Facilitating microfinance in the Kyrgyz Republic, November 2006Facilitating microfinance in the Kyrgyz Republic, November 2006
09 November, 2006
EBRD guarantees $1 million for on-lending to small business
The EBRD is providing Bai Tushum, one of the leading microfinance institutions in the Kyrgyz Republic, with a $1 million guarantee in order to receive local currency loans from Kyrgyz banks. Bai Tushum will use the loans for on-lending to local micro and small enterprises, thus significantly facilitating their access to finance. The EBRDï¿½s guarantee is the first of its kind under the Non-bank Microfinance Institutions Framework II for Early Transition Countries (ETC). The new product is expected to be in great demand and two or three leading banks in the Kyrgyz Republic will participate in the facility.
In many of the Bankï¿½s countries of operations local currency funding is still in short supply. This represents a serious impediment to the expansion of micro and small enterprises which are the backbone of local economies. Easing the sectorï¿½s access to local currency finance is therefore a key challenge to achieve sustainable growth.
Established in 1997, Bai Tushum has become a leading microfinance institution in the Kyrgyz Republic and has a strong rural focus. The institution offers a range of different agricultural loans for crop production, livestock and agri-processing. The majority of the portfolio is outside the capital Bishkek and Bai Tushum currently has around 5,000 clients. 40 per cent of all outstanding loans are for less than $1,000.
Bai Thusum has won international recognition for its activities. In 2005, the microfinance institution received a A+ grade in an international rating process conducted by the Italian Microfinanza Company certified by the World Bank ï¿½ Consultative Group to Assist the Poor. A+ means high reliability and high level of operation and stability of Bai Thusum even under unfavourable conditions.
Daniel Berg, Head of the EBRDï¿½s office in the Kyrgyz Republic, said the project confirmed the Bankï¿½s commitment to supporting the micro and small enterprise sector. It is expected that it will serve as an example to the sector and encourage local banks to finance microfinance institutions.
The EBRDï¿½s Non-bank Microfinance Institutions Framework for Early Transition Countries aims at strengthening microfinance institutions in the Bankï¿½s eight poorest countries of operations. Loans are provided for on-lending to the smallest borrowers across the ETC countries Armenia, Azerbaijan, Georgia, the Kyrgyz Republic, Moldova, Mongolia, Tajikistan and Uzbekistan. The facility is accompanied by a technical cooperation framework funded by donor governments.
Through its micro and small enterprises programmes, the EBRD has supported over one million small enterprises throughout eastern Europe, Russia, Central Asia and the Caucasus. The EBRD has worked with 84 commercial banks and non-bank microfinance institutions to establish or expand specialised micro and small business finance units and has lent 637 million to facilitate close to ï¿½9.5 billion in loans to micro and small businesses in the region.