Risk sharing facility to offer new business opportunities
Loans to small and medium-sized enterprises (SMEs) in Tajikistan, which represent over 50 per cent of the country’s labour force, will be available to a greater number of domestic SMEs following the risk sharing accord between the EBRD and the First MicroFinance Bank (FMFB). The cooperation will help channel much needed funds to businesses across the country, including remote mountainous areas.
The FMFB has joined the EBRD’s Risk Sharing Facility (RSF), a special financing programme designed to share risk in loans provided to small and medium-sized companies. It is the second Tajik financial institution to join the facility.
Under the RSF, the EBRD and the FMFB signed a participation agreement of up to US$ 1.5 million, whereby the EBRD is expected to share up to 50 per cent of the risk on individual sub-projects. This will allow the FMFB expand its lending to a greater number of companies, most of which are smaller businesses that would not otherwise have access to direct EBRD financing because of the size of loans they seek.
This is made possible by support from donors such as the EBRD’s Small Business Impact Fund (Italy, Korea, Luxembourg, Sweden, Switzerland, Taipei China and the USA).
The FMFB’s participation in the RSF will help it gain the necessary experience in providing services to both existing and prospective clients. The FMFB will be able to offer domestic SMEs loans with longer maturities and will employ best lending practices. Under the RSF, the EBRD will also help FMFB introduce modern corporate governance standards, and improve its credit risk assessment, financial modelling and monitoring.
The FMFB has been a client of the EBRD since 2007 and has demonstrated consistent commitment to the development of EBRD projects and successfully participated in various EBRD initiatives.
Ayten Rustamova, EBRD Head of Office in Tajikistan, said: “We would like to welcome our long-term partner, the FMFB, to the EBRD’s Risk Sharing Facility. This project will contribute both to the development of SME lending and the growth of the financial sector in the country. We are confident that with the help of the RSF the FMFB will be able to significantly expand its lending activities across Tajikistan”.
Yenten Lama, CEO of FMFB, commented: “We are pleased to partner with the EBRD, which has been very supportive of our activity. The Risk Sharing Facility will provide opportunities for more SMEs to grow their business and move up the value chain, which will generate more employment and benefit the economy”.
FMFB provides a full range of banking services through its nationwide network of 7 branches and 29 banking service centres. The network covers all regions of Tajikistan, including remote parts of the country, where the presence of other financial intermediaries is limited.
To date, the EBRD has invested over €608 million (US$ 700 million) in various sectors of Tajikistan’s economy.