Bishkek, August 15, 2002—Financing
options for micro, small and medium-sized businesses in the Kyrgyz Republic
have improved considerably through new leasing and microfinance laws adopted
with the support of the International Finance Corporation, the private
sector development arm of the World Bank. The new laws, passed by
the Kyrgyz Parliament in June, 2002 and signed by President Askar Akaev
on July 23, will support small and medium-sized enterprises as well as
micro-entrepreneurs by increasing their access to credit for business expansion.
Experts from the Swiss–IFC Partnership Central Asia Leasing Project office
in Bishkek, and IFC’s Southern Europe and Central Asia Department helped
the Kyrgyz government craft both laws. The leasing law provides the
necessary legal backbone for banks and other financial institutions to
conduct financial leasing operations. The microfinance law provides
a legal framework to create commercially viable microfinance institutions.
“The Kyrgyz Republic deserves commendation for passing these important
laws,” said Khosrow Zamani, IFC’s Director for Southern Europe and Central
Asia. “Not only will they have an immediate positive impact on SME
and micro-enterprise growth, the new laws represent a significant step
forward to building a favorable investment climate for IFC and other private
investors in the leasing and microfinance sector, which should bring much
needed capital to the region.”
Leasing—a key source of medium and long-term financing particularly for
SMEs in countries with transitional economies – is an economically-efficient
solution to the problem of asset acquisition. Leasing improves access
to capital for small business by basing their credit risk upon their projected
generated cash flow, rather than from credit history or collateral. Leasing
often provides a much-needed boost to the small business sector, which
is a key source of job creation in developing and transitioning economies.
The new law sets clear and transparent obligations and rights for all parties
involved in leasing transactions and resolves current contradictions in
the Kyrgyz civil code and outdated decrees on leasing, overcoming many
of the legal issues that have held back the development of leasing in the
Kyrgyz Republic, which accounts for less than 1 percent of the total credit
portfolio in the country.
According to Kyrgyz Parliamentarian Temir Sariev, who presented the law
to the Parliament, “We expect to see the birth of a vibrant leasing sector
in Kyrgyzstan, both from banks and from independent leasing companies.
This step provides critical support to our small and medium enterprises,
which are crucial to our country’s economic growth.”
IFC has long been a champion of leasing for developing and transitioning
economies. IFC has advised 35 countries on developing leasing, and invested
almost US$1 billion dollars in leasing operations in 50 countries over
the last 30 years.
IFC experts also helped the Kyrgyz Republic craft the new microfinance
law. 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.
Without the new microfinance law, current Kyrgyz microfinance institutions
would not have the legal right to convert to microfinance banks.
Initial funds to support the leasing legislation were provided by the Japanese
government who financed a study of the leasing market as well as introductory
seminars with government officials. The Swiss – IFC Partnership,
launched in 2001 by the Swiss Secretariat for Economic Affairs (SECO) and
IFC through its Technical Assistance Trust Funds program, funded technical
assistance and field support.
The Swiss–IFC partnership aims to promote private sector development in
the Central Asian countries of the Kyrgyz Republic, Tajikistan, Uzbekistan,
and Turkmenistan. One of the first projects of the Partnership is
the Central Asia Leasing Project, which works closely with local governments
to create lease finance opportunities.
SECO’s economic development cooperation program has four main objectives:
1) to help transitional countries reach the stage of development most favorable
to growth and investment, 2) to mobilize private sector resources as a
means of increasing the flow of finance to transitional countries, as well
as technology transfer, 3) to improve productive and social infrastructure,
4) to achieve greater integration of developing countries in international
Additional funding for work on some regulatory aspects of the microfinance
law were provided by the United States Agency for International Development
(USAID), which has been a key supporter of microfinance in the Kyrgyz Republic.
USAID provided the initial grant funds for three microfinance institutions
in the country—all of which have graduated to operational self-sufficiency
and are now raising funds from institutional investors.
USAID is the government agency providing U.S economic and humanitarian
assistance worldwide for more than 40 years.
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 through the close of the last fiscal year on June 30, 2002, IFC
committed more than $34 billion of its own funds and arranged $21 billion
in syndications for 2,825 companies in 140 developing countries. IFC’s
committed portfolio at the end of FY02 was $15.1 billion for our own account
and $6.5 billion held for participants in loan syndications.