AKAM's loans have financed agricultural inputs for growing cotton, potatoes, vegetables, wheat, etc. as well as animal husbandry, trading activities, housing repairs and education.At independence in 1991, the Kyrgyz Republic's economy was severely affected by the collapse of the Soviet trading bloc and the resulting loss of vast markets. A landlocked and mountainous country, some 98 percent of Kyrgyz exports had gone to other parts of the Soviet Union prior to independence. However, as factories and state farms collapsed with the disappearance of their traditional markets, the post-Soviet economy suddenly became dependant on the country’s natural resources and geography. While the mountainous terrain accommodated to livestock and agricultural production, it provided few exportable resources (with the exception of small gold reserves) and poor access to major economic centres. Taking also into account the country’s lack of experience with independence and democracy, and the absence of institutions needed to function in a market economy, AKDN worked to address some of these gaps.
One of the institutions was the Kyrgyz Investment and Credit Bank (KICB), which was set up to provide a wide range of products and services, including, short-term working capital loans, medium-to-long-term credits, trade finance products, corporate deposits, international money transfer, money market and foreign exchange operations as well as correspondent banking. The Aga Khan Fund for Economic Development (AKFED) is the principal shareholder; other shareholders include the European Bank for Reconstruction and Development (EBRD) (20%), the International Finance Corporation (IFC) (20%), Deutsche Investitions und Entwicklungsgesellschaft (DEG) (20%) and the Government of the Kyrgyz Republic (10%). KICB has also received a significant grant from the Government of Japan and considerable assistance from Kreditanstalt fur Wiederaufbau (KfW).
AKAM’s microfinance activities in the Kyrgyz Republic have primarily been in the rural mountainous areas of the Osh and Naryn provinces. Beginning in the Alai and Chon Alai districts, the programme extended its operations to areas adjoining the mountainous districts of Karasu and Uzgen. To complement the provision of mountain studies and entrepreneurship at the University of Central Asia, microcredit activities have also been initiated in Naryn Province, which is at the heart of Tien-Shan mountain range.
The programme has grown rapidly, with women representing half the borrowers. These loans have financed agricultural inputs for growing cotton, potatoes, vegetables, wheat, etc. as well as animal husbandry, trading activities, housing repairs and education.
These microfinance activities are meant to provide clients with a bridge between microfinance and the services offered by the Kyrgyz Investment and Credit Bank (KICB), which was set up in 2001 by AKFED and other international agencies (see section above).
The legal transformation of the on-going programme into a full-fledged microfinance bank was initiated during 2005. In a first phase, the programme will evolve into a microcredit company. In line with microfinance regulations in the Kyrgyz Republic, it is intended that the institution will seek a full license after two years of operations, so that it then will be allowed to offer deposit services.
Find out more on the Aga Khan Agency for Microfinance.
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