Kyrgyzstan: European Bank for Reconstruction and Development Arranges the First ...

Dec 2011
London, UK, December, 16 2011 - The EBRD is continuing its efforts to develop local currency lending and local currency capital markets by arranging the first ever syndicated loan in the Kyrgyz Republic, which is also the first syndicated loan in the local currency (som). Micro loans in som will help entrepreneurs in remote areas avoid exchange rate risks.

The EBRD has arranged the loan for one of its non-bank microfinance clients – Mol Bulak Finance – which provides small loans in remote areas. The syndicated loan will be for the Kyrgyz som equivalent of US$ 9 million comprising an A-loan for the EBRD up to US$ 3 million and a B-loan for FMO (the Netherlands Development Finance Company) of up to US $6 million.

The syndicated loan has been arranged under the EBRD Kyrgyz Financial Sector Framework, designed to support sustainable development of the Kyrgyz banking sector and to provide financing to micro, small and medium-sized enterprises (MSMEs).

With this three-year senior loan, the EBRD is increasing the availability of medium-term local currency lending to entrepreneurs in Kyrgyz Republic, especially in the country’s remote rural areas, and helping them avoid taking on currency exchange risks.

According to the recently approved new EBRD country strategy for the Kyrgyz Republic, the EBRD will aim to extend local currency lending in order to build up local sources of domestic funding and reduce the use of foreign exchange in the country’s financial system. This is particularly important for microfinance institutions, which historically have received only foreign exchange funding, but have constrained hedging opportunities and remain limited by law to lend solely in local currency.

“This Kyrgyz som loan is part of the EBRD’s strategy to boost local currency lending, deepen local capital markets and reduce systemic foreign exchange risk in the EBRD’s countries of operations,” says Christopher Clubb, Director of the Early Transition Countires Initative.

To date, the EBRD has committed about US$ 450 million in various sectors of the Kyrgyz economy, mobilising additional investments of about US$ 650 million in over 70 projects. Some 84 per cent of the Bank’s projects have been investments in the development of the country’s private sector.

Source : EBRD

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