The proposed investment in MFB is, therefore, expected to be strongly developmental -- in terms of its economic impacts, stimulus for business reconstruction, employment generation, confidence-building in the banking sector, and introduction of commercially-oriented microfinance techniques to Yugoslavia.

In addition to poverty alleviation and related impacts within the MSE target group, IFC''s involvement in MFB is expected to yield a number of important demonstration effects. First, establishment of MFB will provide for a best-practice financial institution with sound operating policies, transparent financial reporting, environmental screening procedures and a clear governance structure. Establishment of a professionally-managed, reputable bank in Yugoslavia is particularly important in view of public loss of confidence in the country''s banking system as a result of wartime savings account seizures and the pyramid schemes of the 1990s. Second, IFC’s involvement in MFB is expected, over time, to lead to the replication of commercially-oriented MFIs in the market and downscaling by Yugoslavia''s existing commercial bank operations to serve MSEs. Third, Technical Assistance provided to MFB is expected to generate spill-over benefits in the form of trained managers and employees available to other Yugoslav financial institutions. Lastly, MFB will contribute to mobilizing MSE savings in due course, although this will not be its initial focus.