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The World Bank's private sector arm said on Monday it bought a 16 percent stake in BRAC Afghanistan Bank, a start-up commercial bank that will focus on micro- and small enterprise loans.
"Afghanistan is an important market for us because it's a post-conflict, frontier market," Ayesha Muzaffar, investment officer for the International Finance Corp, said in a phone interview from neighbouring Pakistan.
Last month, the World Bank's Multilateral Investment Guarantee Agency approved a guarantee covering a $2 million equity investment in BRAC Afghanistan by Cayman Islands-based ShoreCap International Ltd. Now the International Finance Corp is taking a $1 million equity position in the bank and offering technical assistance to train the bank's staff how to analyse loan requests.
The World Bank is looking to encourage foreign investment in Afghanistan, a landlocked South Asian country trying to rebuild after years of war. BRAC Afghanistan opened its first branch in Kabul last Thursday, and plans by the end of its first year to open two branches in Kabul and one each in Mazar e Sharif and in Herat, plus 40 loans offices for micro- and small enterprise loans.
It aims to offer entrepreneurs short-term loans of $1,000 to $4,000 for up to one year based on their cash flow rather than collateral. "They are looking to have 100,000 loans over four to five years," Muzaffar said. "There is a carpet shop with lots of demand but they are unable to expand ... so the bank looked at their monthly revenues and calculated the loan on that." The bank also plans to take deposits from entrepreneurs and individuals as part of a drive to raise savings levels.

Copyright Reuters, 2006

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