 million equity investment and a US$7 million senior loan in KMB Bank for IFC’s own account.

KMB Bank is headquartered in Moscow and has a network of five regional branches and nine representative offices throughout Russia.

On initiative of the EBRD, KMB Bank started operations in 1992 as the Russian Project Finance Bank, focusing on project finance. The bank was subsequently converted into an institution specializing in financing small businesses, and started operations with this new focus in late 1998. KMB makes loans to privately-owned micro, small, and medium-sized enterprises (SMEs), and provides a range of other financial service. Its lending activity has a regional focus, and future plans include expansion in the Urals, Siberia, and the European part of Russia. Development impact Given the focus of KMB's business plan on regional expansion and the SME sector, by helping the bank maintain its rapid growth trend, IFC will be supporting the development of the key business sector in Russia, especially in areas that are away from the better-banked Moscow region. The development impact of the project is expected to be threefold: (i) supporting expansion of the SME sector which in Russia is still underdeveloped compared with other countries in Central and Eastern Europe; (ii) regional development, as KMB will emphasize expansion outside the better-banked Moscow and St. Petersburg regions; and (iii) financial sector development, by contributing to the growth of banking services aimed at SMEs, and hopefully serving as a demonstration model to other banks that are considering moving into the sector. IFC’s Role Currently, there are virtually no commercial sources of long-term funding for banks in Russia unless they belong to one of the big financial/industrial groups. KMB's access to funding from existing sources (primarily EBRD) has been exhausted and its deposit base is still small, short term, and it will take considerable time and effort to develop into a reliable source of funding. At the same time, funding on the inter-bank market is very short-term and expensive. IFC financing will provide resources which are essential for KMB to expand its lending activities and to broaden the range of its services by making larger loans to serve its best SME customers, in addition to micro-enterprises and to increase profitability. Finally, by taking a Board seat, IFC will be able to provide input into the bank's operations and further development.

This is a category FI Type 1 project according to IFC’s environmental and social procedure. KMB will establish an environmental management system designed to ensure that its borrowers comply with Russian environmental, health and safety standards. Bank officers will complete an IFC-approved environmental training course and KMB will provide IFC with an annual environmental report.

Reiner Muller-Hanke, CEO 15/7. 1st Neopalimovsky per., Moscow 119121, Russia Phone: 7-095-967-3061 Fax: 7-095-967-3060