AccessBank Tajikistan JSC

Summary of Proposed Investment

This Summary of Proposed Investment is prepared and distributed to the public in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only.

Project number	26758
Company name	Access Bank Tajikistan CJSC
Country	Tajikistan
Sector	Finance & Insurance
Environmental category	FI
Department	Global Financial Markets Group
Status	Pending Approval

Date SPI disclosed	May 8, 2008
Projected board date	June 9, 2008
Date revised SPI disclosed	May 27, 2008

Overview

Sponsor/Cost/Location

Development Impact

Contacts

Attachments

Project description

AccessBank Tajikistan JSC (Tajik Access or the project) is a greenfield microfinance bank which will be headquartered in Dushanbe (the country’s capital) towards the end of the second quarter/beginning of third quarter of 2008. Operating under a commercial bank license granted by the National Bank of Tajikistan (NBT), the country’s Central Bank, Tajik Access will seek to offer a broad range of financial services to micro, small and medium-sized enterprises in Tajikistan.

It is the sponsor’s vision that Tajik Access will become the leading microfinance/SME bank in Tajikistan and will set new standards in the country’s banking sector in terms of professionalism, transparency and efficiency. The project will initially focus on providing credit to micro and small businesses (on the basis of a cash flow-oriented credit technology), as well as basic savings and payments services.

Project sponsor and major shareholders of project company

The project’s proposed ownership is as follows:

Investor	in US$’000	in %
AMH	$5,555	50.5%
IFC	$1,980	18.0%
EBRD	$1,980	18.0%
KfW	$1,485	13.5%
Total	$11,000	100.0%

Access Microfinance Holding AG (AMH): AMH is a commercial microfinance holding company that makes equity investments in newly-established and early stage MFIs. AMH develops its investee MFIs through a combination of equity finance, management, and TA services. Investment activity has initially been concentrated in Sub-Saharan Africa and Central Asia, with the development of Microfinance Bank of Azerbaijan (MFBA), an IFC client; AccesBanque Madagascar (ABM), an IFC client; and AccessBank Tanzania (ABT) and Access Bank Liberia, an IFC client. Over time, AMH will transform from an investment holding company into a controlling parent company of a global network of MFI’s with a common brand identity.

LFS Financial Systems (LFS): LFS was founded in 1997 as a consultancy firm with a focus on commercialization of micro and small business finance in developing and transition economies. It is a private limited company under German corporate law, with three shareholders: Bernd Zattler, Thomas Engelhardt, and Dan Balke, all of whom are known to IFC. The majority of its assignments are on behalf of international financial institutions such as IFC, KfW, or EBRD, as well as technical co-operation agencies such as the Department for International Development (DFID) and the German Agency for Technical Cooperation (GTZ).

LFS has built a considerable track record in managing microfinance portfolios and institutions. Since its inception, LFS has implemented more than 50 projects in 30 countries, and built-up lending portfolios of more than $200 million. LFS manages MFBA, ABM and ABT under Management Service Contracts (MSCs), in which LFS is also an investor, as well as a downscaling project in Tajikistan. Other recently completed long-term assignments include downscaling projects in Uzbekistan and Serbia, and an upgrading project in Mongolia.

Total project cost and amount and nature of IFC's investment

The proposed investment will consist of a $1.98 million investment in common shares as IFC’s contribution to the project’ start-up capital of $11.0 million.

Location of project and description of site

Tajik Access will be headquartered in Dushanbe, Tajikistan. In the first year of operation, one branch will be opened in Dushanbe and Khudjand. In the fifth year of operation, it is planned that Tajik Access will have 16 branches across the country.

Anticipated development impact of the project

Development of Financial Sector:

IFC supports the development of a holistic financial sector, with interventions at the macro, meso and micro levels. IFC's work in Tajikistan is an example of how the investment and advisory programs work together to build an enabling regulatory environment for microfinance and to create a new, best practice institution with the ability to demonstrate sustainable delivery of financial services to the micro and small segments of the market.

Commercialization of Industry:

IFC’s main role lies in facilitating the process of commercialization of the industry. Commercialization enables MFIs to better leverage their equity, increasing their ability to serve significantly more clients, and offer them a wider range of financial products and services. The Project will also allow IFC to further develop and nurture a diversified network of investment partnerships and promote commercial microfinance by creating a demonstration and replication effect through the endorsement of microfinance as an attractive and profitable new asset class to commercial individual and institutional investors. Furthermore, IFC’s commitment to AMH’s network investments is likely to be a strong catalyst to attracting other international financial institutions as investors.

IFC's expected development contribution

Equity/AS Package:

IFC will be a founding shareholder in the project and will bring a package of equity and advisory service to support the capacity building phase of the project. IFC's ability to offer a package that includes equity and advisory service funds to start up projects in post-conflict countries is unique. Few other organizations are able or willing to provide this combination of resources to this type of projects. Without IFC's involvement, the proposed new MFIs would not likely be set up due to lack of equity and/or advisory service resources.

Microfinance Expertise:

IFC’s knowledge and expertise in microfinance greenfielding is exceptional and brings significant value-added to the project. IFC has participated as founding shareholder in some 20 microfinance banks in many countries across the world, and has in the process accummulated significant experience. There are few, if any, organizations (private, multilateral or donor-based) with the same level of experience in microfinance greenfielding. IFC’s participation in the project ensures that this value-added will be shared with Tajik Access.

Credibility:

IFC has a unique credibility among prospective microfinance investors and local banking authorities. IFC has, on the back of its significant microfinance program and its recognized commercial orientation, built strong credibility among industry players and government authorities. This credibility helps the sponsor raise additional resources and is often a crucial factor in convincing the banking authorities to grant operating licenses for the new microfinance entities. If IFC were not to participate in Tajik Access, the implementation of the project would most likely be substantially delayed or would not happen at all.

Promotion of Environmental and Social Standards:

The proposed operating policies for MFIs, financed by IFC, with respect to social and environmental standards strictly follow IFC’s requirements for financial institutions. This is also true in terms of anti-money laundering and combating the financing of terrorism (AML/CFT). IFC has therefore had a unique impact on how these new microfinance entities operate according to best practices. IFC will create the same impact in the project. In the absence of IFC’s standards, the adoption of best practices would be inconsistent as the microfinance sector expands to new countries.

Environmental and social issues - Category FI

The project involves IFC support for the business of microfinance and has been classified as a Category FI project according to IFC’s Environmental and Social Review Procedure. Considering the nature of activities supported, the project will be required to:

- Develop a procedure relevant to its business process, prior to disbursement, that is satisfactory to IFC, and that ensures that all its investments are screened and processed to avoid supporting activities on the IFC Microfinance exclusion list;

- Identify qualified persons to manage and implement the procedure;

- Demonstrate commitment and resources to implementing the procedure; and

- Submit a periodic report to IFC as per a format to be provided by IFC.

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