MICROCAPITAL STORY: The European Bank for Reconstruction and Development (EBRD) Extends a $1m loan to Norwegian Microcredit (Normicro) of Azerbaijan

The European Bank for Reconstruction and Development (EBRD), a London-based international bank utilizing investment tools to encourage democracy and market economies from central Asia to central Europe since 1991, is financing a USD 1 million loan to Baku-based Norwegian Microcredit (Normicro), a limited liability company (LLC) reporting 2007 total assets of nearly USD 7 million and a loan portfolio approaching USD 6.9 million. As reported by The Financial, a daily newspaper operating out of Georgia and Ukraine, “the financing will be used for on-lending to micro and small enterprises (MSEs) especially in rural areas of Azerbaijan.”

The funds are meant to maximize outreach amongst the poorest in Azerbaijan and are thus capped at USD 10,000 per borrower. A technical assistance grant of unstated size will also be presented to Normicro “to support institution building through the introduction of best practice in lending, staff training, and investments in equipment and software,” as reports the April 18th Financial article.

The director of EBRD’s Baku office, Francis Delaey, remarked that “micro and small enterprises are playing a key role in the diversification of the country’s economy and unlocking its potential.” Mr. Delaey’s comments come at a time when Azerbaijan is experiencing considerable economic growth due to increased oil revenues. According to The National Bank of Azerbaijan (NBA), gross domestic product (GDP) growth was 25 percent in 2007, yet the non-oil sector grew by only 11.3 percent in comparison.

The EBRD reported 2006 total assets of EUR 30.7 billion and a loan portfolio of nearly EUR 8 billion and is owned by two intergovernmental organizations and 61 countries, of which Azerbaijan is included. For a more detailed description of EBRD and its activities pertaining to Azerbaijan and microfinance in general, please refer to this recent MicroCapital article.

As reported by the MIX Market, Normicro focuses its microfinance efforts on internally displaced persons (IDPs) in Azerbaijan in an effort to improve living conditions. A member of the Azerbaijan Micro-finance Association (AMFA), a supportive organization for a network of 22 microfinance institutions (MFIs) and downscaling commercial banks in the country, and founded in 1998, Normicro has been audited regularly since 2003 and served nearly 9,000 borrowers in 2007 with an average loan balance of USD 766. Rated “BB” in September 2006 by MicroFinanza Rating, an international rating agency headquartered in Milano, Italy and specializing in microfinance and rural finance, Normicro reports return on assets (ROA) of 13.9 percent and a debt to equity ratio of 223 percent. MicroCapital recently reported on Normicro here.