MICROCAPITAL BRIEF: EBRD, EFSE to Loan $16m to FINCA Azerbaijan to Support Micro-, Small, Medium-sized Enterprises (MSMEs), Agricultural Lending

Through two unrelated transactions, the Azerbaijan-based subsidiary of the Foundation for International Community Assistance (FINCA), a US-based microfinance network, received local-currency loans totaling USD 16 million from the European Bank for Reconstruction and Development (EBRD), a UK-based multilateral development bank, and the European Fund for Southeast Europe (EFSE), a government-backed microfinance investment vehicle based in Luxembourg.

Of the total, EBRD loaned the local-currency equivalent of USD 6 million over an unspecified duration to support “medium-term” on-lending to micro-, small and medium-sized enterprises (MSMEs) in Azerbaijan. EFSE provided the local-currency equivalent of USD 10 million as a “long-term” loan to support FINCA Azerbaijan’s agricultural lending. This loan is intended for on-lending to approximately 5,000 new agricultural customers in rural areas in the country.

As of December 31, 2012, FINCA Azerbaijan operates 66 offices in approximately 60 districts in the country. The microlender reported to the US-based nonprofit Microfinance Information Exchange (MIX) total assets of USD 167 million, a gross loan portfolio of USD 153 million, return on assets of 8.02 percent, return on equity of 38.1 percent and 137,000 active borrowers as of the same year. In 2013, EBRD invested EUR 8.5 billion (USD 11.4 billion) in 392 projects across 34 countries. As of June 2013, EFSE has an outstanding investment portfolio of EUR 774 million (USD 1 billion). FINCA International has total assets of USD 841 million as of December 31, 2012.

By A’kos Szebeni, Research Associate

About the Foundation for International Community Assistance (FINCA) Azerbaijan

The Foundation for International Community Assistance (FINCA) Azerbaijan is a microfinance institution (MFI) that was established in 1998 and is a subsidiary of US-based microfinance network FINCA. FINCA Azerbaijan provides financial services to low-income entrepreneurs with the intent of helping them create jobs, build assets and improve their standard of living. As of December 31, 2012, FINCA Azerbaijan operates 66 offices in approximately 60 districts in the country. In the same time period, the MFI reported to the US-based nonprofit Microfinance Information Exchange (MIX) total assets of USD 167 million, a gross loan portfolio of USD 153 million, return on assets of 8.02 percent, return on equity of 38.1 percent and 137,000 active borrowers. FINCA Azerbaijan does not accept deposits.

About European Bank for Reconstruction and Development (EBRD)

The European Bank for Reconstruction and Development (EBRD) is a multilateral institution headquartered in London. The bank began operations in 1991 upon the agreement of 40 countries, and it is owned by 61 countries as well as the European Investment Bank and the European Union as of 2012. It aims to finance operations that are both commercially viable and assist development in 29 countries in Eastern Europe, Central Asia and North Africa. It does this by providing loans, debt securities, equity investments, guarantees and technical assistance to micro- and small businesses via commercial banks and non-bank microfinance institutions (MFIs). In 2013, EBRD invested EUR 8.5 billion (USD 11.4 billion) in 392 projects across 34 countries.

About European Fund for Southeast Europe (EFSE)

The European Fund for Southeast Europe (EFSE) was established in 2005 by Kreditanstalt für Wiederaufbau Entwicklungsbank (KfW), a German development bank, with financial support from the German Federal Ministry for Economic Cooperation and Development (Bundesministerium für wirtschaftliche Zusammenarbeit und Entwicklung) and the European Commission of the EU. EFSE seeks to aid economic development in southeastern Europe and parts of central Asia by supporting the provision of financial services to low-income households and micro- and small enterprises via local financial institutions. EFSE is privately managed, with Oppenheim Asset Management Services of Luxembourg acting as fund manager and Finance in Motion GmbH of Germany acting as fund advisor. As of June 2013, EFSE has an investment portfolio of EUR 774 million (USD 1 billion). As of 2013, EFSE also holds a microfinance label from Luxembourg Fund Labeling Agency (LuxFLAG), an NGO that certifies that social investment vehicles actually invest as advertised.

