Establishment of a "greenfield" microfinance bank to provide financial services to micro and small enterprises (MSEs) in the Federal Republic of Yugoslavia, which was approved in 2001. The EBRD is now considering a capital increase, which will be reviewed by the Board of Directors on a no objection basis in July 2002.
The initial capitalisation and following capital increase will allow MFB to provide reliable access to financial services for MSEs throughout FR Yugoslavia, directly supporting private sector development. MFB has a strong demonstration effect on the sector, encouraging other Yugoslavian banks to enter this market segment.
The project has a significant impact on the transition process. MFB provides continuous support to MSEs that would otherwise have little or no access to formal sector finance. MFB also supports the development of the financial sector by operating as a best practice institution committed to the principles of complete transparency and strong corporate governance.
Microfinance Bank of the Republic of Yugoslavia (MFB) is a newly established bank providing financial services to MSEs. The founding shareholders are: the EBRD (16.7 per cent), Commerzbank AG (16.7 per cent), Internationale Micro Investitionen AG (IMI - 16.7 per cent), Nederlandse Financierings Maatschappij Ontwikkelingslanden N.V. (FMO - 16.7 per cent), Kreditanstalt für Wiederaufbau (KfW - 16.7 per cent) and International Finance Corporation (IFC - 16.7 per cent).
MFB initially started operations in the cities of Belgrade, Novi-Sad and Nis, but has since launched branches in Subotica and Cacak. MFB has plans to expand further to other regions over the next 2 years. Since its establishment in April 2001, MFB has disbursed around 2,500 loans worth over US$ 21 million to micro and small enterprises.
The initial investment was made in April 2001: US$ 1 million (€1.01 million) equity investment to purchase 16.7 per cent of the share capital and a US$ 6 million (€6.06 million) senior loan for on-lending to MSEs.
The proposed capital increase would occur in August 2002: US$ 1 million (€1.01 million) equity investment. EBRD's share remains 16.7 per cent.
Total initial project cost was US$ 21.5 million (€21.7 million), of which the EBRD's share is US$ 7 million (€7.07 million - 32.5 per cent).
The total project cost after the capital increase is US$ 27.5 million (€27.7 million), of which the EBRD's share is US$ 7 million (€7.07 million - 25.5 per cent).
MFB carries out its operations in accordance with the EBRD's Environmental Procedures for Local Banks. In implementing these procedures, it requires all borrowers to comply, at a minimum, with national /local health, safety, environmental and public consultation requirements.
Technical cooperation funding has been provided by FMO, KfW and the US Government. Internationale Project Consult GmbH (IPC) has been selected as technical partner.
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