EBRD supports small businesses in Kyrgyz Republic

By Svitlana  Pyrkalo

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The European Bank for Reconstruction and Development (EBRD) has completed the second syndicated loan in local currency in the history of the Kyrgyz financial sector. The loan – in Kyrgyz som equivalent to US$ 12 million – was made to Kompanion Financial Group, one of the largest microfinance institutions in the Kyrgyz Republic and a long-standing client of the EBRD.

The proceeds of the syndicated loan will allow Kompanion to expand its lending operations to micro, small and medium-sized enterprises (MSMEs), especially in rural areas. It will also reduce Kompanion’s exposure to the risk of sharp fluctuations in foreign currency exchange rates. This risk is particularly relevant to microfinance institutions (MFIs). In the past, MFIs have received only foreign currency funding, and their opportunities for hedging have been constrained.

“With this new loan to our existing client, Kompanion Financial Group, we would like more Kyrgyz businesses to gain access to local currency financing to avoid foreign currency exchange risk,” said Larisa Manastirli, Head of the EBRD office in the Kyrgyz Republic. “Kompanion has a well-established network and good country coverage. These will be used to channel financing to more beneficiaries across the Kyrgyz Republic to support growth of the country’s economy”.

Kompanion CEO Ulanbek Termechikov said: “As a microfinance institution focused on community development, Kompanion is pleased to have this opportunity to expand access to funding for rural micro entrepreneurs, who are mainly engaged in agricultural production throughout the Kyrgyz Republic.”

The syndicated three-year loan comprises an A-loan by the EBRD of up to US$ 4 million and a B-loan by the Netherlands Development Finance Company (FMO) of up to US $8 million.

The loan is consistent with the EBRD country strategy for the Kyrgyz Republic which aims to extend local currency lending in order to build up local sources of funding and to reduce the use of foreign exchange in the country’s financial system.

To date the EBRD has invested €456 million across 105 projects in the Kyrgyz Republic.

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