The Aga Khan Agency for Microfinance (AKAM) has sponsored various microfinance entities including First Microfinance Banks in Pakistan, Tajikistan, and Afghanistan supported by IFC. During 2006, AKAM sponsored MFIs disbursed $109 million to 150,000 borrowers in 12 countries. At end 2006, loan portfolio outstanding totaled $70 million to 140,000 borrowers, 29% of whom were women. About $750,000 was disbursed to entities in East Africa (Kenya, Mozambique and Tanzania), about $1 million to entities in West Africa (Burkina Faso and Mali), $3.7 million in Egypt and $6 million in the Kyrgyz Republic. AKAM currently owns 100% of the program and will retain majority ownership after transformation.

The project entails the transformation of the existing AKAM micro-credit program into a microfinance bank to be named, the First Micro Finance Bank Syria (FMFB Syria or the Bank). The project is modeled after the previously established AKAM sponsored and IFC supported microfinance banks in Pakistan, Afghanistan and Tajikistan. IFC’s exposure is expected to include equity of up to $3 million and debt/guarantee of up to $5 million in addition to a comprehensive technical assistance package of around $0.5 million to support training and development of new products targeting women, savers, and SMEs.

13.50 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee	5.0
Loan	5.0
Equity	3.50

* These investment figures are indicative

The Bank is established in the Syrian Arab Republic with 7 branches countrywide and headquarters in Damascus and has already received a preliminary license to operate.

This project is expected to have a high development impact in the following two main areas: - Demonstration Effect: Consistent with the IFC’s strategy, supporting the first microfinance bank to be established in Syria presents an excellent opportunity develop the sector. Given the large unmet demand and the limited number of existing providers, it is likely that new entrants will replicate FMFB Syria’s experience, thus demonstrating the viability of commercial microfinance in frontier markets. - Access to finance for underserved segments: Over the next three years, the project is expected to provide over $100 million of financing to approximately 75,000 new borrowers, 26% of which are expected to be women. As newer financial products are introduced, (savings, micro-insurance etc) more than solely credit needs of the clients will be serviced. Additionally, the geographical spread is expected to widen as the Bank develops a nationwide network of outlets. Overall, improved access should reduce income disparities and create additional jobs.

For some time now, IFC has been in discussions with the Syrian authorities to share its global microfinance experience and encourage the establishment of a regime for specialized micro-banks, which is now a reality. The availability of risk capital to be deployed in early stage companies in frontier markets such as Syria is not available from the market. Hence, the sponsors have approached IFC to take full commercial risk and build a robust equity base for the Bank and provide/facilitate access to long-term debt in local currency. Such financing is not available to a near start-up entity as the Bank because many of the existing private commercial banks are relatively new and focused on the short end of the market. Using its considerable structuring expertise, IFC will introduce the client to the domestic banking market and design a debt product which meets the needs of the Bank and the market. Since the market is not comfortable taking the risk of a newly established Bank, IFC will attempt to structure a partial guarantee to mobilize local currency financing, something that has not been done in Syria to date. If such attempt is not successful, IFC could consider providing a standby loan to backstop deposit mobilization. Finally, IFC will be providing the Bank access to its global reservoir of knowledge on establishing and managing financial institutions in frontier markets, especially those serving smaller businesses and micro-entrepreneurs.

This project involves IFC support for the business of microfinance, and has been classified as a Category FI project according to IFC’s Environmental and Social Review Procedure. Considering the nature of activities supported, the project will be required to:

- Develop a procedure relevant to its business process, prior to disbursement, that is satisfactory to IFC, and that ensures that all its investments are screened and processed to avoid supporting activities on the IFC Microfinance exclusion list;
- Identify qualified persons to manage and implement the procedure;- Demonstrate commitment and resources to implementing the procedure, and take action to remedy any gaps in implementation on an ongoing basis;
- Submit a periodic report to IFC as per a format to be provided by IFC.