Microfinance through MFO

The RKDF microfinance partners (hereinafter referred to as MFOs)

Microfinance organizations that are residents of the Kyrgyz Republic, operating on the basis of a license or certificate of the National Bank of the Kyrgyz Republic (hereinafter referred to as the NBKR), having a stable financial position

Target borrowers

Borrowers can be small businesses operating in the territory of the Kyrgyz Republic.

Purpose of a loan faciltiy

Provision of microcredits for entrepreneurial activities (except for consumer lending) in the following industries:

  • agro-industrial complex: agro-production (crop and livestock breeding, purchase and production of feeds), agro- processing, as well as projects related to the construction of fruit and vegetable storage facilities.
  •  light industry: clothing, textile, footwear and other industries.

A small business (borrower) must not be an insider or an affiliate of the MFO or the RKDF/ RKDF officials.

Loan funds should not be allocated to refinance previously received loans or other obligations, to purchase real estate, pay salaries and tax deductions, as well as finance participants in the political process.

Amount of MFO loan facility

The amount of the loan facility is determined by the decision of the RKDF Board, depending on the MFO financial indicators and the estimated value of the collateralized property.

The minimum amount of the loan facility is 70.0 million KGS, but not more than 50% of the MFO own funds. The part of the loan facility exceeding the limit must be fully secured with liquid assets (monetary resources, GSTB or government securities.)

Currency of MFO loan facility

Loan funds are provided by the RKDF to MFO in national currency (KGS).

MFO loan facility term

24 months, exemption period - 6 months

The term for the loan facility disbursement is not more than 12 months

Loan ceiling

The maximum amount of a loan or total debt provided by an MFO to a small business entity under this Program should not exceed 500,000 KGS for one individual microcredit, or 500,000 KGS for group microcredits for one solidary borrowers group.

Interest rate

No more than 14% per annum for small businesses

MFO has no right to charge borrowers additional commissions and fees, including for cash services related to the issuance and maintenance of a loan as well as for the early repayment

MFO repayment risks

MFO fully assumes the small-entrepreneurship loan non-repayment risk

Loan facility arrangement

The RKDF provides funding to a MFO on agreed terms, within the established limit, in tranches.

The microfinance organization must disburse the tranche received from the RKDF within 30 days and provide the RKDF with a report on the tranche target-oriented utilization returning the tranche balance to the RKDF.

The next tranche is disbursed only after the microfinance organization submits to the RKDF a satisfactory report on the previous tranche disbursement.

The maximum amount of one tranche is 10,000,000 (ten million) KGS.

The minimum amount of one tranche is 2,000,000 (two million) KGS

Collate security of MFO

Microfinance organizations of the Kyrgyz Republic should provide the Fund with collateral that meets the criteria specified in the Regulation "On targeted funding of microfinance organizations by the Russian-Kyrgyz Development Fund" posted on the official website of the RKDF.

MFO financial status monitoring

A microfinance organization, within 20 calendar days following the reporting quarter, has to provide the RKDF with a quarterly report, which must contain information on the organization financial performance, compliance with mandatory economic standards, as well as other significant information.

The microfinance organization has to provide the RKDF (on an annual basis) with an audit report prepared in accordance with the requirements established by the legislation of the Kyrgyz Republic and international auditing standards.

Loan facility monitoring

The RKDF has the right to monitor the small businesses (end beneficiaries). The MFO undertakes to provide the RKDF with the reports on the target-oriented funds disbursement, as well as justification of the socio-economic effect (for example, information on the number of created jobs) according to the forms and terms established by the RKDF.

Repayment

Interest is the subject to monthly repayments, the loan principal - quarterly in equal installments.

Early repayment

MFOs are entitled to a loan facility early repayment to the RKDF without any penalties.

Small businesses are entitled to a loan early repayment without any penalties.

Requirements for MFO

Microfinance organizations of the Kyrgyz Republic that meet the following requirements:

  • Availability of a license or certificate of the NBKR;
  • Compliance with economic standards of the NBKR, as well as the economic standards of the RKDF;
  • The absence of any sanctions of a material (in the opinion of the RKDF Board) nature on the part of the NBKR over the past 3 years, including the facts of direct supervision of MFOs by the NBKR;
  • Absence of the fact of suspension/revocation of the license for the last three years;
  • The period of activity is at least 3 years at the time of application submission;
  • The break-even activity over the past three years, confirmed by the statement of an independent audit company;
  • Amount of paid up authorized capital:

· MFOs that do not have a license to accept deposit transactions - at least 70 million KGS;

