AKIPRESS.COM - The Asian Infrastructure Investment Bank’s (AIIB) Board of Directors has approved a loan of USD50 million to the Kyrgyz Republic to help address the urgent liquidity pressures faced by its micro, small and medium enterprises (MSMEs) as a result of the COVID-19 pandemic. This is AIIB’s first project financing in the Kyrgyz Republic.
The project, jointly cofinanced with the World Bank, provides emergency support to the country’s private and financial sectors. Due to the pandemic, enterprises are facing a severe revenue drop and difficulty in meeting operational expenses and retaining employees. Banks are facing higher credit risk from MSMEs, leading to tightened lending. The liquidity constraints could pose long-term implications for growth and productivity.
AIIB’s financing entails addressing the liquidity needs of MSMEs via reimbursable financial assistance, and supporting a portfolio risk sharing facility to eligible financial institutions to reduce the risk of lending to MSMEs and ensure credit provision during recovery. It is estimated that more than 45,000 SMEs will benefit from the financial assistance to meet short-term operational needs, with retention of more than 65,000 jobs. In addition, 5,000 MSMEs will benefit from loans supported by the portfolio risk sharing facility.
“The project complements the Government of the Kyrgyz Republic’s measures to help address the funding needs of the private and financial sectors,” said AIIB Director General, Investment Operations, Supee Teravaninthorn. “By providing MSMEs with emergency access to finance during this challenging time, AIIB can help businesses respond to and recover from the pandemic.”
The project was approved under the Special Fund Window (SFW) as part of the AIIB Crisis Recovery Facility (CRF). The SFW will allow the Kyrgyz Republic to buy down the interest rate to reduce the financial burden of the loan. AIIB’s SFW is only available to International Development Association members to help them raise affordable funds to fight the pandemic.
The CRF provides up to USD13 billion of financing to both public and private-sector entities facing serious adverse impacts as a result of the pandemic. As of August 13, 2020, AIIB’s Board of Directors had approved a total of 19 projects amounting to over USD6.16 billion to help 15 members navigate the challenges of these highly uncertain times. Other projects being proposed under the CRF can be found here.