Support for small and medium-sized businesses

All conditions and requirements of the Regulations "On targeted funding of commercial banks by the Russian-Kyrgyz Development Fund", approved by the Decision of the RKDF Council No. 5 dated April 11, 2016 (as amended by the RKDF Council Decision No. 7 dated May 26, 2017) apply to this Program.

  

Purpose:

Acquisition, renewal, expansion and modernization of fixed assets, in the following sectors: agro-industrial complex (production of agro-products, crop and livestock breeding, purchase and production of feed), purchase and processing of agro-products, as well as projects related to the construction of fruit and vegetable storage facilities, garment and textile industry, manufacturing industry, mining and metallurgical industry, transport, infrastructure development, including tourism, medicine and education, as well as other long-term production investments aimed at achieving the goals and objectives specified in the RKDF Charter.

Target market:

Small and medium-sized businesses (hereinafter referred to as SMEs) registered and operating in the territory of the Kyrgyz Republic that meet the following criteria:

· the volume of gross profit of the SME for the previous year is not more than 200 million KGS;

· the average number of employees (for the reporting period) is no more than 250 people;

· the share of the State in the SME nominal capital should not exceed 5 percent;

· the share of public and religious organizations (associations), charitable and other foundations in the SME nominal capital should not exceed 5 percent, with the exception of educational organizations with private ownership;

· the share of the owned by one or more legal entities that are not SMEs in the SME nominal capital should not exceed 50%;

· The SME to which the loan is issued must not be an insider or affiliate of a bank or the RKDF;

· According to the partner bank assessment the SME should have a stable financial position;

· In relation to the borrower, as well as its participants - legal entities, whose share in the nominal capital of the borrower is more than 51 percent, a bankruptcy case should not be commenced;

· Availability of clear and economically feasible primary sources (to avoid the need to sell collateral in the event of a default) for each loan repayment (subject to the Bank assessment).

Partner Banks:

Commercial banks of the Kyrgyz Republic that meet the criteria specified in the Regulation "On targeted funding of commercial banks by the Russian-Kyrgyz Development Fund", approved by the RKDF Council Decision No. 5 dated April 11, 2016 (as amended by the RKDF  Council Decision No. 7 dated May 26, 2017) posted on the RKDF official website.

Partner Bank repayment risks:

A commercial bank fully assumes the SMEs loans non-repayment risk

Terms of a loan facility for a partner Bank:

 

Up to 7 years, including 1-year exemption period for principal repayment for each tranche of the loan facility, including:

· SMEs target-oriented lending – 5 years.

· leasing transactions – 7 years.

· intensive horticulture and forestry funding - 7 years.

Issuance of a loan facility to a partner Bank:

The RKDF provides funding to a commercial Bank on agreed terms within the established limit in tranches. The commercial Bank must disburse the tranche received from the RKDF within 30 calendar days and provide the RKDF with a Report on the tranche target-oriented utilization and return the tranche balance to the RKDF. The next tranche is issued only after the RKDF receives from the Bank a satisfactory report justifying earlier disbursements.

The minimum amount of one tranche is 50 thousand US dollars (or the equivalent in another currency), the maximum amount of one tranche is 1 million US dollars (or the equivalent in another currency).

In exceptional cases, the RKDF has the right to consider the possibility of loan refinancing (issued by a commercial Bank to an SME) within 30 days from the date of loan issuance, provided that the loan meets the requirements of the RKDF in terms of industry focus and purpose.

The term for the loan facility disbursement by the partner Bank:

Not more than 12 months from the date of the Loan Agreement signing.

Currency:

Loan funds are provided by the KRDF to partner banks in Kyrgyz soms and US dollars.

Repayment of interest and principal by the partner Bank:

Repayment of the loan principal - in equal semi-annual payments after the expiration of the exemption period for loan principal repayment; repayment of interest - in quarterly payments.

Early repayment:

SMEs are entitled to a loan early repayment without any penalties, regardless of the time frame for filing an early repayment application by the SME

Partner banks are entitled to a loan facility early repayment without any penalties.

Collateral security provided by a partner Bank to the RKDF:

Partner banks must provide the RKDF with collateral security that meets the criteria specified in the Regulation "On targeted funding of commercial banks by the Russian-Kyrgyz Development Fund", approved by the RKDF Council Decision No. 5 dated April 11, 2016 (as amended by the RKDF  Council Decision No. 7 dated May 26, 2017) posted on the RKDF official website.

SMEs co-funding:

SMEs must provide own contribution in the amount of at least 15% of the total cost of each funded project. Co-funding is the contribution of the SME to the project implementation. The contribution to the project can be:

- cash and non-cash funds;

- financial resources invested in the project capital expenditures at the time of application submission to the Bank or before it, but subject to confirmation that without these expenditures the part of the project funded by the Bank from the loan would not make economic sense;

- production fixed assets used in the project.

