Downscaling: Northern Caucasus MSME Development Finance Project

EBRD’s North Caucasus Development Initiative was an institution building project implementing lending to micro, small and medium enterprises (MSME’s) in the North Caucasus Federal District of Russia (NCFD). The Technical Assistance was financed by the European Union. The project worked with five Partner Banks/Organisations. The first (and for a long time only) Partner Bank was VTB24, which is among the leading banks in retail and MSME lending in the Russian Federation including experience from under the Russia Small Business Fund. Bank Vozrozhdenie and the Microfinance Organization FINCA joined the programme in April 2011, Center-Invest Bank and Rosselkhozbank in May 2011. 

The project had a twofold impact. It provided a stable source of financing to the MSME sector in the NCFD, and it strengthened the financial sector/banks, building the skills and giving them the tools to make MSME lending a profitable business in the difficult conditions of the region. The project started in late 2009 in a challenging operating environment, and was implemented under difficult security conditions. After an intensive preparation phase which included three market studies and detailed negotiations and preparatory work with VTB24 and other banks, lending operations started in February 2011 with VTB24 in Vladikavkaz/North Ossetia-Alania. The programme was later extended to Pyatigorsk/ Stavropolskiy Kraj, Nalchik/Kabardino-Balkaria, and Stavropol/Stavropolskiy Kraj.

At the end of the project in December 2011, the outstanding loan portfolio had reached USD 44.3 million in 1,692 loans. The PAR > 30 was below 1 percent. The project was successfully finished at the end of December 2011