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| FMFB Syria |
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| 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 | 26362 |
| Company name | First Microfinance Institution Syria |
| Country | Syrian Arab Republic |
| Sector | Finance & Insurance |
| Environmental category | FI |
| Department | Global Financial Markets Group |
| Status | Pending Disbursement |
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| Date SPI disclosed | April 1, 2008 |
| Projected board date | May 1, 2008 |
| Previous Events | Signed: January 13, 2009
Approved: December 9, 2008 |
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| Overview |
Sponsor/Cost/Location |
Development Impact |
Contacts |
Attachments |
| Project description |
Aga Khan Agency for Microfinance (AKAM)’s micro-credit program was first established in Salamieh in January 2003 and covers a network of 7 branches across Syria with Damascus being opened in late 2005. The total amount disbursed to-date is $50 million reaching over 38,000 borrowers of which 25% are female. The outstanding portfolio, as of December 2007, stands at $10.9 million with Portfolio at Risk > 30 days at 1.11%. Currently, AKAM’s program offers a variety of loan products such as individual loans, group loans, education loans, health loans and home improvement loans. The loans are extended in local currency averaging $876 equivalency and ranging between 3 to 24 months depending on their specific purpose. The portfolio is spread across various sectors such as trade, services, and transportation (48%) and agriculture (40%) demonstrating its strong rural focus.
The program’s assets and liabilities are expected to be consolidated into First Microfinance Bank (FMFB) Syria, following procedures established by the regulator. FMFB Syria will aim to stimulate income-generation in low-income areas and promote small-scale agricultural and industrial enterprises. It will provide credit and/or deposit products to support micro entrepreneurs, small-scale businesses, and rural development. |
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| Project sponsor and major shareholders of project company |
The Aga Khan Agency for Microfinance (AKAM) has sponsored various microfinance entities including First Microfinance Banks in Pakistan, Tajikistan, and Afghanistan supported by IFC. During 2006, AKAM sponsored MFIs disbursed $109 million to 150,000 borrowers in 12 countries. At end 2006, loan portfolio outstanding totaled $70 million to 140,000 borrowers, 29% of whom were women. About $750,000 was disbursed to entities in East Africa (Kenya, Mozambique and Tanzania), about $1 million to entities in West Africa (Burkina Faso and Mali), $3.7 million in Egypt and $6 million in the Kyrgyz Republic.
AKAM currently owns 100% of the program and will retain majority ownership after transformation. |
| Total project cost and amount and nature of IFC's investment |
| The project entails the transformation of the existing AKAM micro-credit program into a microfinance bank to be named, the First Micro Finance Bank Syria (FMFB Syria or the Bank). The project is modeled after the previously established AKAM sponsored and IFC supported microfinance banks in Pakistan, Afghanistan and Tajikistan. IFC’s exposure is expected to include equity of up to $3 million and debt/guarantee of up to $5 million in addition to a comprehensive technical assistance package of around $0.5 million to support training and development of new products targeting women, savers, and SMEs. |
| Location of project and description of site |
| The Bank is established in the Syrian Arab Republic with 7 branches countrywide and headquarters in Damascus and has already received a preliminary license to operate. |
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| Anticipated development impact of the project |
This project is expected to have a high development impact in the following two main areas:
- Demonstration Effect:
Consistent with the IFC’s strategy, supporting the first microfinance bank to be established in Syria presents an excellent opportunity develop the sector. Given the large unmet demand and the limited number of existing providers, it is likely that new entrants will replicate FMFB Syria’s experience, thus demonstrating the viability of commercial microfinance in frontier markets.
- Access to finance for underserved segments:
Over the next three years, the project is expected to provide over $100 million of financing to approximately 75,000 new borrowers, 26% of which are expected to be women. As newer financial products are introduced, (savings, micro-insurance etc) more than solely credit needs of the clients will be serviced. Additionally, the geographical spread is expected to widen as the Bank develops a nationwide network of outlets. Overall, improved access should reduce income disparities and create additional jobs. |
| IFC's expected development contribution |
| For some time now, IFC has been in discussions with the Syrian authorities to share its global microfinance experience and encourage the establishment of a regime for specialized micro-banks, which is now a reality. The availability of risk capital to be deployed in early stage companies in frontier markets such as Syria is not available from the market. Hence, the sponsors have approached IFC to take full commercial risk and build a robust equity base for the Bank and provide/facilitate access to long-term debt in local currency. Such financing is not available to a near start-up entity as the Bank because many of the existing private commercial banks are relatively new and focused on the short end of the market. Using its considerable structuring expertise, IFC will introduce the client to the domestic banking market and design a debt product which meets the needs of the Bank and the market. Since the market is not comfortable taking the risk of a newly established Bank, IFC will attempt to structure a partial guarantee to mobilize local currency financing, something that has not been done in Syria to date. If such attempt is not successful, IFC could consider providing a standby loan to backstop deposit mobilization. Finally, IFC will be providing the Bank access to its global reservoir of knowledge on establishing and managing financial institutions in frontier markets, especially those serving smaller businesses and micro-entrepreneurs. |
| Environmental and social issues - Category FI |
This 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 take action to remedy any gaps in implementation on an ongoing basis;
- Submit a periodic report to IFC as per a format to be provided by IFC. |
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| For inquiries about the project, contact: |
Jean Lorenz Ehrentrant, CEO designate
First Micro Finance Bank, Syria
Abou Rumaneh, Rawda Square, Abdel Kader Al Jazairi Street, Bldg. No. 15
Damascus, Syria
Telephone: +963 11 447 3892
Fax: +963 11 334 3613 |
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| For inquiries and comments about IFC, contact: |
General IFC Inquiries
IFC Corporate Relations
2121 Pennsylvania Avenue, NW
Washington DC 20433
Telephone: 202-473-3800
Fax: 202-974-4384
E Mail: Webmaster |
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