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Microfinance in Kyrgyz Republic

The loans have financed agricultural inputs for growing cotton, potatoes, vegetables, wheat, etc.The First Micro Credit Company (FMCC) has operated as a credit company since early 2006, after it was transformed from the AKDN microfinance programme that previously operated in the Kyrgyz Republic. Having reached sustainability after just one year of full operations, FMCC ended in 2007 with more than 7,000 loans worth US$ 6.2 million. While the growth in the number of loans was only 13% over the previous year, the portfolio increased by 79% due to a large number of repeat borrowers seeking larger loans. Slower growth in the number of loans was partially due also to the delay in expansion of the branch network until the fi nal quarter of the year.

In its current legal form, FMCC is not permitted to take deposits. This has constrained the institution’s ability to diversify its funding sources. To remedy this, AKAM is considering a change to FMCC’s institutional status to allow it to offer a broader range of financial services and products, in order to meet the significant opportunity for growth in the Kyrgyz microfinance market. Currently, the microfinance market consists of the stateowned Aiyl Bank, with 43% of the total portfolio, and over 168 relatively small microfinance institutions. Consolidation is likely to occur in the coming years and FMCC is examining options that will allow it to scale up quickly in order to capture a larger share of the market, and increase its outreach to the poor and under-served.

FMCC operates largely in the remote rural south-eastern parts of the country, which are part of a wider AKDN regional strategy to promote the social and economic development of mountainous regions throughout Central Asia. FMCC designs products that complement this strategy, including an education loan to assist students enrolled at the University of Central Asia (UCA) in Naryn and an agricultural credit facility to support AKF rural development initiatives. FMCC has developed a stable enterprise and agricultural loan portfolio and has been able to diversify into other products, such as housing microfinance.

In early 2008, FMCC will receive new investments into its capital base from AKAM. International partners have been identified to provide debt financing. This increased growth will be led by expansion into two new areas and an increase in the number of staff. By the end of 2008, FMCC expects to have over 10,000 clients and a loan portfolio of roughly US$ 11 million. Such expected growth will be complemented by FMCC’s plans to transform into deposit taking entity, and invest heavily in training and IT systems.

FMCC endeavoured to meet a special challenge early in the first quarter of 2008. Following a serious earthquake in the southern region of the country, FMCC provided emergency loans and financing at lower than normal interest rates to a number of households which faced extreme challenges and hardships as a result of the damage to their homes and the severe winter that beset the entire region. The efficient and effective response of FMCC helped ease the suffering of many who were affected by the devastation.

These types of actions are an element of the AKDN strategy of facilitating community responses to localised disasters – many of which go unseen by the mass media and the major international relief institutions – and broadening the impact of microfinance.