General Assumptions Crediting the primary agriculture in Uzbekistan and Tajikistan, with the exception of livestock farming, remains problematic due to dominance of strategic crops (cotton, wheat) with some subsistence farming mixed in. There is a lack of commercially viable fully private farms and activities that would generate incomes for farmers and, hence, be profitable for commercial banks. On the contrary, agricultural sector in Azerbaijan is more liberal, commercially viable and relatively free from political influence and government regulation. 11/16/2018

Rural (Agricultural) Lending - The LFS Approach Rural and semi-urban lending in Central Asia is commercially more viable than pure agro-lending Rural lending will significantly contribute to the profitability of branches in the relatively small towns It will broaden the client base, generate non-credit income and broaden the refinancing base From a developmental perspective, access to financial services for rural businesses and households is a high priority. Such include: Access to reliable savings facilities Access to money transfers and remittances Provision of bank cards for easier and safer payments Provision of different credit products, such as business, consumer, educational and personal credits 11/16/2018

Key Concepts for Successful Lending in Rural Areas Establish rural lending as opposed to agricultural lending Approximate rural credit product with the lending scheme currently used by LFS Finance activities more conducive to monthly cash flow Conduct business/household analysis in addition to business analysis Avoid financing activities that require balloon payments at the end Pay closer attention to sources of secondary income of rural businessmen and use the proceeds to “force” monthly payments of at least interest Establish future cash flow projections for each and every loan regardless the loan size 11/16/2018

Key Concepts for Successful Lending in Rural Areas Keep loan term relatively short to reduce risk Due cyclicality nature of agriculture, consider issuing credit line financing instead of conventional term loans Establish frequent monitoring Consider mobile cash payment centers or cash collectors Give more importance to collateral Allow higher loan/collateral ratio Be more conservative with assessment Obtain detailed knowledge of agricultural markets, crop/livestock production specificities, production methods and other external factors inherent to farming and ranching 11/16/2018

Loan Products Micro loans: for working capital and investments loans up to USD 10,000 (or the equivalent in local currency Small business loans: Working capital and fixed asset loans up to USD 50,000 (and higher) to SME clients 11/16/2018

Rural Activities Being Financed Today by LFS Agribusiness Wholesale Retail Storage & warehousing Commercial construction & equipment purchase Food processing 11/16/2018

Agricultural Activities to be Financed in Future Production (Livestock) Animal Husbandry Dairy Poultry & Broiler operation Honey production Farm implements and on-farm construction 11/16/2018

Agricultural Activities to be Financed in Future Processing, Equipment & Machinery Ag. machinery and equipment Agribusiness services (planting, harvesting, processing and etc.) 11/16/2018