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
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.
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.