Microfinance Bank Azerbaijan

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The project will establish a specialized financial institution providing credit and other financial services on commercial terms to small and medium-sized enterprises (SMEs) in Azerbaijan. The Micro Finance Bank of Azerbaijan (MFBA) will have initial equity capital of US$5.0 million equivalent. IFC''s investment in MFBA is expected to yield a strong developmental impact -- in terms of business growth, employment generation, confidence-building in the banking sector, and the introduction of commercially-oriented microfinance techniques to Azerbaijan. The establishment of a professionally-managed, reputable bank in Azerbaijan is particularly important in light of the weakness of Azerbaijan''s private banks and public lack of confidence in the banking system. In addition to poverty reduction and related impact within the MSE target group, IFC''s involvement in MFBA is also expected to:Encourage replication of commercially-oriented IFIs in the market and downscaling by existing commercial banks to serve SMEs;Generate spill-over benefits in the form of trained managers and employees available to other local FIs; and,Mobilize SME savings, although this will not be the bank''s initial focus.IFC initiated this project in 1999 as the result of a promotion mission to Azerbaijan and has been the lead institution in developing this transaction, including fostering dialogue with the Government of Azerbaijan and the Azeri Association of Private Banks, securing approval in principle for MFBA with the National (Central) Bank of Azerbaijan (NBA), identifying financial investors, and managing preliminary legal due diligence. IFC is also providing advice to NBA to strengthen the legal and regulatory environment for SME and microfinance lending.