The project sponsor is BRAC NGO, Bangladesh one of the largest, sustainable, microfinance institutions in Bangladesh, covering all 64 districts and a population of 100 million (of the total population of 140 million) through its microfinance and development programs. BRAC was formed as a relief and rehabilitation organization following the independence of Bangladesh in 1972, and has grown organically under the leadership of its founder, Fazle Hasan Abed. As of December 2005, cumulative loan disbursement reached $3.1 billion (equivalent) with outstanding loans of $276 million (for 4.8 million borrowers) and member savings of $141 million. Disbursements in 2005 reached $ 501 million, up 15% over 2004. Over 90% of the borrowers are women.

The Bank’s estimated initial capital of Afghanis 300 million equivalent to $6.1 million is expected to be subscribed by: BRAC (NGO) $3.1 million (50.8%); and Shorecap of the US, Triodos of the Netherlands and IFC each with an investment of up to $1 million representing a stake of approximately 16.4%.

Total capital required for the Bank is estimated at $6.1 million. The proposed IFC investment is $1 million in equity for a stake of 16.4% in the Bank.

1.0 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan
Equity	1.0

* These investment figures are indicative

BAB will be headquartered in Kabul, Afghanistan, with a branch in a prominent business center in Kabul. In future, the Bank will expand to other provinces. BAB is expected to have a significant portfolio of small enterprise loans and will also take deposits and provide trade finance services.

The project is expected to have a high significant impact on the country’s economic development. Afghanistan has endured more than 25 years of war and civil strife with devastating results. Through financing, the project will stimulate economic activities of the country’s citizens (about 53% of Afghanistan’s 30 million people live on less than $2 per day). Over 5 years, the Bank intends to have strong outreach and target smaller and medium sized companies with critical working capital for their day-to-day operations as well as longer-term funding needed to re-establish and grow their businesses. The project will also broaden and deepen access to financial services in Afghanistan. Finally, by formalizing and conducting its activities as a bank, the project is expected to further strengthen the nascent banking system and serve as a “best practice” for other existing banks.

IFC’s role in this project is strong, as IFC will support the Afghanistan Government’s strategy of promoting small enterprise lending as an instrument of poverty alleviation. IFC will be a full risk participant in the newly created entity, providing it equity capital and technical assistance if required.

This is a category FI Type 1 project according to IFC''s environmental and social review procedure. BAB 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 Afghan 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.