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Summaries of proposed guarantees are provided prior to Board consideration and final contract signing, and therefore are subject to change. Project briefs are disclosed after contract signing and do not reflect subsequent modifications (e.g., changes in guarantee amount).
Project Name Raiffeisen Leasing Aval LLC
Guarantee Holder Raiffeisen Zentralbank Österreich AG
Investor Country Austria
Host Country Ukraine
Sector Leasing
Gross Exposure ($million) 142.50
Fiscal Year 2009
Status Proposed
Project Number 7439
Environmental Category FI
Date SPG Disclosed October 10, 2008
Project Board Date October 28, 2008

This summary covers a guarantee for Raiffeisen Zentralbank Österreich AG (RZB)’s $150 million shareholder loan to its leasing subsidiary in Ukraine, Raiffeisen Leasing Aval LLC (RLAV). RZB has applied for a guarantee of $142.5 million for a period of up to seven years against the risks of transfer restriction and expropriation of funds.

RZB’s shareholder loan will enable RLAV to respond to rapidly growing demand for leasing products in Ukraine. RLAV will use the proceeds of the shareholder loan to extend leases of equipment and machinery to Ukrainian enterprises across various sectors. A substantial part of this funding is expected to benefit small and medium-sized enterprises (SMEs) and support investment in agriculture. The SME sector is an underserved segment of the Ukrainian market as they often do not qualify for bank financing and lack the capital to purchase fixed assets to grow their businesses.

RZB’s shareholder loan is also expected to help RLAV to increase the share of long-term leases in its portfolio. This would be MIGA’s second guarantee in support of RLAV.

Environmental Categorization

The project is a Category FI under MIGA’s environmental review procedures.

Development Impact

One of the two pillars of the World Bank Group’s country partnership strategy for Ukraine is sustaining growth and improving competitiveness. This pillar emphasizes the need to support the development of non-bank financial institutions, including leasing companies, to deepen the financial sector, broaden the availability of financial instruments to Ukrainian enterprises, and support private investment. The proposed investment fits well with this strategy. First, it promotes the involvement of strategic foreign investors, such as RZB, that are playing an important role in the development of the leasing industry in Ukraine. Second, this project is expected to support investments in the agribusiness sector, an important area highlighted in the strategy document.

By supporting RLAV, MIGA will encourage strategic investors and their leasing subsidiaries to shape the industry landscape and establish international best practices.

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