FINCA Azerbaijan was established in 1998 and registered and licensed by the Central Bank of Azerbaijan as a Limited Liability Non-Bank Credit Organization since 2000. During the period 1998 - 2005 FINCA Azerbaijan was an operator responsible for the US Government’s assistance program. FINCA Azerbaijan is one of the microfinance market leaders in Azerbaijan with a gross loan portfolio outstanding of $84 million per December 2010, reaching 97,819 clients. Its product range includes individual and group loan products for urban and rural/agricultural markets. FINCA Azerbaijan is 100 percent owned by FINCA International, Inc. (“FINCA”), a non profit organization headquartered in Washington, DC and one of the largest microfinance networks in the world with 21 affiliates in 21 countries, including 15 IDA countries. FINCA serves approximately 701,000 micro entrepreneurs, 70 percent of which are women. FINCA has been actively preparing the ground for the establishment of a holding company to support the process of transformation of its network affiliates into licensed micro deposit taking institutions. IFC is in the process of finalizing its investment in this holding company (Project #29683) to which the ownership of the Company will be transferred.

The Project involves a senior loan from IFC’s own account to the Company denominated Azerbaijani Manat, in an amount not to exceed $7 million equivalent.

7.0 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	7.0
Equity

* These investment figures are indicative

FINCA Azerbaijan is headquartered in Baku, Azerbaijan. FINCA Azerbaijan maintains a network of 24 branches throughout the country.

- The Project would provide funding for underserved segments of society in an IDA country, more specifically women entrepreneurs, and will contribute to employment creation and poverty reduction in Azerbaijan. - The Project would support the efforts of FINCA Azerbaijan to diversify and increase the volume of their funding and to better manage their asset and liability and their local currency position at a time of limited funding opportunities. - In Azerbaijan, the provision of term funding in the local financial market will have a strong demonstration effect and build market confidence.

IFC's additionality can be summarized as follows: - Provide term-funding that is not easily available in the local market. IFC's loan will provide the necessary financial resources to continue the growth of the Company and support its expanded product offer to local entrepreneurs. - Support local micro and small entrepreneurs through a capable financial intermediary with a good track record of financing micro and small businesses in Azerbaijan. - Local currency options are limited in Azerbaijan. By providing local currency funding to the Company, IFC will help reduce its foreign currency exposure and improve its risk profile. - Enhance IFC's additionality to the FINCA network through a direct and local support to their largest affiliate and help grow its operations, in parallel to IFC's engagement on the creation of the FINCA Microfinance Holdings (project# 29683).

This project involves support for a microfinance company and has been classified as a Category FI project according to the IFC''s Environmental and Social Review Procedure. The E&S appraisal focuses on reviewing Company’s portfolio, E&S due diligence procedures and HR practices. The appraisal indicates that the Company’s lending procedure incorporates a separate environmental policy, a requirement to follow national E&S laws and an Exclusion List. The Company is in compliance with the Performance Standard 2 – Labor and Working Conditions. Based on the review, FINCA Azerbaijan will be required to enhance and/or update its existing procedure to screen and process its investments to avoid supporting activities on the IFC Microfinance Exclusion List and be consistent with the one of the FINCA Microfinance Holdings. The Company will also be required to appoint a qualified SEMS officer to manage and implement the procedures, to maintain compliance with the Performance Standard 2, and to submit an annual report to IFC as per a format to be provided by IFC.