Counterpart Enterprise Fund – Russia

Long term co-operation between Counterpart Enterprise Fund and Krai Government:
six years of collaboration resulted in hundreds of micro loans and thousands of jobs created in small businesses of Khabarovsk.

Co-operation between the Krai Government and CEF started in 1998, when the Khabarovsk microfinance program was launched. The Government fully understood the benefits of the program for local small entrepreneurs and even helped to promote the program to small and medium businesses in Khabarovsk.

In 1998 CEF did not meet the legal requirements to issue micro loans without obtaining a bank license from the Central Bank of the Russian Federation. However, CEF was able to work around this using a financial structure established by the Krai Government. CEF came into agreement with the State Fund for Small Business Support of Khabarovskiy Krai and used the State Fund’s bank account to issue loans and collect money from the borrowers.

During the financial collapse in Russia, CEF was faced with numerous delinquencies and lawsuits, which were originated by clients who wanted to avoid repayment. During this time many negative articles were printed about CEF accusing CEF of plundering small businesses. In this difficult situation the Krai Government supported CEF using mass media to help restore the program’s positive image.

During 2003 CEF experienced a lack of loan capital to be able to satisfy the growing need for loans in the SME sector. The Krai Government analyzed the situation and in July 2003 decided to give CEF a loan of $100,000 for a period of 11 months at the rate of 17% per annum (in Rubles) to enlarge the loan portfolio.

Using the money from the local budget, from August – December 2003, CEF issued 31 micro loans for a total amount $150,000.

In 2003 CEF became a fully independent and sustainable Russian MFI, which is run by a Board of Trustees.

Alexander Shevchenko, the head of the small business department of the Krai Government, was selected as Chairman of the Board. This allows for additional monitoring of the use of funds.

In February 2004 CEF received a second loan of $70,000 for the period of one year and at the rate of 15% per annum (in Rubles). There was a preliminary discussion between CEF and the Krai Government that, after expiration of the loan agreement, the loan may be restructured as Government financing for the creation of a CEF affiliate in another city in the Khabarovskiy Krai.

In March 2004 CEF is planning to reach an agreement with the Government that will give a solid basis for further mutually beneficial initiatives.

On photo: Alexander Levinthal, Minister of Economy and Foreign Affairs of Khabarovskiy Krai, is doing presentation at the microfinance conference in Khabarovsk in October’03.