We support business - we develop the economy. Cooperation with RKDF

October 8, 2020

The standard of living of the population directly depends on business activity in the country. In developed countries, small and medium-sized businesses are the main employers for the middle class - a base for the economic, social and political stability of the state. 

And for developing business, we need access to long and cheap capital. Meanwhile, representatives of the private sector in Kyrgyzstan asked for accessible financing for business development in the country. To solve this problem, the Russian-Kyrgyz Development Fund (RKDF) was established in 2014. 

The organization has a serious impact on the country's financial market. The Fund's financing amounts reach 10% of the country's banking system loan portfolio. The RKDF's annual report for 2019 states: "The volume of financing provided by the fund consistently occupies about 10% of the loan portfolio of the banking system, and less mortgages and consumer lending - 13.2%, which is also an indicator confirming the systemic importance of the fund for the credit market of the Kyrgyz Republic". 

Development of agricultural clusters - a response to the challenges of the pandemic

Photo credits: UNDP Kyrgyzstan

Due to the COVID-19 pandemic, international experts started talking about the upcoming food crisis. A report prepared by the Food and Agriculture Organisation of the United Nations (FAO) in cooperation with the World Food Programme showed that the pandemic could worsen the problem of access to food. "The unstable food supply situation in the world was in full swing in 2019, and the crisis with the COVID-19 pandemic will further contribute to the worsening of the situation," warned the authors of the report.

At the same time, World Bank specialists predicted that agriculture in the Central Asian region will play a stabilizing role in the economies of the region during the COVID-19 pandemic.

One of the measures supported by the Russian-Kyrgyz Development Fund was new for agricultural entities. These include loans for clusters operating in the dairy and meat industry, the fish industry and producers of fruit and vegetable goods. The cluster provides for the participation of entities working at all stages of the commodity production chain. The new loan therefore provides financing for the purchase of breeding stock, planting material, equipment and machinery, production facilities, construction and installation work, reconstruction and, most importantly, working capital replenishment. The last factor, combined with low interest rates and a long credit period of up to 10 years, makes the product very affordable for agricultural producers. The loan can be obtained either directly from the fund or through the fund's partner banks. 

Photo credits: UNDP Kyrgyzstan

From microentrepreneurs to millions of projects 

The RKDF directly finances large projects - worth between 1 and 25 million USD - at a rate of 4 to 7%. 

As part of the leasing programme, its participants among the fund's clients and its partner banks can purchase machinery and equipment for agriculture, processing companies and logistics centres. Leasing from the RKDF also covers special equipment for road construction and the construction of production facilities, medical, telecommunications and printing equipment, as well as equipment for mechanical engineering.

A quality business plan is half of success

Poor quality business plans are a major problem for the business sector. Investors, both private and institutional, constantly note that it is rare to find an entrepreneur in Kyrgyzstan who is able to prepare a good application for project financing. A well-designed business plan is half the way to obtaining investment. 

Often business owners cannot put ideas and vision of their company's development on paper, and the investor simply does not have time to physically meet with all entrepreneurs. This is why a business plan is the business card of a project. If the document is prepared in a high-quality manner, there is no need for oral comments from the author when reading it at the first stage of decision-making. A well-prepared business plan will rather interest potential investors. 

For the third year, UNDP in the Kyrgyz Republic, together with the Russian-Kyrgyz Development Fund, is implementing the project "Strengthening Capacities for Financing Sustainable Development in the CIS Region". 

The project is supported by the Russian Federation through the UNDP-RF Development Trust Fund. Under the project, entrepreneurs are assisted in preparing business plans for a loan application for financing from the RCFD. To this end, the project involved a consulting company with extensive experience in providing services to local and international partners in the areas of corporate finance, investment attraction, transaction support, taxation and expert valuation of industrial enterprises. The company provided technical support for selected business plan development projects.

In addition, one of the components of the United Nations Development Programme and the Kyrgyz Republic are receiving technical advisory assistance in identifying, preparing and implementing projects to be funded by the Russian-Kyrgyz Development Fund. Here too, a consultant is working to provide technical support to the Ministry of Economy in identifying and forming investment projects. In addition, all consultants providing technical support to project partners are highly qualified experts and are selected through a national or international transparent competition. 

The UNDP project supports business projects that ensure inclusive, social, economic and environmentally sustainable development that benefits women equally.

Priority sectors include agriculture and processing, manufacturing and manufacturing, light industry, IT and innovation, tourism and recreation, infrastructure projects and logistics. The company must have a stable financial position and be prepared to provide its own funds amounting to at least 15% of the project cost.