The project will establish a specialized financial institution providing credit and other financial services on commercial terms to micro and small enterprises (MSEs) in Macedonia. MFBM will have initial equity capital of €5.0 million equivalent. IFC's investment in MFBM is expected to yield a strong developmental impact -- in terms of business growth, employment generation, confidence-building in the banking sector, and the introduction of commercially-oriented microfinance techniques to Macedonia. The establishment of a professionally-managed, reputable bank in Macedonia is particularly important in light of the weakness of the majority of Macedonia’s private banks and the lack of public trust in the banking system. In addition to poverty reduction and related impact within the MSE target group, IFC's involvement in MFBM is also expected to: Encourage replication of commercially-oriented microfinance institutions (MFIs) in the market and downscaling by existing commercial banks to serve MSEs; Generate spill-over benefits in the form of trained managers and employees available to other local FIs; and, Mobilize MSE savings, although this will not be the Bank's initial focus. IFC initiated this project in 1999 by including it in its first Global Microfinance Capacity Building Facility. IFC has been the lead institution (together with EBRD) in developing this transaction, including dialogue with the Government of Macedonia, securing approval in principle for MFBM with the Central Bank, advising the government on the recently passed Law on Microfinancing Banks, and identifying financial investors.