1 CENTRAL ASIA MICRO FINANCE ALLIANCE December, 2006

2 CENTRAL ASIA MICRO FINANCE ALLIANCE USAID funded 3-year project, continuation of CAMFA I project. Objective: To increase the range and enhance the outreach of financial services to micro and small businesses, especially in rural and isolated regions of Kyrgyzstan.

3 CAMFA II: 3 COMPONENTS I: Continue support the development of 4 Microfinance Associations in Central Asia region II: Continue support of Frontiers, a wholesale lender for small and very small financial institutions in Central Asia III: Promote Agricultural Finance in Kyrgyzstan

4 COMPONENT I To increase the capacity and sustainability of national Microfinance Associations (MFAs).

5 COMPONENT I MFA Capacity building Improve the policy and regulatory environment for microfinance Increase availability of microfinance training and specialized technical assistance Support standards development and increased financial transparency

6 COMPONENT I PARTNERS: AMFOK – Kazakhstan (May 2004) AMFOT – Tajikistan (Feb 2005) MTA – Uzbekistan (July 2005) AMFI – Kyrgyzstan (Dec 2005) Regional Network (July 2006)

7 COMPONENT I SUPPORT TO MFAS FOR: Lobby government Gain access to new technical approaches Best practice information in Russian Hands-on experience at best practice MFIs New information technologies and support Networking and sharing regional experiences Reporting to the MixMarket Social impact tools and research Commercial financing options

8 COMPONENT I MFA CAPACITY BUILDING Improving Governance Strategic planning / Operations Membership driven service delivery Increased MFA Financial Sustainability Human Resource Development Enhanced External Relations

9 COMPONENT I COUNTRY SPECIFIC ACTIVITIES Credit Bureau in Tajikistan Legal assistance to MFI in Uzbekistan

10 COMPONENT I ACHIEVEMENTS: MF law in Uzbekistan (Sept’06) Tax benefits for MFIs in Uzbekistan (Jan’06) Loan size cap for MFIs in Kazakhstan (Nov’06) MFI Reporting to NBT in Tajikistan (Apr’06) MF midterm strategy participation in Kyrgyzstan

11 COMPONENT I REGIONAL NETWORK Regional MOU between the 4 MFAs in May 2006 AMFOT – in 2007 will take the responsibility for regional coordination hub

12 COMPONENT I REGIONAL NETWORK Coordination of activities Information sharing Trainings Donor/ commercial funding

13 COMPONENT II FRONTIERS SUPPORT To increase MFI access to wholesale lending

14 COMPONENT II Institutional development of Frontiers Facilitate expansion of Frontiers loan portfolio and outreach to MFIs in Central Asia region. Continue diversification of Frontiers’s sources of funds through increased leveraging of its capital.

15 COMPONENT III Expanding Ag Financial Services: TA and mini-grants to MFI, CU, Ag Coop. and commercial banks for innovative products and new lending methodologies Rural Finance window at Frontiers (on-lending fund) OBJECTIVE: Improving access to demand driven and sustainable rural and agricultural financial services

16 COMPONENT III Two main motivations Agriculture sector remains a leading economic sector for Kyrgyzstan; main exporter and major employer Improved financial markets can accelerate agricultural and rural growth, increasing food security, poverty reduction and conflict resolution

17 COMPONENT III Specialized technical assistance services Small grants program Disseminate best practices in rural finance Access to credit through Frontiers Support pilot activities for innovative financial services

18 COMPONENT III Lending for agricultural production Lending for animal husbandry Lending for agro-processing, that operate in rural areas Fixed Asset purchases for farm equipment and agricultural processing (including leasing) Loans that support improved technologies for handling, storage and marketing of agricultural products Loans that support rural enterprises for competitive packaging and labeling and branding of products

19 COMPONENT III Challenges and Opportunities in Rural Financial Market High transactions costs for lenders and borrowers High risks faced by borrowers and savers due to natural disasters and limited tools to manage risks Lack of reliable information Lack of adequate collateral Inhospitable legal and regulatory framework

20 COMPONENT III Key Assumptions Improving economic opportunities in rural areas leads to improvement in agricultural productivity The financial services should be tailored specifically to rural households, rural enterprises and Ag. sector Need to improve the ability of existing financial institutions to deliver appropriate rural and Ag. Financial services

21 COMPONENT III Serving clients at a distance - managing high transaction costs Management loans at a distance - decentralization of loan approval authority Ag lending specific: Seasonality of agricultural production Loan terms structured around cash flow and crop cycles Loan application assessments require substantial knowledge of local crops, crop prices, yields and farming methods

22 COMPONENT III Dealing with risks in rural financial services Need for non-conventional lending methodologies Alternative (creative) collateral and term conditions

23 RURAL FINANCE: Financial services used in rural areas by people of all income levels AGRICULTURAL FINANCE: Financing of agriculture-related activities, from production to market MICROFINANCE: Financial services for poor and low- income people Rural Micro Agricultural Financial Markets Financial Services in Rural Areas

24 COMPONENT III TA for Financial intermediaries for new product development, cash flow lending, savings, etc. Building long term capacity by TA and incentives to increase the provision of agricultural finance services

25 COMPONENT III TA to selected financial institutions: competitive system based on commitment and potential for increased outreach Policy and regulatory reforms

26 Financial Sector Challenges Elevated perceptions of risk, based on past negative experiences Weak systems of land titling, collateral laws and judiciaries Long time process for accepting innovative loan products and practices Information imbalance Need for donor effort coordination

27 Thank you! ACDI/VOCA Kyrgyzstan Bishkek, , Suyunbaeva Street Tel: ( ) , Fax: ( ) Web cite: