The London-based European Bank for Reconstruction and Development (EBRD) is considering issuing a syndicated A/B loan of USD 50 million to provide capital to Azerbaijan-based, “socially oriented” bank DemirBank for “on-lending to micro, small and medium-sized enterprises (MSMEs)”[1] in the country.
If the board of EBRD approves the transaction, the institution would fund the “A” portion of the loan from its own resources, while the “B” portion of the loan would be offered by unspecified partners of EBRD via syndication. The A portion of the loan would include USD 13 million, including USD 3 million from EBRD’s Financial Intermediaries Special Fund.
EBRD also is studying the possibility of disbursing an energy-efficiency loan of USD 5 million to DemirBank. The aim of this loan would be to fund business and residential energy efficiency investments in Azerbaijan. The EBRD loan would be supplemented with technical cooperation and “incentives to end-borrowers”[2] offered by the Austrian Ministry of Finance and the Neighborhood Investment Facility of the European Union.
The London-based European Bank for Reconstruction and Development (EBRD) provides loans, debt securities, equity investments, guarantees and technical assistance to micro- and small businesses via commercial banks and non-bank microfinance institutions (MFIs) in Eastern Europe, Central Asia and North Africa. In 2013, EBRD invested EUR 8.5 billion (USD 11.4 billion) in 392 projects across 34 countries. Azerbaijan-based DemirBank reported to the US-based nonprofit Microfinance Information Exchange (MIX) total assets of USD 484 million, a gross loan portfolio of USD 360.5 million and approximately 67,100 borrowers as of 2012 as well as return on assets of 0.74 percent and return on equity of 5.69 percent as of 2011.
By Alíz Crowley, Research Associate
About the European Bank for Reconstruction and Development (EBRD)
The European Bank for Reconstruction and Development (EBRD) is a multilateral institution headquartered in London, England. The bank began operations in 1991 upon the agreement of 40 countries, and it is owned by 64 countries as well as the European Investment Bank and the European Union as of 2014. It aims to finance operations that are both commercially viable and assist development in Eastern Europe, Central Asia and North Africa. It does this by providing loans, debt securities, equity investments, guarantees and technical assistance to micro- and small businesses via commercial banks and non-bank microfinance institutions (MFIs). In 2013, EBRD invested EUR 8.5 billion (USD 11.4 billion) in 392 projects across 34 countries.
About DemirBank
Azerbaijan-based DemirBank is a “socially oriented” commercial bank that lends to small and medium-sized enterprises. DemirBank was established as Azerdemiryolbank in 1989 under license of the USSR State Bank and was known by that name until 2009. In 2005, the European Bank for Reconstruction and Development (EBRD) purchased 25 percent of DemirBank’s stock plus 1 share. Since 2007, the Netherlands Development Finance Company (FMO) has held 10 percent of its stock. DemirBank has 31 branches and units in Azerbaijan. For 2012, DemirBank reported to the US-based nonprofit Microfinance Information Exchange (MIX) total assets of USD 484 million, a gross loan portfolio of USD 360.5 million and approximately 67,100 borrowers. Demirbank also reported return on assets of 0.74 percent and return on equity of 5.69 percent as of 2011.
Sources and Additional Resources
[1] EBRD, May 2014, DemirBank Syndicated A/B Loan
[2] EBRD, May 2014, CEEP – DemirBank Azerbaijan
MicroCapital, April 24, 2013, DemirBank of Azerbaijan Offers Automated Teller Machine Repayment Option
MicroCapital, February 7, 2012, DemirBank of Azerbaijan to Borrow $8m from Microfinance Enhancement Facility, Co-Managed by responsAbility
MicroCapital, July 14, 2011, responsAbility Loans $24m to Microfinance Institutions (MFIs) Inecobank, Agricultural Cooperative Bank of Armenia (ACBA), ACBA Leasing all of Armenia; DemirBank of Azerbaijan; Sekerbank of Turkey
MicroCapital Universe Profile: European Bank for Reconstruction and Development (EBRD)
MicroCapital Universe Profile: DemirBank
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