IFC Lends Support to Microloans in Russia, by Anna Smolchenko

Monday, June 20, 2005

The International Finance Corporation, the World Bank’s private lending unit, signed its first deal to support microloans in Russia on Friday.

The $1 million loan to the Russian Women’s Microfinance Network is intended to support hundreds of microloans — on average $1,500 each — to entrepreneurs without the collateral to qualify for traditional bank loans.

“For us this is a very interesting project targeting segments of the population that are not being served,” said Alireza Zavar, head of financial markets for Central and Eastern Europe at the IFC. “The amount that you provide is small, but the impact is great.”

Although there are more than 1,200 banks in Russia, small and medium-sized enterprises often find it difficult to obtain affordable loans. And even as banks increasingly reach out to entrepreneurs in the regions, it is still not very lucrative to target entrepreneurs in small towns and villages.

According to the Russian Microfinance Center, 80 percent of the country’s 6 million small businesses are in need of microcredits ranging from $300 to $10,000. Total demand for loans is between $5 billion and $7 billion, with a supply of only $1 billion, the center said.

The Women’s Microfinance Network, which in the past relied exclusively on grants for its funding, has given 37,000 loans — totaling $44 million — to some 6,000 entrepreneurs since 1999.
Story found here.

Source: The Moscow Times