OREANDA-NEWS. December 21, 2007. Building on the successful development of micro finance institutions in the Kyrgyz Republic, the EBRD is launching a new $40 million Financial Sector Framework with the signing of two loans to Kyrgyz Investment and Credit Bank (KICB), reported the press-centre of EBRD.

Under the new framework the EBRD is providing funds to local partner banks for on-lending to small and medium-sized enterprises. The framework will promote the growth of this key sector of the economy by introducing or developing new products such as leasing or mortgage finance for which there is a growing demand in the market.

In accordance with the EBRD’s latest Strategy for the Kyrgyz Republic the new framework will also assist and promote institutional and financial strengthening of the local banking sector. The Kyrgyz economy is largely cash based and the level of financial intermediation is still low. The framework is complemented with ?560,000 grant funding from the EBRD’s Early Transition Countries Multi-Donor Fund for technical assistance.

KICB, a majority privately owned commercial bank, will receive a $3 million credit line for lending to small and medium sized enterprises and a $2 million loan for mortgage financing. The SME credit line will be used to finance local enterprises including the tourism sector and related services. The mortgage loan will be used to for financing residential mortgages.

Kenji Nakazawa, Head of the EBRD’s Resident Office in Bishkek, said the new framework was “an important milestone for the implementation of our strategy for the country. We are broadening and widening our activities to the benefit of the Kyrgyz financial as well as enterprise sector. Our new products will help us to meet rising demand for advanced financial solutions”, he added.

K.Y.Choi, CEO of KICB, stated that “we value very highly our long term strategic partnership with the EBRD. KICB has achieved good results in building up a strong and sound credit portfolio since the bank was established in 2001. These two credit lines from the EBRD will enable us to strengthen medium and long term lending to the small and medium enterprise sector mainly focusing on tourism. The special residential mortgage loan facility will allow KBIC to continue providing mortgage loans in the Kyrgyz Republic according to international lending practice.“

KICB was officially set-up on 29 August 2001 with a fully paid-up share capital of $7 million and has been the largest commercial bank in the Kyrgyz Republic for a long time. The EBRD together with the Aga Khan Fund for Economic Development (AKFED), the International Finance Corporation (IFC), Deutsche Investitions und Entwicklungsgesellschaft (DEG) and the Government of the Kyrgyz Republic are shareholders. AKFED, the principal shareholder, oversees the Bank’s management. KICB has received assistance from the Government of Japan and Kreditanstalt fuer Wiederaufbau (KfW).

To-date, the EBRD has signed about 60 projects in the Kyrgyz Republic, totalling more than ?200 million. These funds helped generate over $600 million from other sources. The Bank is planning to significantly increase its activities in the next years.