Raiffeisenbank AVAL SME II Loan Facility

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The proposed project is medium term financing to Joint-Stock Post Pension Bank AVAL (“AVAL”) to support its lending to private small and medium-size companies. The project consists of a USD 50 million SME credit line for on-lending to local SMEs. The funds will be on-lent to small and medium sized enterprises, whose demand for financing is high and further growing. The loans to SME sector would meet the demand for investment finance from local businesses. The long-term financing received from EBRD will enable AVAL to on-lend to small companies which traditionally have little or no access to long-term finance. Sub-loans from the SME credit line have a positive impact on local economic situation and employment level as small and medium sized companies, which represent the backbone of the economy, are enabled to grow and develop further. AVAL is a universal commercial bank and is the second largest bank in Ukraine with total assets of USD 3.8 billion and equity of USD 345 million at the end of 2005. EBRD financing includes up to USD 50 million SME credit line for on-lending to private SME sub-borrowers under Ukraine MSE/SME Lending Framework USD 50 million. Screened FI. AVAL will be required to comply with EBRD’s Environmental Procedures for SME Loans and for Intermediated Financing through Local Banks which require adherence to the Bank’s Environmental Exclusion and Referral List, compliance with the applicable national environmental, health and safety requirements and submission of an annual environmental report to the Bank. In the past TC has been received from the following donors: EU, US, Germany and Dutch governments under the SME II Credit Line project for SME programmes. The funds were used to develop lending operations, train lending staff and for institution building in participating banks, including AVAL. Under the present operation, AVAL will receive a technicall assistance, funded by the European Union. The TC funds will be used to facilitate the review and upgrade of the SME lending processes in Aval. This would require the bank and its staff to introduce new segmentation of the SME customers, review of the SME loan products and lending procedures and re-training of the loan officers in branches and points of sale. Ms Victoria Masna, Financial Institutions Phone/Fax : +380-44- 230-23-44 e-mail: vmasna@aval.com