MFBAzerb Loan

completed

The project involves the extension of a senior credit line of up to $3 million to Microfinance Bank of Azerbaijan (MFBA or the Bank). IFC’s current exposure to MFBA is a $1.75 million equity investment, representing 25.55% of the share capital. The proposed loan is part of a larger credit envelope of up to $9 million in which two additional shareholders in MFBA, Kreditanstalt Fur Wiederaufbau (KfW) and the Black Sea Trade and Development Bank (BSTDB), will participate. The purpose of the credit line is to support MFBA’s rapid loan portfolio growth, which is critical to the further development and sustained profitability of the Bank.MFBA started operations in October 2002 as a specialized provider of credit and financial services to individual entrepreneurs, and small and micro enterprises (SMEs) across Azerbaijan. The Bank started operations in Baku with a headquarters office, and has since opened four branch offices in Baku (Airport market, Xalqlar Dostlugu and 20th January area) and Sumgait. The Bank is expected to open a fifth branch office in Ganja in May 2005.To date, MFBA has served 4,500 micro and small enterprise clients with 10,500 credit lines totaling over $23 million. Loan portfolio has increased by 73 percent in 2004 to $7.2 million as of December 31, 2004 and $8.8 million by the end of March 2005. The Bank projects its loan portfolio to increase to $15.1 million by the end of 2005. MFBA requires additional funds to expand its growing loan portfolio.MFBA requires additional funds to expand its growing loan portfolio, which is expected to double to $15 million by the end of 2005. Because MFBA is only now able to accept deposits and the inter-bank market in Azerbaijan remains underdeveloped, MFBA must rely primarily on IFI financing until it can build up its deposit base. In February 2005, the European Bank for Reconstruction and Development (“EBRD”) finished disbursing a $5 million credit line which is expected to be fully utilized by end May 2005. The other shareholders, KfW and BSTDB, are planning on providing an additional $3 million each also in the first half of 2005.