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| This Summary of Project Information 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. |
Summary of Project Information (SPI) |
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| Project number | 10656 |
| Project name | SEF FINCA |
| Country | Kyrgyz Republic |
| Sector | Finance & Insurance |
| Department | Global Financial Markets Group |
| Company name | FINCA Microfinance Resource |
| Environmental category | FI |
| Date SPI disclosed | November 21, 2000 |
| Projected board date | December 22, 2000 |
| Status | Completed |
| Previous Events | Invested: April 4, 2002
Signed: February 28, 2002
Approved: May 3, 2001 |
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| Project sponsor and major shareholders of project company |
The project sponsor is FINCA International, Inc. (FINCA), a not-for-profit NGO established in 1984 with support from the US Agency for International Development (USAID) to provide financial services tailored to the needs of the working poor in countries around the world. FINCA’s goal is to provide micro-entrepreneurs and micro-enterprises with on-going, reliable access to micro-loans at commercial interest rates in order to enable them to build their businesses and improve their standard of living.
FINCA has a long standing record of successfully starting and managing microfinance institutions. Over half of its overall funding comes from USAID. Other funding comes from foundations, grants and donations. Headquartered in the USA, FINCA has programs that currently serve over 120,000 clients in 17 countries on 5 continents, and its village banking methodology has been replicated by more than 40 other programs in 32 countries. Its largest operations have been in Latin America, but it is rapidly setting up new programs in the Newly Independent States (NIS), including Russia, Georgia, Azerbaijan and Armenia. FINCA's microfinance operation in Kyrgyz Republic (FINCA Kyrgyzstan, or FK) is its oldest and leading program in Central Asia. |
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| Total project cost and proposed IFC investment |
| The total project cost is estimated at US$2.5 million. IFC will make an equity investment of up to US$1 million to establish FINCA Microfinance Resource (FMR or the Resource), a new special purpose vehicle to be managed on a commercial basis by FINCA. IFC's investment will be for up to 40% of the share capital of FMR, and will be made in several phases concurrent with FINCA subscriptions in a 40/60 ratio. FMR will have a 3-year horizon, after which it will be either converted into equity of a new, commercial microfinance entity, or liquidated. The intent is to provide FK with capital on a commercial basis to supplement its other resources and enable it to expand its existing program. This is an interim step while preparations to convert FK into a commercial, regulated microfinance institution are undertaken. |
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| Location of project and description of site |
| FK is headquartered in Bishkek, the capital city of the Kyrgyz Republic, and has six regional offices throughout the country. |
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| Description of company and purpose of project |
Company Description:
FK was established in 1995, with USAID finance. It has a disbursed portfolio of over US$2 million with a repayment rate of 99% and serves nearly 20,000 active clients throughout Kyrgyz Republic. FK is governed by FINCA's Board of Directors.
From the outset, FK has adopted a commercial approach to microfinance. It has 100% operational and financial self-sufficiency in recent years and some of the lowest levels of delinquency in the FINCA network, despite a difficult macroeconomic environment, while increasing the incomes of its borrowers.
Purpose of Project: In order to expand its outreach in the country and to institutionalize the activity on a more permanent basis, FK seeks to access commercial sources of funding. To do so, the sponsor wants to convert FK into a regulated for-profit microfinance institution. However, the legal framework for such an entity does not yet exist in Kyrgyz Republic. An interim step is therefore proposed, whereby funding is put in place now on a commercial basis to expand FK's activity without having to wait for the legal framework surrounding conversion to be addressed first. Hence, IFC would make an equity investment of up to US$1 million to establish FINCA Microfinance Resource to support the lending operations of FINCA Kyrgyzstan during its transformation from a non-profit microfinance organization into a for-profit microfinance institution. The Resource will be a closed-end, 3-year limited liability corporation, and will have a capital of up to US$2.5 million. It will be managed by FINCA. The funding would later be rolled into the equity of the new for-profit institution to provide part of its capital on its formation.
IFC Role and Development Impact: During the last eighteen months, IFC and FINCA have explored various ways to support the conversion of FK into a commercial microfinance institution. IFC provided technical assistance funding from IFC's Trust Fund to support a market analysis that will be part of a detailed feasibility study for FK's conversion. Through this project, IFC in conjunction with FINCA, will provide FK with the necessary commercial funds as an interim step, in order to ensure that the expansion of the FINCA Kyrgyzstan's program is not delayed. During FK's transformation, IFC will play a catalytic role in facilitating communication with the Kyrgyz government authorities and the National Bank of Kyrgyzstan.
IFC expects to become a founding shareholder in the new microfinance institution, and expects to help provide a sound basis for the corporate governance of the new microfinance institution. IFC will also seek to attract other investors into the equity of the new microfinance institution.
The proposed project will have a strong development impact as it supports the growth of a successful microfinance program, which aims at improving the standard of living of the poor. As FINCA has successful operations throughout the world, including extensive networks in Latin America and the NIS, the proposed project is expected to have a good replication potential to other commercially viable programs of FINCA, and have positive demonstration effect on other microfinance organizations. |
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| Environmental and social issues - Category FI |
This is a Category FI Type 1 project according to IFC's environmental and social review procedure. FINCA/FMR must ensure that all microfinance subprojects financed by the Resource comply with applicable local and national environmental, health and safety requirements and IFC's Microfinance Exclusion List. IFC's Environment Division will provide training to FINCA/FMR staff. FINCA/FMR will provide IFC with a brief annual environmental report on the project.
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| To contact the project company, please write to: |
| Mr. Jason Meickle, Country Director; FINCA Kyrgyzstan; 127 a Gogolya; Bishkek; Kyrgyzstan. Telephone no.: 996 312 29 58 82; Fax no.: 996 312 681 810. |
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