The maturation of a start-up into an institution attracting equity investment by a major institution within the region is an example of how international support can incubate and then garner local investment for inclusive financial services.
In 1999, as part of a broader USAID program promoting access to finance in the Caucasus, ShoreBank International Ltd. (SBI) established the nonbank financial institution SOA Kredit to meet the financial needs of small businesses and entrepreneurs. This green-field approach was taken only after finding no local banks or financial institutions open to these market opportunities, with the aim of demonstrating the viability and economic development impact of this focus.
In early 2003, SOA Kredit launched a real estate product to provide financing for up to five years to individuals for the acquisition and/or renovation of primary residences and investment properties. SOA Kredit became the first non-bank lending institution in Azerbajan licensed to offer mortgages and other lending products, a signficiant break-through in the market. SBI structured the loan products, established procedures for originating and servicing the mortgages, and hired and trained staff.
By October 2007, SOA Kredit had successfully disbursed over $22.5 million in micro and small business loans and residential mortgages to some 1,400 clients, while maintaining a delinquency ratio of less than 1%. In December 2007, SBI entered into an agreement with TBC Bank, a leading Georgian commercial bank, whereby TBC provided expansion capital to SOA Kredit in exchange for a majority equity stake. Renamed TBC Kredit, it is now managed by TBC Bank and today has disbursed over $50.7 million to micro and small businesses and households. SBI continues to hold a small equity stake.
The maturation of a start-up into an institution attracting equity investment by a major institution within the region is an example of how international support can incubate and then garner local investment for inclusive financial services. The TBC Kredit experience also, however, illustrates the essentiality of “patient capital” in building permanent development finance institutions that demonstrate the profitability as well as development impact of focusing on the small and growing business sector. Without USAID’s multi-year engagement, what is today an institution operating on fully commercial terms could not have been created.
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In 1999, as part of a broader USAID program promoting access to finance in the Caucasus, ShoreBank International Ltd. (SBI) established the nonbank financial institution SOA Kredit to meet the financial needs of small businesses and entrepreneurs. This green-field approach was taken only after finding no local banks or financial institutions open to these market opportunities, with the aim of demonstrating the viability and economic development impact of this focus.
In early 2003, SOA Kredit launched a real estate product to provide financing for up to five years to individuals for the acquisition and/or renovation of primary residences and investment properties. SOA Kredit became the first non-bank lending institution in Azerbajan licensed to offer mortgages and other lending products, a signficiant break-through in the market. SBI structured the loan products, established procedures for originating and servicing the mortgages, and hired and trained staff.
By October 2007, SOA Kredit had successfully disbursed over $22.5 million in micro and small business loans and residential mortgages to some 1,400 clients, while maintaining a delinquency ratio of less than 1%. In December 2007, SBI entered into an agreement with TBC Bank, a leading Georgian commercial bank, whereby TBC provided expansion capital to SOA Kredit in exchange for a majority equity stake. Renamed TBC Kredit, it is now managed by TBC Bank and today has disbursed over $50.7 million to micro and small businesses and households. SBI continues to hold a small equity stake.
The maturation of a start-up into an institution attracting equity investment by a major institution within the region is an example of how international support can incubate and then garner local investment for inclusive financial services. The TBC Kredit experience also, however, illustrates the essentiality of “patient capital” in building permanent development finance institutions that demonstrate the profitability as well as development impact of focusing on the small and growing business sector. Without USAID’s multi-year engagement, what is today an institution operating on fully commercial terms could not have been created.
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