MICROCAPITAL STORY: International Finance Corporation (IFC) and BP (British Petroleum) to Finance New MFBA (Micro Finance Bank of Azerbaijan) Branch Offices

World Bank unit IFC (International Finance Corporation) and energy giant BP (British Petroleum) have announced a partnership to assist for-profit microlender MFBA (Micro Finance Bank of Azerbaijan) in expanding microfinance services to Azerbaijan’s untapped rural regions. IFC’s and BP’s assistance will consist of financial support for the establishment of additional MFBA branch offices in the country’s untapped rural areas. BP’s assistance is provided via its affiliate, nonprofit BP Foundation. Neither BP Foundation nor IFC disclosed a specific amount of financial support.

IFC and BP Foundation have previously collaborated on projects to expand MFBA’s branch offices. Most recently, in December 2007, MicroCapital reported that the two institutions financed the establishment of three MFBA regional offices with a USD 1 million grant from BP Foundation and an undisclosed investment amount from IFC.

Micro Finance Bank of Azerbaijan (MFBA) was established in 2002 by six shareholders: IFC, Black Sea Trade and Development Bank, Germany’s Development Bank KfW, German consulting company LFS Financial Systems GmbH, and consulting Firm Access Holding. The bank provides financial services to micro and small enterprises, and as of June 2008 served 49,596 borrowers, which constitutes a gross loan portfolio of USD 177.2 million. As of June 2007, MFBA had total assets of USD 133.3 million, a debt-to-equity ratio of 713.61 percent, and return on assets of 0.2 percent.

As reported by MicroCapital, MFBA has been the target of recent investment by other institutions. In June 2008, MicroCapital reported that MFBA would receive a USD 40 million syndicated loan from the European Bank for Reconstruction and Development. In March 2008, MicroCapital reported that MFBA received a USD 5 million loan from Dutch investment fund Dexia Fund. Stories covering these transactions may be found in this listing of recent MicroCapital stories on MFBA.

Based in Washington, D.C., IFC is a multilateral institution that is a member of the World Bank Group. Established in 1956, IFC seeks to promote sustainable private sector investment in emerging economies worldwide through the provision of loans, equity and structured finance. As of December 2007 it had a global investment portfolio of USD 790 million, return on assets of 6.46 percent, and a debt-equity ratio of 186.98 percent, as calculated from its 2007 financial statements. For a complete list of MicroCapital stories tracking IFC’s investments and partnerships, please click here.

IFC’s collaboration with BP is the latest in a series of partnerships with private firms, government development banks, and microfinance investment funds. In May 2008, MicroCapital reported that IFC would collaborate with Standard Chartered Bank of England to provide USD 45 million worth of credit-linked notes to microfinance institutions in Africa. In February 2008, MicroCapital reported that IFC partnered with financial services giant Citi to expand micro-lending in Bangladesh.

BP Oil is the world’s third largest global energy company, a multinational oil company with headquarters in London. BP makes investments in the economic stability of Azerbaijan, as it is involved in a number of oil exploration projects, and is leading the Baku-Tbilisi-Ceyhan (BTC) pipeline project, in which it is the largest shareholder. The pipeline transports crude petroleum 1,768 kilometers from the Azeri-Chirag-Guneshli (ACG) oil field in the Caspian Sea to the Mediterranean Sea, the second longest oil pipeline in the world.

By Ryan Benson, Research Assistant

Additional Resources:

MICROCAPITAL STORY: International Finance Corporation (IFC), a Member of the World Bank Group, to Invest $45m in Britain’s Standard Chartered Bank to Expand Microfinance in Africa and Asia, Stephen Son, May 19, 2008.

MICROCAPITAL STORY: “Citi teams with IFC to Support Expansion of BRAC Microlending in Bangladesh with USD 22M, Part of USD 55M Financing Deal”, Priya Rajdev, February 25, 2008.

IFC Press Release: IFC Supports Regional Expansion of the Micro Finance Bank of Azerbaijan, July 10, 2008.

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Micro Finance Bank of Azerbaijan: MFBA

International Finance Corporation: 2007 Annual Report