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| [PHOTO: Ed Yourdon/Flickr/CC BY-SA 2.0] |
Washington/Moscow: Up to 1.28 million clients of microfinance institutions and
members of credit cooperatives will benefit from a US$20 million World Bank
loan approved recently by the World Bank Board of Executive Directors for the
Microfinance Development Project in Russia. The Russian Federation will
co-finance the project in the amount of US$40.3 million. The project will
promote development of a proper legal, regulatory, and supervisory framework to
foster safe and sound growth of the microfinance and credit cooperative sectors
in Russia. It will also help develop the industry's capacity to meet
sector-related regulations and institutional standards.
Since currently the microfinance and credit cooperative
sectors only cover about 10 percent of the demand, the project will be
beneficial to a large segment of the under-served Russian population, mostly
living in small and remote areas of the country. Given the explicit targeting
of women as good clients by many microfinance institutions and credit
cooperatives, it is expected that women will particularly benefit from this
project.
“The Microfinance Development Project is aligned with the
World Bank Group’s Country Partnership Strategy priorities for 2012-2016, such
as increasing growth and diversification, expanding human potential, and
improving governance and transparency,” said Michal Rutkowski, World Bank
Country Director for Russia. “It is also consistent with the Russian
Government’s priorities, including economic growth and diversification, and
development of human capital and Russia’s regions.”
The Russian banking sector is relatively shallow,
fragmented, and concentrated in Moscow, and thus does not appropriately serve
poor rural households and small and micro enterprises. The high cost of setting
up and running a branch network in such a large country makes it unfeasible for
banks to open branches in smaller communities. As a result, even with
relatively high figures of bank branch penetration per 100,000 people (37 in
2011 compared to an OECD median of 33), Russia falls behind many other
countries in terms of the geographical expansion of the banking network
development, with only 2.73 bank branches per 1,000 square km.
The microfinance sector has the potential to significantly
expand access to financial services to individuals as well as small and micro
enterprises. In 2012, there were 3,570 registered non-bank microfinance
providers in Russia, including membership-based institutions such as credit
cooperatives, specialized NGO-type microfinance institutions, public funds, and
commercial non-bank companies.
“However, the microfinance industry remains in its early
stages of development and is yet to reach scale due to limiting factors, such
as an incomplete legal and regulatory framework; a lack of agreed performance
and reporting standards, including prudential and non-prudential supervision
norms, which would allow for a proper risk assessment of the sector; and weak
governance, capacity, and financial infrastructure supporting microfinance,”
said Pierre Olivier Colleye, World Bank Project Team Leader