With this local currency loan the Bank launches in Kyrgyzstan the EBRD’s new Local Currency Lending Programme in Early Transition Countries (ETC), as part of its drive to reduce the risks – exposed by the economic crisis – of depending excessively on foreign currency funding.

The new programme allows the EBRD to support private sector development by extending local currency-denominated loans to eligible banks, microfinance organisations and private enterprises, which will avoid taking on exchange rate risks.

With this 3-year loan, the EBRD is increasing the availability of local currency lending to entrepreneurs in the Kyrgyz Republic, while their access to lending remains rather limited.

The EBRD’s funds will help Bai Tushum and Partners in expanding its lending portfolio, especially in the country’s remote rural areas, which will have a significant impact on the country’s economic recovery.

“With this new investment the EBRD continues to place a high priority on its investments in early transition countries, especially, in the Kyrgyz Republic after the recent tragic events in the country. Crucially, the customers of Bai Tushum and Partners will get better services and easier access to much-needed cash at interest rates intended to catalyse the country’s local currency market, as well as further development of Kyrgyz entrepreneurship,” said Kenji Nakazawa, Head of the EBRD Resident Office in the Kyrgyz Republic, speaking at the 2011 Central Asian Microfinance Summit in Bishkek, where the loan was signed.

“We highly appreciate the EBRD’s support, our long-time partner, especially at the time of severe lack of local currency funding and hedging instruments available to MFIs in the Kyrgyz Republic. The new EBRD loan in soms will allow us to further expand our lending, especially, to agricultural micro enterprises in the country’s rural areas,” said Gulnara Shamshieva, the General Director of Bai Tushum and Partners, speaking at the loan signing ceremony.

The new loan to Bai Tushum and Partners is the result of signing a Memorandum of Understanding in May this year between the EBRD and Kyrgyz government. In this MoU, the authorities confirm their intention to implement economic reforms aimed at reducing dollarisation and inflation and at developing, over time, local capital markets.

The Local Currency Lending Programme is supported by international donors through the ETC Local Currency Risk Sharing Special Fund. The programme falls under the Bank’s wider Local Currency and Local Capital Markets Initiative launched in May 2010.

In the Kyrgyz Republic, the EBRD focuses its activities on supporting micro, small and medium-sized enterprises and developing key infrastructure projects. In 2010 the EBRD’s investments amounted to a total of US$ 112.5 million.

To date, the EBRD has committed about US$ 450 million in various sectors of the Kyrgyz economy, mobilising additional investments of about US$ 650 million in over 70 projects. Some 80 per cent of the projects have been investments into the development of the country’s private sector.

The EBRD’s Early Transition Countries Initiative aims to stimulate economic activity in the Bank’s countries which still face the most significant transition challenges: Armenia, Azerbaijan, Belarus, Georgia, Moldova, Mongolia, Kyrgyz Republic, Tajikistan, Turkmenistan and Uzbekistan.

Thus far, Local Currency Lending MoUs have been signed with five ETC countries: Armenia, Georgia, the Kyrgyz Republic, Moldova and Tajikistan.