MICROCAPITAL.ORG STORY: International Finance Corporation (IFC) Supports Transformation of Kyrgyz Republic’s Bai-Tushum From Microcredit to Microfinance Company With the Intention Becoming a Deposit-Taking Instituion

The International Finance Corporation (IFC), the investment arm of the World Bank, has aided Bai-Tushum and Partners of the Kyrgyz Republic in transforming from a microcredit to a microfinance company [1,2,3]. This transformation will allow Bai-Tushum to provide more services to its clients beyond just small loans [1]. Namely, Bai-Tushum and Partners has now applied for a deposit-taking license from the National Bank of the Kyrgyz Republic in order to offer “deposit, savings, and related services to the public” [1]. Microcapital reported on the early stages of this effort in August 2009 [4].

The transition to having the capacity to take deposits was fostered by IFC advisers who worked with managers from Bai-Tushum and Partners on “strategic and business planning” [1]. Specifically, advisers from IFC Azerbaijan and the Central Asia Microfinance Transformation Support Project, two IFC projects intended to aid this type of transformation in Central Asia, helped with “organizational and financial restructuring, investor relations, and consulting in key organizational and institutional capacity-building activities” [1,5]. Gulnara Shamshieva, Bai-Tushum and Partner’s General Manager commented on the transformation, saying that, assuming the deposit-taking license is received, the transition will allow Bai-Tushum and Partners “to offer different deposit schemes to [their] clients, [and they] will be able to mobilize savings from the population and increase our funding base” [1].

Bai-Tushum and Partners is one the Kyrgyz Republic’s leaders in microcredit. It currently holds 26 percent of the country’s market share and has a network of 7 branches and 37 sub-branches nationwide [1]. According to the MIX Market, the microfinance information clearinghouse, Bai-Tushum and Partners products include agroloans to finance agricultural activity, trade, service, and production loans, mortgage loans, financing equipment, and consumer loans among others [6]. Bai-Tushum and Partners has reported to the MIX Market a gross loan portfolio of over USD 35.1 million [6]. As of the end of 2008, Bai-Tushum and Partners has a return on assets of 5.76 percent, a return on equity of 34.78 percent, and a debt to equity ratio of 5.50 [6].

The IFC was founded in 1956 by the World Bank [2]. The Kyrgyz Republic became an IFC member in 1993 [7]. As of the end of 2008, the IFC has committed over USD 62 million to investments in the country, mostly in the “oil and gas and financial sectors” [7]. The IFC has also provided advisory services in “textile, tourism and financial markets sectors” to the Kyrgyz Republic since 1996 [7]. In 2008 the IFC began a project called the Azerbaijan & Central Asia Microfinance Transformation Support Project [5]. The project is intended “to assist and support micro finance institutions (MFIs) based in Azerbaijan, Tajikistan, the Kyrgyz Republic, and Kazakhstan” in terms of providing a “broader range of financial services” [5]. To do this, the IFC approaches transformation in terms of “institution building” as well as “corporate strategy” [5]. Institution building involves giving advice related to “financial management, assets and liabilities management, funding strategies, treasury, development of deposit products, risk management, internal audit and control, [human resources], and [management information systems]” [5]. Corporate strategy advice includes “advice on structuring equity transactions, corporate planning, investment presentations, investor relations, and management” [5].

Christopher Maggio, Research Assistant

Bibliography
[1] IFC press release entitled: ‘IFC Supports Transformation of Kyrgyz Republic’s Bai-Tushum into Deposit-taking Microfinance Organization’: http://www.ifc.org/ifcext/media.nsf/content/SelectedPressRelease?OpenDoc…
[2] IFC: http://www.ifc.org/
[3] Bai-Tushum and Partners: http://www.baitushum.kg/en
[4] MICROCAPITAL STORY: International Finance Corporation (IFC) to Assist Four Microfinance Institutions (MFIs) in Central Asia to Accept Deposits: https://www.microcapital.org/microcapital-story-international-finance-cor…
[5] IFC Azerbaijan and the Central Asia Microfinance Transformation Support Project: http://www.ifc.org/ifcext/eca.nsf/Content/Tajikistan_AdvisoryProjects#Az…
[6] Bai-Tushum on the MIX Market: http://www.mixmarket.org/mfi/bai-tushum
[7] Kyrgyz Republic on IFC website: http://www.ifc.org/ifcext/eca.nsf/Content/KyrgyzRepublic_Home

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