This summary covers an investment by ShoreCap International (SCI) of the Cayman Islands in BRAC Afghanistan Bank (BAB) in Afghanistan. The investors have applied for a MIGA guarantee of up to $225,000 (90 percent of additional equity of $250,000) for a period of up to ten years against the risks of transfer restriction, expropriation, and war and civil disturbance. ShoreCap invested $1 million into BAB in 2006 which was also covered by a MIGA guarantee against the same risks.
SCI along with three foreign sponsors, including the International Finance Corporation (IFC), a World Bank Group member, will invest additional capital into BRAC Afghanistan Bank. The additional funds are required to meet the Afghanistan Bank’s $5 million minimum bank capital requirement; to fund infrastructure investments in additional branches, automated teller machines and point of sale devices; and toleverage a small business loan portfolio which is expected to grow to almost $50 million by the end of 2008.
The project is a Category C under MIGA’s environmental review procedures.
The project is expected to have a significant impact on the country’s economic development as it will be providing financing and savings instruments to micro-enterprises, which form the largest underserved, yet productive, segment of the local economy. Greater access to financial services will help reduce poverty and expand economic opportunity for low-income populations throughout Afghanistan.
MIGA’s support in establishing a for-profit, national, and fully regulated microfinance bank would help demonstrate the profitability and sustainability of large-scale financial services to new microfinance providers. This will help encourage new entrants and greater overall penetration to meet the vast need for financial services for Afghanistan’s poor. The project will be underwritten through MIGA’s Small Investment Program