OJSC Raiffeisen Bank Aval

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MIGA has issued a guarantee of $380 million to Raiffeisen Zentralbank Österreich AG (RZB) of Austria covering its shareholder loan of $400 million to its subsidiary, OJSC Raiffeisen Bank Aval. MIGA's guarantee is for a period of up to six years and provides coverage against the risks of transfer restriction and expropriation of funds. [1] RZB's shareholder loan will provide funding to Raiffeisen Bank Aval to enable it to expand its portfolio and improve the range and quality of its banking services. Proceeds of the loan are expected to be on-lent primarily to individuals and small and medium enterprises (SMEs), mostly for long-term assets such as residential and commercial mortgages. The retail business potential of Ukrainian banks is currently limited by a shortage of long-term funding in the local market. This loan from RZB is designed to provide Raiffeisen Bank Aval, the second largest lender in the country, with long-term funding needed to increase its reach into under-served markets. In particular, the project is expected to support the role of Raiffeisen Bank Aval as one of the market leaders in SME banking. SME loans currently account for about 20 percent of the bank's total portfolio, and in 2006, Raiffeisen Bank Aval established an SME business unit. The World Bank Group's country assistance strategy for Ukraine places a strong emphasis on improving the environment for private sector development and identifies building financial institutions as a priority area. This project will help Ukraine's private sector gain access to banking and financial products to help the country achieve sustainable growth.   [1] The guarantee was cancelled on April 30, 2013.

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