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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 | 24248 |
| Project name | MFBAzerb Loan |
| Country | Azerbaijan |
| Sector | Finance & Insurance |
| Department | Global Financial Markets Group |
| Company name | AccessBank |
| Environmental category | FI-1 |
| Date SPI disclosed | May 11, 2005 |
| Projected board date | June 15, 2005 |
| Status | Active |
| Previous Events | Invested: July 12, 2005
Signed: July 8, 2005
Approved: July 6, 2005 |
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| Description of company and purpose of project |
The project involves the extension of a senior credit line of up to $3 million to Microfinance Bank of Azerbaijan (MFBA or the Bank). IFC’s current exposure to MFBA is a $1.75 million equity investment, representing 25.55% of the share capital. The proposed loan is part of a larger credit envelope of up to $9 million in which two additional shareholders in MFBA, Kreditanstalt Fur Wiederaufbau (KfW) and the Black Sea Trade and Development Bank (BSTDB), will participate. The purpose of the credit line is to support MFBA’s rapid loan portfolio growth, which is critical to the further development and sustained profitability of the Bank.
MFBA started operations in October 2002 as a specialized provider of credit and financial services to individual entrepreneurs, and small and micro enterprises (SMEs) across Azerbaijan. The Bank started operations in Baku with a headquarters office, and has since opened four branch offices in Baku (Airport market, Xalqlar Dostlugu and 20th January area) and Sumgait. The Bank is expected to open a fifth branch office in Ganja in May 2005.
To date, MFBA has served 4,500 micro and small enterprise clients with 10,500 credit lines totaling over $23 million. Loan portfolio has increased by 73 percent in 2004 to $7.2 million as of December 31, 2004 and $8.8 million by the end of March 2005. The Bank projects its loan portfolio to increase to $15.1 million by the end of 2005. MFBA requires additional funds to expand its growing loan portfolio.
MFBA requires additional funds to expand its growing loan portfolio, which is expected to double to $15 million by the end of 2005. Because MFBA is only now able to accept deposits and the inter-bank market in Azerbaijan remains underdeveloped, MFBA must rely primarily on IFI financing until it can build up its deposit base. In February 2005, the European Bank for Reconstruction and Development (“EBRD”) finished disbursing a $5 million credit line which is expected to be fully utilized by end May 2005. The other shareholders, KfW and BSTDB, are planning on providing an additional $3 million each also in the first half of 2005. |
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| Project sponsor and major shareholders of project company |
The shareholders of MFBA are: IFC (25.55%), BSTDB (25.55%), KfW (24.96%), EBRD (18.25%), and LFS Financial Systems GmbH (5.69%).
LFS Financial Services (LFS) is the project’s technical partner in addition to being a shareholder. This is the first project in which IFC has invested with LFS, which came highly recommended by MFBA’s co-investors, EBRD and KfW. Its track record encompasses managing SME credit lines in Azerbaijan (KfW German-Azerbaijan Fund), loan programs in Bosnia (EU housing refurbishment loans) and Uzbekistan (EBRD-Japan Small Business Fund), and a micro bank in Mozambique (GTZ Sociedade de Credito). LFS is engaged as the professional manager under a Management Services Contract financed by an EBRD Technical Assistance Program. |
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| Total project cost and proposed IFC investment |
| Total project cost is estimated at $9 million. The proposed IFC Investment would be a $3 million A loan for IFC’s own account. |
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| Location of project and description of site |
| The Bank started operations in Baku, Azerbaijan with a headquarters office and has since opened four branch offices in Baku (Airport market, Xalqlar Dostlugu and 20th January area) and Sumgait. The Bank is expected to open a fifth branch office in Ganja in May 2005. |
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| Project Development Impact and IFC's Role |
IFC’s investment in MFBA is expected to be strongly developmental, stimulating micro and small enterprise growth and development and generating employment. Because the average loan is $2,000 with a tenor of less than 12 months, IFC’s $3 million loan can be expected to fund over 15,000 SME credit lines valued at $30 million over its seven year term. By extending credit lines to micro enterprises and individuals, MFBA is drawing previously excluded groups of people into active participation in the financial system, increasing the economy’s financial depth, and generating more broad-based economic growth. Moreover, since October 2004, MFBA began accepting deposits and will continue to develop a wide variety of banking products to suit the local market. The further development of this product will foster greater savings and therefore investment in the economy.
The World Bank Group aims to support diversified economic growth in Azerbaijan as a necessary condition for reducing poverty. In recent years, Azerbaijan has achieved strong economic growth and low inflation, largely as a result of oil sector development and high international oil prices. Sustainable economic development can be achieved if driven by a dynamic private enterprise sector outside the oil sector and stronger financial sector intermediaries, supported by a more streamlined efficient and transparent public sector. IFC's strategy in Azerbaijan is thus focused on broadening financing opportunities for small private enterprises linked with as well as outside the oil and gas sector and financial sector development. IFC’s role on this project will be:
- to meet MFBA’s critical funding needs;
- to support the growth and development of micro and small businesses in Azerbaijan by supporting MFBA until it is financially stronger; and
- to continue to play an important role in the governance of MFBA through its seat on the Supervisory Board. |
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| Environmental and social issues - Category FI-1 |
This is a category FI type 1 project according to IFC's environmental and social review procedure. As a result of an earlier IFC investment in MFBA, the Bank implemented an environmental management system (EMS) satisfactory to IFC, including environmental training of staff, compliance with Azeri environmental, health and safety standards and IFC's Microfinance Exclusion List, and the provision of annual environmental performance reports (AEPRs) to IFC. For the duration of IFC's new investment, MFBA will be required to maintain its EMS and continue to provide AEPRs, and any new environmental officers will be required to participate in environmental management training conducted or approved by IFC.
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| To contact the project company, please write to: |
137, A. Guliev Street
Baku, Azerbaijan
370000 |
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