Interest rate for SME:

The maximum interest rate for SMEs on loans in US dollars will be 5% per annum and on loans in Kyrgyz soms will be 9% per annum, excluding financing of the following areas:

· Tourism infrastructure improvement in Bishkek city,

 

In the above areas, the interest rate for SMEs will be 7% per annum for loans in US dollars and 11% for loans in Kyrgyz soms.

Commercial partner bank has no right to charge any commissions and fees in excess of the interest rate, including cash services related to the issuance and maintenance of a loan.

Loan facility monitoring:

The RKDF has the right to monitor the SMEs final beneficiaries. The partner bank undertakes to provide the RKDF with the following reports on the target-oriented funds disbursement:

- report on the target-oriented loan/tranche disbursement within 30 calendar days from the date of this loan/tranche receipt, but not later than the issuance of a new loan/tranche by the RKDF;

- monthly report on the target-oriented disbursement of the RKDF funds by the 5th day of the month following the reporting;

-  annual report by the 20th day of the month following the end of the reporting year.

SMEs lending terms:

The bank is obliged to request in writing (signed by the borrower) a forecast of the project stages and implementation timeframe.

The bank is obliged to use the following forms of lending:

- one-time loan - if the term for the loan disbursement does not exceed 3 months;

- loan facility (not revolving) - if the term for the loan disbursement exceeds 3 months. The issuance of each subsequent tranche (after the first) is possible only if there is target-oriented loan disbursement evidence submitted by the borrower.

Monitoring of the partner bank of the target-oriented loan disbursement 

The bank is obliged to monitor according to the following scheme:

- 2 monitoring forms (This monitoring is carried out only during the project implementation):

1. The Bank monitors loans not exceeding 50 thousand US dollars (or the equivalent in another currency) in accordance with the NBKR instructions and requirements, as well as the Bank internal standards for loan risk management and target-oriented loan disbursement promotion. At the same time, the RKDF reserves the right to request confirmation of the target-oriented loan disbursement.

2. A complete report on loans over 50 thousand US dollars (or equivalent in another currency) with the supporting documents justifying target-oriented loan disbursement attached in accordance with the RKDF regulations (including the Regulation "On targeted funding of commercial banks", as well as a report of the client site visit by the Bank employee) - at least once every 3 months from the date of the loan issuance.

The loans exceeding 50 thousand US dollars (or the equivalent in another currency) are the subject of a comprehensive monitoring (at least once every three months).

Activities prohibited for funding:

Production of tobacco and tobacco products, alcoholic beverages, weapons, drugs with the exception of medicine, gambling, forced and child labor, other legally prohibited activities.

The following types of funding are prohibited within the Program:

- commercial transactions funding;

- funding of current assets, except for cases when current assets funding is carried out in the framework of products approved by the RKDF Board.

As amended by the decision of the Board No. 06-2/24-5 dated May 8, 2020

Additional restrictions:

1. Limitation for the cash withdrawal for the territories of the Kyrgyz Republic specified in the List [1], in the amount of:

-  10% of the loan - if the loan does not exceed 2 million KGS (or 30 thousand US dollars);

- no more than 15 thousand US dollars (or 1 million KGS) within one loan - in case of the loan exceeds 2 million KGS (or 30 thousand US dollars).

 

Limitation for the cash withdrawal for the regions of the Kyrgyz Republic not indicated in List 1, in the amount of:

-  30 thousand US dollars (or equivalent in other currency);

Following the RKDF Board no-objection the amount of the cash withdrawal within one loan project may be increased;

2. Prohibition of transactions using loan funds within the Program with companies registered (recognized by NBKR) in offshore zones.

Restrictions on lending for the purchase of real estate (except for farmland): no more than 30% of the loan.

One SME loan ceiling:

The maximum amount of a loan or total debt provided by a partner bank to an SME under the Program should not exceed the equivalent of 1 million US dollars.

Refinancing component:

Loans to SMEs, in exceptional cases, may include a refinancing component. The refinancing component, including refinancing loans from other banks, must not exceed 30% of the loan, and can be provided subject to the following conditions being met:

1. the refinanced loan was used for investment purposes within an ongoing project;

2. the target-oriented disbursement of the refinanced loan is confirmed by the relevant documents (account statements, contracts, invoices, customs declaration, acceptance note, certificate of completion, acceptance certificate);

3. the period of the refinanced loan disbursement is at least 6 months at the time of application consideration;

4. there should be no late payments on loan principal and interest on the refinanced loan;

5. there should be no restructuration of a refinanced loan associated with a worsening financial situation or debt servicing (repayment of principal and interest), unless otherwise decided by the RKDF Board.

At the same time, the total amount of all loans with refinancing should not exceed 30% of the total funding ceiling within the program.

Refinancing of loans issued by other than financial institutions and banks is prohibited.

Additional requirements for SMEs:

 The duration of SME is at least 6 months.

 

[1] -   Bishkek city, Osh city, г. Jalal-Abad city, Alamudun and Sokuluk districts of Chui region;