BRAC Afghanistan Bank

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  Project Number 6938 Environmental Category C Date SPG disclosed March 25, 2008   View SPG Disclosure Projected Board date N/A Project Description MIGA has issued a guarantee of $112,500 to ShoreCap International (SCI) of the Cayman Islands covering its equity investment in BRAC Afghanistan Bank. An additional amount of $112,500 is being guaranteed by the MIGA-administered trust fund, Afghanistan Investment Guarantee Facility. The coverage is for a period of up to ten years against the risks of transfer restriction, expropriation, and war and civil disturbance. ShoreCap invested $1 million into the Afghan bank in 2006 which was also covered by a MIGA guarantee against the same risks. SCI along with three foreign sponsors, including the International Finance Corporation (IFC), a World Bank Group member, are investing additional capital into BRAC Afghanistan Bank to increase the bank's capital base, fund infrastructure investments in additional branches, automated teller machines and point of sale devices, and to leverage a small business loan portfolio which is expected to grow substantially.  The project is expected to have a significant impact on the country's economic development as it will be providing financing and savings instruments to micro-enterprises, which form the largest underserved, yet productive, segment of the local economy. Greater access to financial services will help reduce poverty and expand economic opportunity for low-income populations throughout Afghanistan. MIGA's support in establishing a for-profit, national, and fully regulated microfinance bank is expected to help demonstrate the profitability and sustainability of large-scale financial services to new microfinance providers. This will help encourage new entrants and greater overall penetration to meet the vast need for financial services for Afghanistan's poor. The project was underwritten through MIGA's Small Investment Program and is aligned with MIGA's priority of supporting investment in conflict-affected nations.

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