MICROCAPITAL BRIEF: European Bank for Reconstruction and Development (EBRD) Lends $5m to DemirBank of Azerbaijan to Promote Residential, Business Energy-Efficiency Projects

The European Bank for Reconstruction and Development (EBRD), a UK-based development bank that operates in eastern Europe, central Asia and northern Africa, has loaned USD 5 million to DemirBank, a commercial bank in Azerbaijan that focuses on lending to small and medium-sized enterprises (SMEs), with the intention of promoting projects that reduce energy use in the country. DemirBank is planning to use the loan for on-lending to businesses and individuals for the purpose of improving the energy efficiency of homes, office buildings and production processes such as by financing production facilities, windows, insulation, solar water heaters and solar electric panels.

According to a statement made by Neil McKain, the head of EBRD’s Baku office, “there is a wide range of energy efficiency opportunities in which the local financial sector and the EBRD have a crucial role to play. We are delighted to support DemirBank to further boost investment in renewable energy and energy efficiency in the country.”

The loan to DemirBank was supported by grant funding of EUR 9.2 million (USD 12.2 million) from the European Union (EU) Neighborhood Investment Facility, a financial mechanism that seeks to offer funding for energy, social and environmental development to countries adjacent to EU countries; and the Austrian Federal Ministry of Finance, the government agency in charge of financial regulation in Austria [1].

As of 2014, DemirBank reported total assets of USD 524 million, a gross loan portfolio of USD 417 million outstanding and approximately 107,000 borrowers. As of 2012, DemirBank reported deposits of USD 224 million in 38,000 accounts, return on assets of 0.74 percent and return on equity of 5.69 percent. With total assets of EUR 49 billion (USD 65 billion), EBRD invested EUR 8.5 billion (USD 11.4 billion) in 392 projects in 34 countries during 2013.

By Benjamin Krupp, Research Associate

About DemirBank

Azerbaijan-based DemirBank is a “socially oriented” commercial bank that lends to small and medium-sized enterprises. DemirBank was established as Azerdemiryolbank in 1989 under license of the USSR State Bank and was known by that name until 2009. In 2005, the European Bank for Reconstruction and Development (EBRD) purchased 25 percent of DemirBank’s stock plus 1 share. Since 2007, the Netherlands Development Finance Company (FMO) has held 10 percent of its stock. DemirBank has 31 branches and units in Azerbaijan. As of 2014, DemirBank reported to the US-based nonprofit Microfinance Information Exchange (MIX) total assets of USD 524 million, a gross loan portfolio of USD 417 million outstanding and approximately 107,000 borrowers. As of 2012, DemirBank reported deposits of USD 224 million in 38,000 accounts, return on assets of 0.74 percent and return on equity of 5.69 percent.

About European Bank for Reconstruction and Development (EBRD)

The European Bank for Reconstruction and Development (EBRD) is a multilateral institution headquartered in London, England. The bank began operations in 1991 upon the agreement of 40 countries, and it is owned by 64 countries as well as the European Investment Bank and the European Union as of 2014. It aims to finance operations that are both commercially viable and assist development 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). With total assets of EUR 49 billion (USD 65 billion), EBRD invested EUR 8.5 billion (USD 11.4 billion) in 392 projects in 34 countries during 2013.

Sources and Additional Resources

[1] EBRD: EBRD and DemirBank to Boost Energy Efficiency in Azerbaijan

MicroCapital, August 21, 2014: European Bank for Reconstruction and Development (EBRD) Likely to Loan $150m in Jordan Including to Bank Al Etihad, Cairo Amman Bank for On-lending to Micro-, Small, Medium-Sized Enterprises (MSMEs)

MicroCapital, August 21, 2014: European Bank for Reconstruction and Development (EBRD) Likely to Loan Morocco’s Banque Centrale Populaire (BCP), Affiliates $133m for On-lending to Micro-, Small, Medium-Sized Enterprises (MSMEs)

MicroCapital, June 4, 2014: European Bank for Reconstruction and Development (EBRD) Likely to Loan Azeri DemirBank $50m for On-lending to Micro-, Small, Medium-Sized Enterprises (MSMEs); $5m to Promote Residential, Business Energy Efficiency

MicroCapital Universe Profile: DemirBank

MicroCapital Universe Profile: European Bank for Reconstruction and Development (EBRD)

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