MICROCAPITAL STORY: Swiss Investment Fund for Emerging Markets (SIFEM) Lends USD 6 Million to Micro Finance Bank of Azerbaijan (MFBA)

Swiss Investment Fund for Emerging Markets (SIFEM), on behalf of Swiss Confederation, granted a six-year USD 6 million loan to Micro Finance Bank of Azerbaijan (MFBA), marking the first deal between the two entities. The loan will be applied toward financing micro, small, and agricultural businesses of Azerbaijan; a minimum of USD 3 million will be used exclusively for granting agrarian credit, a bank product that MFBA first launched in August 2007. By supporting Azerbaijan’s agricultural sector, SIFEM hopes to foster a diversification of the Azerbaijan economy away from oil and gas sectors.

SIFEM is a private Swiss investment consultant that provides long-term funding for private equity funds investing in small and medium-sized enterprises (SMEs) in developing and transition economies. SIFEM also selectively co-invests in the underlying portfolio companies of private equity funds, as well as makes direct investments in financial institutions that focus on SMEs or microfinance. As of year-end 2007, SIFEM reported over USD 300 million in assets under management held in 40 private equity funds located in thirty countries. This amounts to over 150 indirectly-held SME portfolio companies and over a dozen direct investments. Since 1999, SIFEM has been mandated to manage the investment portfolio of the Swiss State Secretariat for Economic Affairs (SECO). SIFEM’s current managing director is Claude Barras.

MFBA is the leading provider of financial services for micro and small enterprises in Azerbaijan, controlling approximately 30 percent of Azerbaijan’s microfinance market. As reported in a previous MicroCapital story, MFBA was founded in 2002 by six shareholders: the European Bank of Reconstruction and Development (EBRD), the International Finance Corporation (IFC), the Black Sea Trade and Development Bank (BSTDB), KfW Development Bank, LFS Financial Systems GmbH, and AccessHolding. In 2007, MFBA reported a 100 percent increase in total assets to USD 120 million as of October 1. According to its 2006 year-end report, it has a debt to equity ratio of 710.4 percent, and return on assets of negative .93 percent. Since its inception, the bank has served over 40,000 clients and dispersed over 80,000 loans worth USD 225 million.

Previous deals involving MFBA, as reported by MicroCapital:

December 10, 2007: USD 4.95 million loan by SNS Institutional Microfinance Fund

December 7, 2007: USD 1 million grant by BP, matched by USD 2.3 million by International Financial Corporation (IFC) and MFBA’s own investments

September 14, 2007: USD 11.4 million bonds issued, sponsored by Developing World Markets (DWM)

June 13, 2007: USD 8 million by Blue Orchard

June 6, 2007: USD 4.3 million shares sold to six investors: European Bank for Reconstruction and Development (EBRD), International Financial Corporation (IFC), Black Sea Trade and Development, KfW, LFS Financial Systems, and AccessHolding

October 28, 2006: USD 2 million loan from Triodos-Doen Foundation and the Triodos Fair Share Fund

May 10, 2006: USD 4 million loan by Blue Orchard

February 28, 2006: USD 5 million loan by German development bank KfW

February 14, 2006: USD 1.25 million loan by Impulse Microfinance Investment Fund

October 18, 2005: USD 4.5 million loan by Black Sea Trade and Development Bank and Triodos-Doen Foundation

 

By Mary Fu

Additional Resources:

Trend Capital: “SIFEM Sign First Credit Deal with Azerbaijan Bank”

MicroCapital article, August 30, 2007: “Microfinance Bank of Azerbaijan Launches Agricultural Loans”

MicroCapital article, December 10, 2007: “Micro Finance Bank of Azerbaijan Receives First Private Investor Loan in Manat Currency (AZN)”

Swiss Investment Fund for Emerging Markets (SIFEM): About Us

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