MICROCAPITAL STORY: Fitch Ratings Assigns the Micro Finance Bank of Azerbaijan (MFBA) a Grade of BB+

Fitch Ratings has assigned the Micro Finance Bank of Azerbaijan (MFBA) a long-term issue default rating of BB+, a short-term issue default rating of B and a long-term outlook of ‘stable.’ This rating qualifies MFBA as investment grade and makes it the highest rated private bank in Azerbaijan.

According to Fitch Ratings, MFBA has been “performing well,” “asset quality has been sound to date” and “liquidity is comfortable.” The ratings organization also stated that so far this year “MFBA [has] continued to strengthen its profitability, improving all major performance ratios.” The high ratings imply that there are very low odds that MFBA will default on any credit obligations in the long- or short-term.

Fitch has a country ceiling rating of BB+ in effect in Azerbaijan, implying that financial institutions inside the country cannot receive higher ratings. In fact, these new rankings make MFBA the highest rated privately owned bank in Azerbaijan. Other publicly owned banks, such as the International Bank of Azerbaijan, have identical ratings to MFBA.

Founded in 2002, the Micro Finance Bank of Azerbaijan (MFBA) is a for-profit microfinance institution that also provides a full range of banking services to other clients. Its main shareholders are the International Finance Corporation, the European Bank for Reconstruction and Development (EBRD), Kreditanstalt fur Wiederaufbrau Development Bank (KfW), Black Sea Trade and Development Bank and Access Microfinance Holding. As of December 31, 2007, the bank had total assets of USD 133m (in local currency), a debt to equity ratio of 713 percent, and a return on equity of 37 percent. As of June 30, 2008, the bank also had a gross loan portfolio of USD 177m (in local currency). While the number of active borrowers as of this same date was unavailable, MFBA had over 46 thousand active borrowers at the end of 2007. MicroCapital has recently reported on further investments by the IFC and EBRD into MFBA.

Fitch Ratings is an international leader in ratings services. According the Microfinance Rating and Assessment Fund, FitchRatings currently rates 20 MFIs all of which are located in Latin America. The website also states that Fitch is willing to rate MFIs located in other parts of the world.

By Greg Casey, Research Assistant

Additional Resources:

MIX Market: Profile for MFBA

Fitch Ratings: “Micro Finance Bank of Azerbaijan”

Azerbaijan Business Center: “Micro Finance Bank of Azerbaijan became highest rated private bank in Azerbaijan”

Micro Finance Bank of Azerbaijan Press Release: “MFBA – highest rated private bank in Azerbaijan”

Cbonds: “Fitch Rates Micro Finance Bank of Azerbaijan ‘BB+’; Outlook Stable”

MicroCapital Story, July 15, 2008: “International Finance Corporation (IFC) and BP (British Petroleum) to Finance New MFBA (Micro Finance Bank of Azerbaijan) Branch Offices”

MicroCapital Story, June 19, 2008: “The European Bank for Reconstruction and Development (EBRD) increases syndicated loan for Microfinance Bank of Azerbaijan (MFBA) up to USD 40 million”

Microfinance Rating and Assessment Fund: Fitch Ratings