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| Summary of Project Information (SPI) |
| 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. Board dates are estimates only. |
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| Project number | 11530 |
| Project name | Rabitabank II |
| Country | Azerbaijan |
| Sector | Finance & Insurance |
| Department | Global Financial Markets Group |
| Company name | Rabitabank |
| Environmental category | FI |
| Date SPI disclosed | March 26, 2003 |
| Projected board date | April 30, 2003 |
| Status | Completed |
| Previous Events | Invested: December 12, 2003
Signed: May 8, 2003
Approved: April 28, 2003 |
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| Description of company and purpose of project |
Rabitabank (RB) or (the Bank) was established in 1993 by public-sector companies of the Ministry of Communications. Since then, the Bank has been privatized, and currently is 95% privately owned. Following privatization, RB retained its communications sector niche and continues to serve and finance local and joint-venture companies in the cellular, long-distance, and telecom installation fields. However, learning from the experience of peer banks' failures from sector concentrations as well as understanding the importance of SMEs in the country's economic development, RB is placing importance on increasing work with SMEs. The Bank is headquartered in Baku and has 4 branches in and outside of Baku.
IFC has been approached by Rabitabank for loan funds to on-lend to small businesses in Azerbaijan. The Bank wishes to increase the provision of financing to small businesses to strengthen the linkages between large oil and gas sector firms and the small business market. There is currently a major shortage of funds targeted at this segment of the economy.
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| Project sponsor and major shareholders of project company |
At its establishment, RB was 100% owned by public-sector enterprises controlled by the Ministry of Communications. Successive share capital increases have diluted the public sector interest in RB to less than 2%. Management and employees of RB hold about 70% of equity, and Azinvestbank, a medium-sized local joint-stock bank, holds a 9% stake. Azerigazbank holds a 4% stake. With capital increases in 2002, the Bank’s paid in capital is now US$2.5 million.
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| Total project cost and proposed IFC investment |
The total project cost of the IFC Senior Loan is estimated at $1,200 thousands to be disbursed in two tranches of $600 thousands each. The duration of this loan is 6 years (including 2 year grace).
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| Location of project and description of site |
| Rabitabank’s branches are in Baku as well as other cities in Azerbaijan.. |
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| Project Development Impact and IFC's Role |
IFC’s experience over a range of micro and small business finance projects has shown that a financial institution whose main focus is small business finance provides an efficient means of reaching the small business target group with initial technical assistance support. Due to the small size of the Bank, streamlined credit evaluation procedures and appropriately tailed MIS and small loan monitoring technologies, can be put in place quickly with the help of on-site technical advisors. High efficiency levels for small business lending are therefore achieved in a relatively short timeframe.
The project is expected to strengthen the financial sector in Azerbaijan, which has an economy of significant gaps in funding for economic activity. In addition, there is potential for the development of small businesses which are directly linked with, and supply to, large companies within Azerbaijan’s oil and gas sectors.
The proposed TA support will make four major contributions to the Bank:
Create systems and procedures for prudent assessment of small business loan applications;
Create a small business development function within the bank to enable ongoing generation of new lending opportunities;
Create and implement a system within the institution to ensure that loans are properly monitored and portfolio risk is adequately controlled;
Implement a training program for branch managers, loan officers and credit analysts to strengthen the credit and risk management capacities of the bank.
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| Environmental and social issues - Category FI |
Environmental considerations. Rabitabank is a category FI Type 1 project according to IFC’s environmental and social review procedure. The Bank must require and use its best efforts to ensure that its small enterprise clients comply with the environmental, health and safety, and IFC’s Microfinance Exclusion List requirements on both a national and local level. The Bank will also provide IFC with an annual environmental performance report and ensure that adequate number of staff members have been through IFC’s environmental training course.
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| To contact the project company, please write to: |
Mr. Zakir Nuriyev, Chairman of the Board
Rabitabank
1 Bunyat Sardarov Street,
Baku, Azerbaijan
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