Azerbaijan, Baku / Trend / IFC, BP and The Micro Finance Bank of Azerbaijan (MFBA) announced on 21 May the launch of Supplier Finance Facility (SFF) in Azerbaijan. This project is an innovative initiative which will improve access of finance to local suppliers of the oil and gas industry of the country. This project is the result of, in large, of the SME Linkages Project jointly sponsored by IFC and its co-ventures in Azerbaijan which have been providing technical assistance to local suppliers and SMEs.
In mid-2006, as part of the Linkages activities, IFC, MFBA and BP implemented a pilot project to develop and test the SFF model. The pilot was a success and led to the launch of this $15 million investment project.
The SFF is a joint credit facility with funding provided by BP and its co-ventures in Azerbaijan, IFC and MFBA. Loans to local suppliers are backed in part by local companies' contracts with BP.
The SFF project is in line with BP and its co-ventures target to double their total spending with locally-owned companies by 2010.
Local companies eligible to receive SFF loans will be pre-qualified by the BP-operated Enterprise Centre launched in May 2002 as a one-stop shop to help SMEs develop their business in support of major oil and gas developments in Azerbaijan.
"Insufficient collateral is one of the main factors that limit access to finance for SMEs and slows their development. The Supplier Finance Facility is specially designed to overcome this problem and will help MFBA provide an extra boost to SME development in Azerbaijan. MFBA is already working with over 18,000 businesses in Azerbaijan and is the leading financing partner of SMEs in the country. We are thus delighted to have another investment tool to offer Azerbaijani SMEs" said MFBA General Manager Andrew Pospielovsky.
"This project is a great example of how IFC can bring together production companies and financial institutions to improve access to finance for local SMEs. Supplier finance is an exciting new initiative and IFC will seek to develop more such projects in the future" said Jyrki Koskelo, Director of IFC's Global Financial Markets Department.
"Through the implementation of this project, IFC recognizes the importance of the development of the oil and gas service sector for Azerbaijan's long-term development," said Shahbaz Mavaddat, Director of IFC's Southern Europe and Central Asia Department. "This project also highlights the very positive role SMEs can play in this development," he added.