International Finance Corporation (IFC), the private sector arm of the World Bank Group, has signed an agreement to provide a US$2.2mn financing package to Micro Credit Agency Bai Tushum Financial Foundation, one of Kyrgyzstan’s leading micro lending institutions.
IFC will support the transformation of Bai Tushum from its present not-for-profit status to a more sustainable, commercially-oriented, deposit-taking financial institution that can serve as a model for similar microfinance organisations in the Kyrgyz Republic.
IFC’s director for global financial markets, Jyrki Koskelo, says, “The IFC financing will enable Bai-Tushum to expand its lending activities to farmers, private entrepreneurs, and micro and small enterprises and extend its reach to other remote regions of the Kyrgyz Republic.”
The IFC financing comprises a US$1.2mn credit line to Bai Tushum for increasing its portfolio of micro loans, thereby scaling up operations in preparation for the transformation. Additionally, IFC will receive an option to acquire an equity stake for US$1mn, or up to 20% shareholding, in the new commercially-oriented Bai Tushum microfinance institution.
The Bai-Tushum project reflects IFC’s strategy of strengthening local financial institutions and expanding microfinance in the Kyrgyz Republic and Central Asia in order to support private sector development. Providing access to capital is critical to IFC’s small business development strategy, as it will help boost private sector wealth and job creation, lift confidence in the financial sector, and strengthen microfinance by introducing commercially-oriented techniques.
Shahbaz Mavaddat, IFC’s acting director for Southern Europe and Central Asia, says, “The creation of a new regulated microfinance company will make a significant contribution to economic development in the Kyrgyz Republic. As a regulated microfinance company, Bai Tushum will be able to provide a fuller range of credit and savings products that were previously not available to micro-entrepreneurs.”
IFC’s development agenda in the Kyrgyz Republic complements the emphasis that the Kyrgyz authorities have placed on the development of the microfinance sector.
Gorton de Mond, IFC’s regional representative covering Central Asia, adds, “The Bai Tushum transformation project is the first of its kind in the Kyrgyz Republic and provides an opportunity for the authorities to refine and apply the rules and regulations that have been laid out to address the transformation of suitably qualified micro credit organizations operating in the country.”
Gulnara Shamshieva, Bai Tushum’s CEO, says, “This is our first medium-term loan from an international financial institution and it will enable us to fulfil our expansion plans. IFC’s investment strengthens Bai Tushum’s commercialisation process and elevates its profile as a professional organisation that has gained recognition from the international financial community.”