ADB is one of the top private banks in Azerbaijan with total assets in the amount of $172.6 million, net loan portfolio of $122.8 million and equity of $30.0 million as of December 31, 2007. The Bank provides a full range of banking products including corporate loans (mainly to small, medium and micro entrepreneurs), car loans, consumer loans and mortgage finance and plans to continue diversifying its product base and revenue steams by promoting new products, such as leasing and mortgages. The Bank operates through its network of 33 branches and offices located in the capital city Baku and throughout Azerbaijan’s regions. The main shareholders of the Bank are: Mr. Rahman Hajiyev, EBRD and FMO.

The proposed IFC investment includes mortgage and leasing facilities in the total amount of $10.0 million in the form of an A loan for the IFC’s account.

5.0 million (USD)

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

* These investment figures are indicative

The Bank is headquartered in Baku, Azerbaijan, and operates a branch network in various locations in the capital city and in the country.

IFC’s investment is expected to have a high developmental impact in the following areas:

- Development of Azerbaijan’s housing finance and leasing sectors:

Consistent with the IFC’s strategy, the project presents the opportunity to promote the development of the housing finance and leasing markets in Azerbaijan by: providing the much needed long-term funding to the banking system; raising the credit underwriting standards in accordance with the best industry practices; increasing standardization of mortgage and leasing products.

- Increased Access to Funding:

By providing long term funding, the project will also increase the affordability of home purchase, thus promoting home ownership in the country, as well as providing financing for houses renovation. Furthermore, by developing the mortgage market in Azerbaijan, the project is expected to lower the cost of mortgage loans over the short to medium term. By funding the Bank’s leasing operations. the project is also expected to diversify the funding options available to small and medium enterprises.

- Strengthening of the Financial Sector:

The successful implementation of this project will develop financial intermediation by increasing the range of products and services available in the market.

- Demonstration Effect:

IFC’s involvement will help bring credibility to the country’s growing mortgage finance and leasing sectors and will facilitate attracting long-term funding from other sources.

The proposed project fits well with the strategic objectives of IFC and the World Bank Group as it will support the development of the housing finance and leasing sectors and increase the financial intermediation in the economy.

IFC’s developmental contribution is two-prong:

- IFC''s growing and successful experience in the housing finance and leasing sectors will ensure that the best international practices are incorporated;
- IFC’s longer term funding will extend the maturity of the mortgage loans and leases available in Azerbaijan and will further stabilize and diversify the funding base of the country’s financial sector.

This project involves IFC support for the leasing business and has been classified as a Category FI project according to IFC’s Environmental and Social Review Procedure.

For the leasing component 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 FI exclusion list, and ensures that the use of the leased equipment complies with the applicable National laws.
- Identify qualified persons to manage and implement the procedure.
- Demonstrate commitment and resources to implementing the procedure.
- When leasing to business activities with potentially significant environmental and social risks (e.g., mining, oil production), inquire and review S&E information available in the public domain and avoid leasing to businesses that have substantial unresolved environmental and social issues. In such cases, the company will also need to satisfy itself that the activity is being undertaken in compliance with the applicable national laws.
- Submit a periodic report to IFC as per a format to be provided by IFC.