Baku, Azerbaijan, Sept.22
By Ilaha Mamedli - Trend:
German Development Bank KfW has decided to send the second loan of 3.5 million euros intended for agro financing to the Azerbaijani window of the European Fund for Southeast Europe (EFSE) through which it is planned to continue lending to rural areas by local banks, the KfW Baku office told Trend.
This decision was made after consultation with the Central Bank of Azerbaijan (CBA), particularly with the Risk Management Department. The KfW has not approved the former funding mechanism of the agricultural sector in the country.
In accordance with the previous strategy of the project, KfW funds are allocated in the form of subordinated loan for financing of projects in rural areas, including small business development in the regions, except Baku, Sumgayit and Ganja. And some 1.5 million euros have been allocated to Bank Respublika and 2 million euros - to NBCO "CredAgro" in the first phase of the project.
The decision to transfer credit allocated for the second phase of the agricultural project to the EFSE fund is associated with the desire to reach a larger number of banks. Otherwise, only one bank could get credit resources of the German bank in the amount of 3.5 million euros (in connection with the capitalization of banks opportunities to attract foreign loans extended). And these funds were planned to be sent to the second level capital of the banks with a period of four years (in the form of a subordinated loan).
KfW believes that these funds will work on the principle of revolving account within the framework of the EFSE Fund, i.e. the means will be sent to the loan up of new banks as redemption proceeds. The fund is currently operating in Azerbaijan with Bank Respublika, which received $5 million in 2010, and AccessBank (received $15 million in 2014).
The Fund offers long-term funding tools to local financial institutions for crediting small enterprises, especially micro and small enterprises, including loans for private housekeeping.
"EFSE Fund will inform our bank of the transactions carried out with credit resources of KfW, and the fund consultants will manage them," noted the office of the German bank.
There are 44 banks in Azerbaijan.
Azerbaijan's cooperation with KfW began in 1994. The strategic directions of the bank's activity include restoration of energy, water and other infrastructures, supporting the development of the financial and banking sectors, the private sector, healthcare systems, environment, etc. Throughout a period starting from the onset of Azerbaijan's cooperation with KfW until January 1, 2014, the country and the bank have signed 13 loan agreements worth 230.3 million euros.
The European Fund for Southeast Europe (EFSE) was initiated by KfW Development Bank (KfW) with the financial support of the German Federal Ministry for Economic Cooperation and Development (BMZ) and the European Commission. It aims to foster economic development and prosperity in the countries of Southeast Europe and the South Caucasus region. As access to finance is a key success factor in developing the micro, small and medium enterprise segments, the EFSE focuses on assisting local financial sectors in strengthening their ability to ensure adequate and sustainable financing. Supporting the EFSE's investment activities is the EFSE Development Facility, which provides partner lending institutions with technical assistance, consulting and training services to build operational capacities and professional management.
The investors of the fund are such financial institutions as the European Commission, German Federal Ministry of Economic Cooperation and Development , the governments of Austria, Switzerland, Denmark and Albania, KfW, IFC, FMO, the European Bank for Reconstruction and Development (EBRD), the European Investment Fund (EIB) and Oesterreichische Entwicklungsbank (OeEB), and Oppenheim and Deutsche Bank permenantly contribute to the stock base.
EFSE fund activity seeks to promote economic growth and prosperity in Southeast Europe, including countries such as Albania, Azerbaijan, Belarus, Bosnia and Herzegovina, Bulgaria, Macedonia, Georgia, Kosovo, Moldova, Montenegro, Romania, Serbia and Ukraine.
