Kyrgyz Agricultural Finance Corporation (KAFC)

This paper explores the effects of the Sustainable Livelihoods for Livestock Producing Communities (SLLPC) Project funded by United Kingdom Government's Department for International Development (DFID) of which Kyrgyz Agricultural Finance Corporation (KAFC) is a partner.

The author highlights the some achievements of the project:

• Outstanding credit portfolio of KGS was One billion on December 31, 2002; a stable rate of return close to 95% and low administrative costs of 6%;
• Successful combination of commercial activity with appropriate social impact;
• Sustainability assured through rigorous financial appraisal and full coverage of cost of funds and administrative margin.

The author has also listed some challenges that the project faces:

• Rapid agrarian reforms;
• Lack of investment capital;
• Lack of credit culture;
• Weak legislative base;
• Political interference in credit management;
• Lack of experienced staff and MIS system;
• Lack of risk management and internal control.

The paper also puts forth some suggestions based on the learning from the project:

• Well developed strategy business plan for establishing microfinance institutions;
• Well regulated legislative environment to facilitate development of bank and microfinance operations;
• Intensive staff training into financial aspects;
• Special promotion for prospective loan recipients and inculcating financial discipline among the recipients;
• Strong support from governing bodies such as parliament, government, central bank;
• Insurance or guarantee system for loan operations;
• Detailed control of possible internal or external corruption.

This paper was presented at: "Paving the Way Forward for Rural Finance" - an international conference on best practices.