Central Asia Micro and Small Business Capacity Building Facility

completed

The project is to establish a financial facility for (i) Kazakhstan; (ii) The Kyrgyz Republic; (iii) Uzbekistan; and later (iv) Tajikistan. The facility will comprise individual credit lines to selected partner banks (PBs) which will then be on-lent to micro and small enterprises (SMEs) through specialized micro and small business finance windows that will be created at the PB level for this purpose.The objective of the facility is to expand the frontier of finance by extending downward the range of market segments served by commercial financial institutions. Thus, the facility will increase the availability of sustained credit to creditworthy SMEs, while at the same time building up the lending capacity and skill base of selected PBs. To help achieve this objective, the project will be supported by a donor-funded Technical Assistance (TA) program. The main objectives of this program are to (i) create and strengthen the SME departments at PBs; (ii) train all levels of SME lending personnel; (iii) develop new loan products; (iv) develop internal audit and management information systems; and (v) establish and evaluate SME departments as profit centers.This project capitalizes on the experience of a similar and successful EBRD program in Kazakhstan. This existing program has shown strong financial and developmental results -- US$72.5 million has been disbursed under the program and the portfolio at risk is only 0.58%. The new program will both increase the activity in Kazakhstan, and introduce it to additional Central Asian countries.The proposed facility will have a strong development impact, as it will introduce a micro and small business finance program to a wider market in Central Asia, building from the experience of an existing successful EBRD program in Kazakhstan. It aims to improve the standard of living of the poorest segments of the populations in the countries to be covered by the facility – some of which are among the poorest in the world. Micro finance is a key sector where IFC can focus its efforts to support economic development. The proposed project is part of a concerted WBG effort to develop partnerships with international micro finance support organizations and technical partners that stand as leaders in the field.The facility will assist in the development of the emerging micro and small business sector in Central Asia by augmenting financing to existing SMEs. It will also have a strong institution-building role. By providing selected PBs with training and technical assistance, the project will seek to address the shortage of banking skills that are necessary to establish a market-based banking environment, especially with respect to SMEs. It will also fuel the expansion of SME operations into previously under-served regions of Central Asia. An additional key objective of the facility is to generate a significant international demonstration effect, which can catalyze replication of model micro finance programs in developing countries, and in Central Asia in particular.