· MFOs licensed for the deposit transactions - at least 100 million KGS;

Absence of overdue monetary obligations to the RKDF on the selected funds within the loan and interest on them and (or) on other RKDF funds;

No overdue obligations to other creditors on payments to the budget or wages payroll;

Information transparency of MFOs before the RKDF (official owners, end beneficiaries, lenders and borrowers);

Lack of information (including in the media) about the participation of the MFO, its owners and beneficiaries in money laundering, other illegal activities;

The share of graded loans should not exceed 10% of the total loan portfolio of MFOs;

Absence of unfinished legal proceedings of a material (in the opinion of the RKDF) nature, in which the microfinance organization acts as the defendant, as well as proceedings on insolvency (bankruptcy), reorganization (prevention of bankruptcy)

Submission of any required relevant information and documentation regarding the activities of the MFO which (in the opinion of the RKDF Board) is capable of influencing the MFO obligations fulfillment within 3 working days, unless otherwise  is agreed with the RKDF;

Information on the compliance of MFOs with the norms of the banking legislation of the Kyrgyz Republic in the field of combating the legalization (laundering) of criminal proceeds and financing of terrorist or extremist activities, as well as conducting transactions with signs of suspicious transactions;

Ensuring (during the loan term) unimpeded access to any financed entities and facilities funded through the RKDF loan used as collateral for the MFO obligations to the RKDF;

Unless otherwise agreed by the RKDF, it is prohibited to join the capital of another company/bank or create a company/bank;

Unless otherwise agreed by the RKDF, it is not allowed to amend the MFO Charter significantly;

It is necessary to notify (within two working days) the RKDF about new attracted loans (any debt) in the amount of 10% of the MFO own financial resources (capital) and provide all information about the proposed collateral for such loans, if they are attracted against the collateral security;

Ø Quarterly submission of information on compliance with the standards established by the NBKR and financial statements.

In the event of the provision of highly liquid collateral (cash, highly liquid securities), the above requirements for MFOs may be revised by the decision of the RKDF Board provided that the size of the MFO equity capital is not less than 70 million KGS; the MFO license/certificate is valid/not suspended; the MFI is not involved in money laundering or other illegal activities.    

Prohibited practices

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

This Program is subject to all prohibitions and restrictions established by the Regulations on targeted funding of Commercial Banks, as well as, unless the Program explicitly states otherwise, all prohibitions and restrictions established by the SMEs targeted funding Program.

Sanctions and other requirements

If the MFO violates the target purpose, conditions and criteria of target-oriented funding purpose, the interest rate for the MFO is increased up to 20% per annum.

If the MFO violates the purpose, conditions and criteria of target-oriented funding purpose, the RKDF is entitled to cancel the loan facility and demand early repayment of the outstanding amount.

In case of violation of the mandatory standards of the NBKR, as well as other regulations governing the activities of MFO, the RKDF has the right to cancel the loan facility and demand early repayment of the outstanding amount.

 

Recommended performance standards

Title

Performance standard

RKDF recommended standard

MFO that do not accept the deposit transactions

 

 

Maximum MFO cumulative investment

no more than 30%

no more than 30%

Maximum aggregate amount of funds borrowed from founders (shareholders) - individuals

no more than 100%

no more than 100%

Maximum aggregate amount of funds borrowed from founders (shareholders) - legal entities

no more than 100%

no more than 100%

The maximum total amount of funds borrowed from legal entities and founders (shareholders)

no more than 500%

no more than 400%

Capital adequacy (sufficiency) (М2)

n/a

not less than 15%

MFO that accepts the deposit transactions

 

 

MFO minimum equity capital ratio (M1)

not less than 100%

not less than 100%

Capital adequacy (sufficiency) (М2)

not less than 8%

not less than 15%

Maximum exposure per borrower (M3)

no more than 5%

no more than 5%

Liquidity ratio for MFO (М4)

not less than 30%

not less than 40%

Risk limitation rate for the return of attracted deposits (M5)

not less than 100%

not less than 110%

Cumulative debt of MFO employees

no more than 5%

no more than 5%

Total currency position size

no more than 20%

no more than 18%

The size of the total currency position per 1 currency

no more than 15%

no more than 13%

General requirements for all MFOs

 

 

Share of classified assets in total assets subject to classification

-

no more than 10%

Share of overdue loans

-

no more than 10%

Share of loans overdue by more than 30 days, in the amount of rescheduled loans in the loan portfolio (PAR> 30 days + rescheduling)

-

no more than 15%