MICROCAPITAL BRIEF: European Bank for Reconstruction and Development (EBRD), Deutsche Investitions-und Entwicklungsgesellschaft mbH (DEG) Subscribe to Convertible Bonds Issued by Azerbaijan's Unibank, Provider of Microfinance and Traditional Banking

European development finance institutions, European Bank for Reconstruction and Development (EBRD) and Deutsche Investitions-und Entwicklungsgesellschaft mbH (DEG), have subscribed to convertible bonds issued by Unibank, a private commercial bank in Azerbaijan that provides microfinance and other services. EBRD has purchased USD 17.5 million in convertible bonds and DEG has committed to purchasing bonds worth USD 7.5 million [1]. The convertible bond facility was designed to support Unibank’s capital base as well as to provide long-term liquidity for continued lending to small and medium-sized enterprises and retail customers. The terms of the convertible bonds have not been reported.

Mike Taylor, EBRD Director for Financial Institutions in Central Asia, Caucasus and Mongolia, commented, “Although global markets have started to gradually recover, the macroeconomic environment remains fragile with limited access to long-term funding. In this context, convertible bonds represent an important financial instrument which provides not only funding support to Unibank, but also serves as a capital cushion against a potential portfolio deterioration. The conversion element is an innovative component of this facility, which promotes the development of local financial markets “[1].

Unibank CEO Faiq Huseynov said, “We are proud that Unibank as the pioneer of the international best practices in Azerbaijan banking industry is introducing convertible bonds which is the first of its kind in the sector…We are pleased that these funds will be channeled to the small and medium size enterprises in Azerbaijan” [1].

EBRD has supported Unibank in the form of equity and debt facilitates since 2003. EBRD currently holds a 15 percent equity stake in Unibank. DEG has supported Unibank since 2005 and currently holds an eight percent equity stake with a total exposure of USD 26.3 million. According to the Central Bank of Azerbaijan, as of year-end 2010, Unibank’s assets and the net loan portfolio were reported as USD 465 million and USD 329 million, respectively, with a regulatory share capital comprising USD 56 million.

By: Alexandra Pattee, Research Associate

About European Bank for Reconstruction and Development (EBRD): The European Bank for Reconstruction and Development (EBRD) is a development finance institution headquartered in London. The bank began operations in 1991 upon the agreement of 40 countries and is owned by 61 countries as well as the European Investment Bank and the European Union as of year-end 2010. The bank invests primarily in private sector clients, seeking to promote entrepreneurship and foster transition towards open and democratic market economies. It aims to finance operations that are both commercially viable and assist development in 29 countries in Eastern Europe and Central Asia. 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). Its operating assets for fiscal 2009 were EUR 6.1 billion (USD 8 billion). With 112 microfinance investments, the bank has allocated EUR 439.5 million (USD 2 billion) to microfinance.

About Unibank: Unibank is private commercial bank that provides microfinance services in Azerbaijan. Unibank’s mission is “to be a first-class, highly-stable and universal finance institution”. Unibank was established in October 2002 as a result of the merger of two private commercial banks, MBank and PromtekhBank. Unibank provides loans, voluntary savings and leasing to its customers. Unibank reports to the Microfinace Information Exchange (MIX) that 21-30 percent of its operations are comprised by microfinance. According to the Central Bank of Azerbaijan, as of year-end 2010, Unibank’s assets and the net loan portfolio were reported as USD 465 million and USD 329 million, respectively, with a regulatory share capital comprising USD 56 million.

About Deutsche Investitions-und Entwicklungsgesellschaft mbH (DEG): Deutsche Investitions-und Entwicklungsgesellschaft GmbH (DEG) is a European development finance institution offering long-term project and organization financing. DEG was founded in 1999 and provides financial services for “socially oriented” organizations. DEG is a member of KfW Bankengruppe, a German government-owned development banking group. DEG provides assistance to all sectors, with particular attention to agribusiness, financial institutions and infrastructure and processing industries. As of March 2011, DEG’s total investment portfolio was reportedly USD 57.4 million.

Sources and Resources:

[1] European Bank for Reconstruction and Development (EBRD) Press Release, “EBRD and DEG Subscribe To Unibank’s Convertible Bonds”, http://www.ebrd.com/pages/news/press/2011/110330.shtml

MicroCapital.org Article, March 1, 2011, “European Bank for Reconstruction and Development (EBRD), Credit Agricole Serbia Accept Warehouse Receipts as Collateral for $27m in Loans to Agribusinesses”, https://www.microcapital.org/microcapital-brief-european-bank-for-reconstruction-and-development-ebrd-credit-agricole-serbia-accept-warehouse-receipts-as-collateral-for-27m-loans-to-agribusinesses/

MicroCapital.org Article, February 1, 2011, ‘European Bank for Reconstruction and Development (EBRD) Loans $3m to Mol Bulak Finance of the Kyrgyz Republic for On-Lending to Small and Medium Enterprises (SMEs)”, https://www.microcapital.org/microcapital-brief-european-bank-for-reconstruction-and-development-ebrd-loans-3m-to-mol-bulak-finance-of-the-kyrgyz-republic-for-on-lending-to-small-and-medium-enterprises-smes/

MicroCapital.org Article, May 7, 2010, “European Bank for Reconstruction and Development (EBRD) Provides $1m For Small and Medium-sized Agricultural Enterprises to Tajikistani Bank Amonatbonk”, https://www.microcapital.org/microcapital-brief-european-bank-for-reconstruction-and-development-ebrd-provides-1m-for-small-and-medium-sized-agricultural-enterprises-to-tajikistani-bank-amonatbonk/

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

MicroCapital’s Microfinance Universe: Deutsche Investitions-und Entwicklungsgesellschaft mbH (DEG), https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Deutsche+Investitions-und+Entwicklungsgesellschaft+GmbH+%28DEG%29

MicroCapital’s Microfinance Universe: Unibank, https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Unibank

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