MICROCAPITAL STORY: IFC invests USD 20 million In Bank Respublika Intending to Boost Finance for Azerbaijan's Businesses

The International Finance Corporation (IFC) announced it will invest USD 20 million in Bank Respublika, Azerbaijan’s fourth-largest private sector bank, to help increase lending to micro, small, and medium businesses in the country’s rural areas. [1]

Bank Respublika aims to more than double its lending to small businesses, and expects half of its loans to be in rural areas of Azerbaijan where there is significant unmet demand for financing. IFC’s senior loan to the bank will support these goals. [1]

Through this transaction, IFC hopes to:

Address the long-term funding needs of the MSME sector in Azerbaijan
Develop financial intermediation by supporting the growth of different financial products and services serving MSME clients
Yield significant developmental and economic benefits for the private sector and the whole economy [2]

In 2007, IFC provided Bank Respublika with a USD 5 million senior loan. The bank also participates in IFC’s Global Trade Finance Program as an issuing bank with a USD 10 million trade finance line from IFC. [1] The Global Trade Finance Program provides risk mitigation in new or challenging markets by offering full or partial guarantees covering payment risk on banks in the emerging markets for trade related transactions. [2]

IFC’s strategy in Azerbaijan is to support diversification of the private sector, including the financial and real sectors, infrastructure, health, and education, through a combination of investment and advisory services. Since 1995, IFC has provided more than USD 300 million financing in Azerbaijan. [2]

Bank Respublika was established in 1992 as a private commercial join-stock bank, and offers universal banking services to retail and corporate segments. The bank has Assets which amount to USD 478 million and a net loan portfolio of USD 312 million as of December 31, 2008. The Guyilev family owns 75 percent of the bank, while Investment Company DEG and Sparkassen International Development Group own the remaining 25 percent. The bank is headquartered in Baku, Azerbaijan, and operates through its network of 33 branches and offices located in the capital city Baku and throughout Azerbaijan’s regions. Moody’s ranks Bank Respublika’s long-term deposits in national and foreign currency as B2 (speculative grade, subject to high credit risk) and deposits in national and foreign currency as NP (not falling into any prime category, high credit risk). [3]

IFC aims to foster sustainable economic growth in developing countries by financing private sector investment, mobilizing capital in the international financial markets, and providing advisory services to businesses and governments. IFC’s has total assets of USD 51 billion and a Return on Assets of -0.3 percent as of June 30, 2009. IFC has 447 projects in 103 countries. IFC is a World Bank group. [4]

By Kenny Kline, Research Associate

[1] IFC Press Release, “IFC and Bank Respublika to Boost Access to Finance for Azerbaijan’s Businesses”, October 8, 2009

http://www.ifc.org/ifcext/media.nsf/content/SelectedPressRelease?OpenDocument&UNID=B71D44C58C0E408585257648004F4181

[2] Bank Respublika

www.bankrespublika.az/index.php?mod=inside&menu=151?=en

[3] The International Finance Corporation

www.ifc.org

[4] The Mix Market