Sources and Additional Resources:

European Bank for Reconstruction and Development (EBRD) Press Release, “EBRD supports financing for micro, small and medium-sized enterprises in Azerbaijan,” http://www.ebrd.com/pages/news/press/2014/140318a.shtml

European Fund for Southeast Europe (EFSE) Press Release, “EFSE lends USD 10 million in local currency to FINCA Azerbaijan,” http://www.efse.lu/Press-releases—Details—2014-03-20-EFSE-lends-USD-10-million-in-local-currency-to-FINCA-Azerbaijan——_nav.52_siteid.134_entryid.526_dir._likecms.html

MicroCapital, December 23, 2013, “European Fund for Southeast Europe (EFSE) Loans $3.4m to Agricultural Cooperative Bank of Armenia (ACBA) Leasing in Armenia, Makes $106k Equity Investment in Kreditimi Rural i Kosoves of Kosovo,” https://www.microcapital.org/microcapital-brief-european-fund-for-southeast-europe-efse-loans-3-4m-to-agricultural-cooperative-bank-of-armenia-acba-leasing-in-armenia-makes-106k-equity-investment-in-kreditimi-rural-i-koso/

MicroCapital, December 19, 2013, “European Fund for Southeast Europe (EFSE) Loans $63m to Belorussian-Russian Belgazprombank of Belarus, Banca Transilvania of Romania, Microfinance Institution AccessBank of Azerbaijan,” https://www.microcapital.org/microcapital-brief-european-fund-for-southeast-europe-efse-loans-63m-to-belorussian-russian-belgazprombank-of-belarus-banca-transilvania-of-romania-microfinance-institution-accessbank-of-azerbai/

MicroCapital, November 14, 2013, “European Bank for Reconstruction and Development (EBRD) Issues $12.5m in Local Currency Loans to Armenia’s Agricultural Cooperative Bank of Armenia-Credit Agricole Bank (ACBA) to Support Micro-, Small and Medium-Sized Enterprises (MSMEs), Energy Efficient Investments,” https://www.microcapital.org/microcapital-brief-european-bank-for-reconstruction-and-development-ebrd-issues-12-5m-in-local-currency-loans-to-armenias-agricultural-cooperative-bank-of-armenia-credit-agricole-bank-ac/

MicroCapital, July 18, 2013, “Pasha Bank Underwrites Inaugural Bond Issue of $12.7m to FINCA Azerbaijan to Support Micro and Small Businesses, Entrepreneurs,” https://www.microcapital.org/microcapital-brief-pasha-bank-underwrites-inaugural-bond-issue-of-12-7m-to-finca-azerbaijan-to-support-micro-and-small-businesses-entrepreneurs/

MicroCapital, July 1, 2013, “International Finance Corporation (IFC) Loans $4m to FINCA Georgia to Support Micro- and Small Businesses, Entrepreneurs,” https://www.microcapital.org/microcapital-brief-international-finance-corporation-ifc-loans-4m-to-finca-georgia-to-support-micro-and-small-businesses-entrepreneurs/

MicroCapital, June 1, 2012, “responsAbility Loans $6.4m to Microfinance Institutions KMF of Kazakhstan, FINCA Jordan, FINCA Azerbaijan,” https://www.microcapital.org/microcapital-brief-responsability-loans-6-4m-to-microfinance-institutions-kmf-of-kazakhstan-finca-jordan-finca-azerbaijan/

MicroCapital Universe Profile: FINCA Azerbaijan https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=FINCA+Azerbaijan

MicroCapital Universe Profile: FINCA International https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=FINCA+International

MicroCapital Universe Profile, European Bank for Reconstruction and Development (EBRD), http://microcapital.org/microfinanceuniverse/tiki-index.php?page=European+Bank+for+Reconstruction+and+Development+%28EBRD%29

MicroCapital Universe Profile: European Fund for Southeast Europe (EFSE), https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=European+Fund+for+Southeast+Europe+%28EFSE%29

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