Press Releases

IFC Fights Poverty with $1 Million Investment in Kyrgyz Microfinance

Afshin Molavi
Phone:(202) 458-5674

Fax:(202) 974-4384


Washington D.C., April 8, 2002—The International Finance Corporation, the private sector development arm of the World Bank Group, has approved, and partially disbursed, an investment of up to US$1 million to provide funds to FINCA Kyrgyzstan, the leading microfinance provider in the Kyrgyz Republic.  The investment will help fight poverty by expanding access to micro-loans for low-income entrepreneurs, mostly women, helping them build their businesses and raise their standard of living.

A key goal of the IFC investment will be to help FINCA Kyrgyzstan (FK)–a highly successful donor-supported microfinance provider with a 99 percent repayment rate–transition to a regulated, commercially-based microfinance institution.  The Kyrgyz Government fully supports this objective and is currently reviewing new regulations that would support the establishment of commercial microfinance institutions.

World Bank President James D. Wolfensohn, who is visiting the Kyrgyz Republic to discuss national development goals with President Askar Akaev and other officials, plans to visit FINCA Kyrgyzstan’s operations center in Bishkek on Tuesday, April 9.

The investment reflects an important aspect of IFC’s global microfinance strategy: support for the commercial viability of microfinance activities.  IFC believes that well-managed microfinance institutions can—and should—be commercially viable so that financial services can be provided to the underserved over the long term, resulting in a substantial and sustainable increase in the volume and range of financial services for microenterprises.  As part of its newly increased efforts in microfinance, IFC has recently approved a global partnership agreement with FINCA International that is expected to lead to additional support for commercialization of its existing affiliates in Africa and Latin America.

Khosrow Zamani, IFC’s Director for Southern Europe and Central Asia, said: “We feel that FINCA Kyrgyzstan’s success rate on repayment makes it a prime candidate for transition to a commercially sustainable institution.  A successful transition will help expand access to the vital micro-loans that help micro-entrepeneurs build their businesses and improve their lives.”

The Southern Europe and Central Asia team of the IFC came up with an innovative plan to get FK on the road to commercial sustainability as it awaits the introduction of new regulations.  IFC’s equity investment of up to $1 million will help establish FINCA Microfinance Resource (FMR), a special purpose vehicle that will be managed on a commercial basis by FINCA International, the US-based non-profit organization that runs microfinance activities in 17 countries.  FINCA International will invest up to $1.5 million in the FMR and will maintain a 60 percent control.  The intent is for the FMR to provide FK with capital on a commercial basis in order to enable it to expand its existing program as it prepares its transition.

“FMR will provide a parallel lending stream in FK’s work that will be purely based on commercial terms. As a result, the existing entity will gain valuable experience to prepare for its eventual transition,” Mr. Zamani added.

Microfinance involves the provision of a broad range of financial services to low-income households that operate microenterprises.  Microfinance is a proven, effective tool in the fight against poverty.  The poor have displayed a capability to repay loans, pay the real cost of loans, and generate savings that are reinvested in their business.  Income earned through microenterprises enables families to increase their spending on education, health care, and improved nutrition.

More than 500 million poor people around the world run profitable microenterprises and often cite credit as the primary constraint to business growth.  In the poorest countries, these activities constitute the private sector—generating jobs and resources for services crucial to poverty reduction, especially for women.  Nearly 90 percent of FK’s cumulative total of $43 million in loans since its inception in 1995 has gone to Kyrgyz women.

“FINCA’s mission is to provide financial services to the world’s poorest families so they can create their own jobs, raise household incomes, and improve their standard of living,” said Rupert Scofield, FINCA International’s Executive Director. He added: “This joint venture in Kyrgyzstan is exciting and will better enable us to meet our mission goals there.”

FINCA, which stands for Foundation for International Community Assistance, was established in 1984.  FINCA Kyrgyzstan, created in 1995 with U.S. government grant funding of $6 million, is now financially sustainable and expects to obtain a license, under pending law in the Kyrgyz Republic, to become the first microfinance institution in the country to serve the poor with both loan and saving products.

IFC’s mission is to promote sustainable private sector investment in developing countries, helping to reduce poverty and improve people’s lives.  IFC finances private sector investments in the developing world, mobilizes capital in the international financial markets, and provides technical assistance and advice to governments and businesses.  Since its founding in 1956, IFC has committed more than $31 billion of its own funds and arranged $20 billion in syndications for 2,636 companies in 140 developing countries.  IFC’s committed portfolio at the end of FY01 was $14.3 billion.