MICROCAPITAL STORY: International Finance Corporation (IFC) to Invest USD 5 million in FM Bank, Poland’s First Microfinance Bank

The International Finance Corporation (IFC), the private sector lending arm of the World Bank has announced an investment of USD 5 million in FM Bank, a new microfinance bank based in Poland [1]. The investment would help the bank ‘to support the [Polish] microfinance sector and improve access to finance for micro and small businesses’. FM Bank, a spin-off from the operations of the Polish microfinance institution Fundusz Mikro, only recently received a commercial banking license and is reportedly the first microfinance bank in the country [1].

This investment by IFC follows a press release early last week that the Polish Financial Supervision Authority (PFSA) had ‘granted permission for the establishment of FM Bank’ [2].(PFSA is the Polish supervisory body in-charge of banking, capital markets, insurance, pension schemes and electronic money institutions). Per information available in the website of the European Monitoring Center on Change (EMCC), the FM Bank would focus on the development of small and medium-sized enterprises in Poland and in Central Europe [3]. In this regard, the release also quotes the acting President of FM Bank, Mr. Henryk Pietraszkiewicz, as saying that the bank’s focus would be on ‘providing tailored service and products for micro and small entrepreneurs’. FM Bank does not appear to have a web presence as yet nor is much information on the bank currently available in public domain. However, as per initial information available on Polish information portal, Polish Market Online, FM Bank is expected to be financed by the Abris private equity fund which is based in Poland [14]. FM Bank is also expected to operate a network of 62 branches around the country by the end of the year with a workforce of 400, as per information from the EMCC [2]. (The EMCC is an information resource established in 2001 to promote an understanding of how to anticipate and manage change. It was set up within the Eurofound, a European Union body dedicated to better living conditions in Europe, with the full support of the European Parliament, the European Commission and other social partners [4,5]). No further information on the establishment of FM bank is currently available.

Fundusz Mikro, the MFI responsible for the new bank, was founded in 1994 by the Polish-American Enterprise Fund, which invested USD 20 million of loan capital [7]. In addition, a USAID grant had also covered its initial operating costs. As of August 2008, the MFI had disbursed a total of USD 405 million to a total 51929 clients [8]. Total assets as of 2008 stood at USD 49 million, with a capital to asset ratio of 33.19 percent and a debt to equity ratio of 2.01 [6]. Its total value of balance outstanding as of August 2008 was (approx) USD 53 million [8]. Fundusz Mikro operates through 38 branches located in cities throughout Poland.

The microcredit market in Poland accounts for 29 percent of low-income households comprising up to 1.98 million low-income micro-enterprises, according to a 2007 analysis in the MicroFinance Center (MFC) Newsletter titled ‘Microfinance in Central and Eastern Europe and the New Independent States’. (The Microfinance Centre (MFC) for Central and Eastern Europe and the New Independent States is an international, grass-root network comprising of over 90 microfinance institutions from the region [11]). The MFC analysis also indicates the need for linking specialized non-bank financial institutions in Poland with commercial and cooperative banks [10]. Per information available in an EBRD press release, a recent European Union sponsored study estimates that ‘only 3 percent of registered micro and small enterprises [are] financed by the formal financial sector’ [9]. According to the study, ‘there remains a large demand for micro finance in Poland’. In this regard, Mr. Pietraszkiewicz states that Poland has ‘a diverse and active micro-enterprise sector but it is not well served by traditional banks’. He was also quoted as saying that the FM Bank wanted to ‘change that’. For more on the Polish microfinance sector, please look up Microcapital’s past stories available here.

Created in 1956 and based in Washington, DC, the International Finance Corporation, a member of the World Bank Group, fosters sustainable economic growth in developing countries by supporting private sector development, mobilizing private capital, and providing advisory and risk mitigation services to businesses and governments [12]. Its net worth at the end of 2008 was USD 18.3 billion [12, 13]. Microcapital has extensively covered the IFC’s contribution towards the microfinance sector; a list of our coverage on the IFC is available here.

By Bharathi Ram, Research Assistant

Bibliography:

[1] Microfinance Focus, IFC to invest in FM Bank, http://www.microfinancefocus.com/news/?p=579

[2] Eurofund, FM Bank Fact Sheet, http://www.eurofound.europa.eu/emcc/erm/static/factsheet_14157.htm?template=searchfactsheets

[3] Eurofund: http://www.eurofound.europa.eu/about/index.htm

[4] EMCC: http://www.eurofound.europa.eu/emcc/about.htm

[5] International Leaders’ Forum on Development Finance, Fundusz Mikro, http://docs.google.com/gview?a=v&q=cache%3AOlk5u2O8L7QJ%3Awww.dfforum.com%2Fpdf%2FFundusz_Mikros.pdf+fundusz+mikro+bank&hl=en&gl=us&pli=1

[6] MIX Market, FM, http://www.mixmarket.org/mfi/fundusz-mikro/data

[7] Fundusz Mikro: http://www.funduszmikro.pl/about_fundusz_mikro.php

[8] Fundusz Mikro, Annual Results, http://www.funduszmikro.pl/results.php

[9] EBRD Press Release: http://www.ebrd.com/new/pressrel/2009/090205a.htm

[10] MFC Newsletter, Microcredit Market in Poland, http://docs.google.com/gview?a=v&q=cache:Lvb4H_PPL8AJ:www.european-microfinance.org/data/file/microcredit-market-in-poland-(2).pdf+poland+microfinance&hl=en&gl=us