On August 12, 2018 took place an official ceremony of signing the Equity Investment Agreement between Open Joint Stock Company “FarhadBank” and the European Bank for Reconstruction and Development. This event was a logical consequence of longstanding fruitful cooperation of two financial institutions.
Cooperation between OJSC “FarhadBank” and EBRD started with signing of Joint Program Statement on March 2017, which gave an opportunity for OJSC “FarhadBank” to become a general partner of EBRD in implementation of Uzbekistan Micro & Small Enterprise Finance Facility (TMSEF) and Trade Facilitation Program (TFP).
Joining of OJSC “FarhadBank” in realization of successfully developing at that period Uzbekistan Micro & Small Enterprise Finance Facility (TMSEF), allowed the Bank to enhance considerably its participation at the micro-credit market, which resulted in expansion of access to loan resources for small & medium business, particularly in rural and mountainous regions. The program was targeted on institutional development of local partner banks, as well as provision of sustainable and effective financing of micro & small enterprises. During implementation of TMSEF Program within a period from 2015 to 2019 through specialized credit departments of OJSC “FarhadBank” 17 774 credits have been disbursed at the total amount 73 422 000 USD, out of which with expired maturity 13 276 credits have been repaid at the amount 59 422 000 USD. In order to form appropriate loan portfolio of the Bank, financial resources of the EBRD at the amount equal to 12 mln. USD were used, disbursed for five years at the base of payment of interests and their repayment. In addition, within the framework of technical assistance 174 specialists were trained in the field of lending, which substantially strengthened human resources, and assured maintenance at the high level the quality of loan portfolio, disbursed under the program, loan exposure of which does not exceed 1,5%. At the moment, the activity of all loan divisions of OJSC “FarhadBank” are built on the procedures of micro credits, developed and applied in TMSEF Program.
Participation of OJSC “FarhadBank” at Trade Facilitation Program in Uzbekistan (TFP) began in 2015 with involvement of international consultant under the technical assistance of EBRD. This allowed the Bank to start active cooperation with leading banks of Europe, Russia and Kazakhstan in the field of trade finance. As a result of its activity, OJSC “FarhadBank” has been awarded by EBRD several years in a row as «Most Active issuing Bank in Uzbekistan under TFP Program of EBRD». Gradually with an increase of experience and expansion of spheres for application of new procedures related with financing of foreign economic trade transactions for banks of Uzbekistan, annually grew a financial support of EBRD. If in 2015 this program was supported by USD 2 million-line provided by EBRD, in 2018 it increased up to USD 6 million. Since 2018 the total sum of the committed credit lines for the security provisioning in the framework of the Trade Finance Program for OJSC “FarhadBank” has comprised USD 10 million. During 2015-2019 OJSC “FarhadBank” has financed 407 transactions of its clients under the TFP for the total amount of USD 100,3 million, including 200 transactions for USD 45 million under the stand-by letter of credit of EBRD.
The implementation of the new Tajik Agricultural Finance Facility (TAFF) program with establishing USD 6 million – credit line for OJSC “FarhadBank” started from December 2017. The purpose of this program is a credit support of the agrarian sector of the Republic of Uzbekistan, in particular, farms specializing in production of crops.
Along with implementation of this program OJSC “FarhadBank” started new lending method suitable for farmers using the Client Scoring Evaluation program. 40 credit groups affiliated to the credit divisions of the bank, including mastered credit experts and agronomists, were organized and trained for the task-oriented, free and conventional service for farmers in the framework of the technical assistance of the program under the guidance of Frankfurt Business and Finance School consultants. It is the first program oriented on the micro and small lending for agricultural sector, financing the circulating assets for the production of wide range of crop products, including cotton. A huge step was made towards the complex lending suitable for the agrarian sector which significantly increases its business solvency and determination to the final results in the form of profits and develops business in the rural areas of the country. At the present time, more than 1 000 loans for the total sum of USD 4 245 000 were disbursed under the TAFF program.
In the process of implementation of the above mentioned EBRD projects OJSC “FarhadBank” widely uses its own funds as well as raised funds from other resources, the total value of which at the moment is USD 63.5 million.
At the moment, equity capital of OJSC “FarhadBank” is equal to 132 mln. TJS. EBRD Equity Investment in OJSC “FarhadBank” according to the terms of agreement will be done through realization of additional issue of common shares of the Bank. As a result the share of EBRD in equity capital of OJSC “FarhadBank” will be 25 % plus 1 share. In addition to financial involvement in the equity capital, the terms of the agreement envisages realization of Institutional Business Plan of OJSC “FarhadBank” with attraction of international consultants. This plan is a key component of EBRD’s Equity Investment in OJSC “FarhadBank”. It is expected that its realization will enhance the level of competition in the banking sector of Uzbekistan, which would positively influence on the quality of offered services to clients.
Equity Investment project between EBRD and OJSC “FarhadBank” will allow to expand essentially the frameworks and horizons of cooperation between the parties at absolutely new level. There is a basis for the stability increase not just for the one domestic bank, which receives the investments, but also for the potential growth of the entire banking system of the country in terms of support of various branches of the real sector of the economy of Uzbekistan.