Summary of Proposed Investment
Project Number
9205
Company Name
Probusiness Bank
Date SPI Disclosed
Jan 3, 2001
Country
Russian Federation
Industry
Financial Markets
Projected Board Date
Feb 6, 2001
Status
Completed
Sector
Commercial Banking - General
Department
Regional Industry FIG LAC & EUR
Environmental Category
FI
Previous Events
Approved : Mar 12, 2001
Signed : Nov 16, 2001
Invested : Dec 28, 2001
Project Description
Probusinessbank was founded in 1993 as a full service commercial bank by a group of graduates from the top Moscow universities. The initial capital came from companies in the chemical, construction, food production and machinery industries. At the end 1999 it had assets of $92 million and equity of $9 million equivalent. The bank''s business focus is on lending to mid-sized corporates and small and medium-sized enterprises (SMEs).The investment will strengthen Probusinessbank capital base which was seriously eroded as a result of the 1998 crisis in the banking sector. It will also provide long-term funding to support the bank''s business development program, particularly the expansion of lending to mid-sized corporates and SMEs. On a selective basis the bank will also be able to start offering longer maturities to its strongest clients. The investment will be accompanied by a donor-funded program of technical assistance to upgrade the bank''s practices, systems and technologies.
Currently there are virtually no commercial sources of long-term funding for Russian-owned banks, unless they belong to one of the big financial industrial groups. IFC''s financing will strengthen Probusinessbank''s balance sheet and provide resources to expand its lending activities without compromising its independence. The financing will be combined with a program of technical assistance to improve the bank''s operations. IFC''s presence as an investor in the bank may also help it attract foreign strategic investors, once the country conditions improve.
The Russian financial sector is seriously undeveloped and does not function efficiently either in mobilizing or allocating resources. The resulting shortage of financing is a major constraint to the development of the productive sector of the economy. This project will contribute to rehabilitate and restore confidence in the Russian financial sector by helping a viable bank, that has the potential to become a leader in the commercial banking industry and provide credit to help the development of productive enterprises. It will also stand as a model for other similar institutions to follow its lead. The investment will also allow the bank to increase its lending, with longer maturities, to mid-sized Russian corporates and SMEs, thus supporting a sector of the economy which will be a key to achieving sustained economic growth and generating employment in the next few years.
Currently there are virtually no commercial sources of long-term funding for Russian-owned banks, unless they belong to one of the big financial industrial groups. IFC''s financing will strengthen Probusinessbank''s balance sheet and provide resources to expand its lending activities without compromising its independence. The financing will be combined with a program of technical assistance to improve the bank''s operations. IFC''s presence as an investor in the bank may also help it attract foreign strategic investors, once the country conditions improve.
The Russian financial sector is seriously undeveloped and does not function efficiently either in mobilizing or allocating resources. The resulting shortage of financing is a major constraint to the development of the productive sector of the economy. This project will contribute to rehabilitate and restore confidence in the Russian financial sector by helping a viable bank, that has the potential to become a leader in the commercial banking industry and provide credit to help the development of productive enterprises. It will also stand as a model for other similar institutions to follow its lead. The investment will also allow the bank to increase its lending, with longer maturities, to mid-sized Russian corporates and SMEs, thus supporting a sector of the economy which will be a key to achieving sustained economic growth and generating employment in the next few years.
Sponsor / Cost / Location
Development Impact
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Contacts
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