The International Finance Corporation, the private sector arm of the World Bank, has signed agreements to make a US$5 million investment in Probusinessbank, a private Russian bank that focuses on lending to mid-sized corporates and small and medium enterprises (SMEs). The investment, in the form of a subordinated convertible loan, will strengthen the bank’s capital base and support an expansion in corporate lending.
The investment fits in with IFC’s global strategy of supporting the growth of independent financial institutions in developing countries as a way to boost private sector development. The bank is independent from the large financial industrial groups that dominate large parts of the Russian economy.
The agreement was signed in Moscow by IFC Chief Peter Woicke and Sergei Leontiev, President of Probusinessbank. Woicke, who is currently touring Russia to discuss the investment climate with businessmen and government officials, said: “A vibrant and healthy private sector is a key element of economic growth and sustainable job-creation. We are committed to supporting independent Russian financial institutions that provide the architecture for future growth.”
Probusinessbank was founded in 1993 as a full service commercial bank by a group of Russians hailing from some of Moscow’s top universities. The initial capital for the bank came from companies in the fields of chemicals, construction, food production, and machinery industries. As of June 30, 2001, the Bank had assets of approximately $167 million and equity of $33 million equivalent.
Edward Nassim, Moscow-based IFC Director for Central and Eastern Europe, noted that the IFC investment will allow Probusinessbank to increase its long maturity lending to mid-sized corporates and SME’s, two groups currently underserved by local financial institutions. “The support of mid-sized corporates and SMEs will be a key to achieving sustained economic growth and generating employment in the next few years,” Mr. Nassim said. “We will continue to look for viable opportunities in Russia’s financial sector,” he added.
The IFC investment is coupled with a $700,000 donor-funded program of technical assistance to upgrade the bank's practices, systems and technologies. The UK Department for International Development through the IFC Technical Assistance Trust Fund Program provided the donor support that includes the funding of an experienced UK banker to work with the bank full time, offering advice on its internal restructuring and re-engineering program.
Probusinessbank is IFC’s first investment in the financial sector in Russia in the fiscal year 2002.
As of December 2000, IFC’s approvals in Russia totaled over one billion dollars and covered various sectors of the Russian economy. The Corporation is pursuing an active ongoing investment program, with development of the financial sector constituting one of the key priorities.
IFC’s mission is to promote sustainable private sector investment in developing countries, helping to reduce poverty and improve people's lives. IFC finances private sector investments in the developing world, mobilizes capital in the international financial markets, and provides technical assistance and advice to governments and businesses. Since its founding in 1956, IFC has committed more than $31 billion of its own funds and arranged $20 billion in syndications for 2,636 companies in 140 developing countries. IFC’s committed portfolio at the end of FY01 was $14.3 billion.
