NBD II

completed

NBD is a regional private commercial bank, specialized in financing small and medium businesses. It was established in 1992 and it is currently the fourth largest bank in the Nizhniy region by assets, with a net worth of $9.1 million and assets of $42 million equivalent as of June 30, 2002. NBD has continuously benefited from cooperating extensively with international financial institutions such as IBRD (housing program, ESP and FIDP), the US Russia Investment Fund, USAID etc. Despite its small size, it has become the 3rd largest user of the EBRD’s Russian SME lending program. The main strategic goal of NBD is to remain a leading regional financial institution with a solid and dominant position in the Nizhny Novgorod region, providing a wide range of high quality financial services to small-and medium enterprises. The bank would use IFC funding to finance medium-sized enterprises in productive sectors of the economy and to strengthen its balance sheet. Development ImpactIFC funding will support the expansion of the bank''s lending capacity to SME sector, thus supporting a sector of the Russian economy that will play a key role in achieving a sustained economic growth. At the same time, NBD’s activity will help address the limitations of the Russian banking sector in providing term-financing to SMEs and growing Russian businesses, particularly in areas outside the better-served Moscow region both through its activity and via the demonstration effect for other banks. While providing the bank with longer term funding, the project would support the development of a leading regional bank. IFC RoleWhile the IFC investment would provide NBD with access to long-term funding not available in the market, particularly IFC''s quasi-equity investment component would primarily (i) provide institutional support; (ii) strengthen the operational capacity of one of the leading regional banks in Russia; (iii) strengthen NBD’s balance sheet, both in size and structure; and (iv) help the bank strengthen its market position in the region. In addition, IFC''s quasi-equity investment, could potentially affect shareholding in NBD, and hence it could send a signal to the market and enhance the bank''s attractiveness to potential strategic investors.