Following receipt of its banking license in June 2005, the bank is expected to be fully capitalized at $12.0 million equivalent, over the next 18 months. Equity is expected to come from FORA Fund (the fund), a non-profit, non-governmental entity based in Nizhny Novgorod, Russia. The fund has been operating in its current form since 2000, when existing regional organizations that had been working in Russia since 1994 were merged. The fund’s operations were originally financed by grants from the governments of the UK, USA, and the UNHCR, as well as from private donors. The fund is owned by several Opportunity International (OI) network members located in Australia, UK, Germany, USA and Russia. Founded in 1979, OI is an international coalition of microfinance institutions and supporting organizations, with roots in Christian charity. OI is dedicated to providing opportunities to poor entrepreneurs to transform their lives through small and micro loans. In 2002, OI was incorporated in Switzerland as a Verein, a not-for-profit, cooperative entity that was selected as the most flexible legal structure. Today, OI has one of the largest global microfinance networks with operations in 27 countries serving over 500,000 clients. The aggregate equity capital of OI’s network is over $90 million equivalent.

IFC proposes to provide a loan facility for IFC’s own account of up to €5.0 million to FORUS Bank.

6.31 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	6.31
Equity

* These investment figures are indicative

FORUS Bank is headquartered in Nizhny Novgorod. The bank is expected to inherit six regional offices (Nizhny Novgorod, St. Petersburg, Lipetsk, Voronezh, Rostov and Saratov) and 27 satellites outlets from FORA Fund following completion of the bank transformation.

The developmental impact of this project is expected to be high, which is consistent with commercially-run micro credit programs, particularly in countries where small businesses have limited or no access to formal credit institutions. The project supports the creation of a sustainable commercial microfinance bank, from an existing NGO program that currently serves about 16,000 clients in some of Russia’s poorest regions. Sustainability of OI’s program is expected to be greatly improved, because its legal status will be clearer, and as a bank it will be allowed to access deposits (initially only for current accounts of legal entities and sole proprietorships). The existence of the bank will enhance the program’s ability to raise other sources of external funding and grow through leverage. Leverage should also improve profitability over the long term and distinguish FORUS Bank as a commercially viable microfinance operation. The needs of micro and small enterprises for financial services – FORA’s customer base – are particularly poorly served, and Russia’s banks are scantily represented outside the major cities. IFC’s role is to assist in the bank’s development, which will enhance its capacity to serve more customers and broaden the number of products and services that it can provide to its clients and improve its sustainability.

This is a category FI Type 1 project according to IFC''s environmental and social review procedure. FORUS will be required to designate individuals to have responsibility for the environment and who will attend IFC''s environmental management workshop or an approved equivalent, establish an environmental management system to ensure that activities financed under relevant operations are consistent with applicable Russian environmental, occupational health and safety regulations and IFC''s Microfinance Exclusion List, and submit to IFC an environmental management plan and annual environmental performance reports.
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