A US$5mn loan to Kazkommertsbank Kyrgyzstan (KKB-K) marks the start of a new international programme helping to finance banks in the Central Asian republic to lend money on to the very smallest businesses.
The EBRD’s share of the loan was US$2.25mn, with the rest provided by the International Finance Corporation (IFC) and the International Cooperation and Development Fund of Taipei China (Taiwan ICDF) through the Financial Intermediary Investment Special Fund.
KKB-K, a privately owned Kyrgyz subsidiary of Kazakhstan’s Kazkommertsbank, will use the funding to facilitate the development of micro and small enterprises (MSEs) by making formal finance available to them either in local currency or dollars.
This loan is the first to be made under a new US$30mn Kyrgyz Micro and Small Enterprise Financing Facility, known as KMSEFF II, of which US$20mn is provided by the EBRD as part of its Early Transition Countries (ETC) Initiative which aims to provide increasing support to smaller private sector projects in the bank’s seven lowest-income countries of operations.
It builds on the success of an earlier micro and small enterprise facility of US$12.6mn which was set up in April 2002 and is now fully committed. KMSEFF II is bigger in cash terms than its predecessor and plans to expand the number of participating banks with credit lines from two to a targeted five. The programme has a new emphasis, too, on expanding into economically depressed regions and to agricultural regions.
MSE lending has proved a vibrant sector of the Kyrgyz economy. By May 2005, the first programme had provided 21,452 loans worth a total of US$36mn. Most clients are small traders who have never had access to formal finance, and the average loan size is just US$1,638.
A majority of clients – 59% – are women. The repayment rate is outstanding: 99.4%. The Kyrgyz participating banks have opened 40 MSE lending departments in 12 cities and trained 217 loans officers to assess and administer loan requests.
KMSEF II is supported by co-financing from Taiwan ICDF, IFC and Switzerland’s State Secretariat for Economic Affairs (Seco). It also has technical cooperation funding from the recently established multi-donor ETC Fund, the EU and the US Agency for International Development (USAid).