AgroKredit Plus

A Non-Profit Micro-Credit Agency Serving the Rural Agricultural Communities of Southern Kyrgyzstan

Foundation & Motives Behind the Creation of AgroKredit Plus (AK+)

Environment that Motivated the Creation of AK+– Frustration of TES Centre personnel when farmer/clients were unable to fully

utilize their training due to inability to afford minimal amounts of ag inputs. This was compounded by the knowledge that these minimal investments had huge payback multiples when combined with training and extension services.

– In reality, no sources of financing existed for small balance (< USD$500), uncollateralized, short-term loans to small farmers.

– Abundance of low quality inputs, provided by transient merchants of questionable ethics, made the purchase of ag inputs by individual small farmers a risky proposition that impacted their entire operation.

– Kyrgyzstan is a rural-based society where 40-60% of the population in is directly involved with agricultural production. Thus, improving the incomes of small farmers/producers has an enormous “multiplier effect” on the community as a whole.

AK+ was founded by the AK+ was founded by the ТТES Centre (Technical Extension Services ES Centre (Technical Extension Services Centre) in March ofCentre) in March of 2005 2005. TES is an Osh based organization providing . TES is an Osh based organization providing agricultural training and extension services to individual farmers.agricultural training and extension services to individual farmers.

Organizational Strategies & Objectives

– Leverage Pre-Existing Knowledge• Through working with their clients, the extension service agents have valuable

knowledge regarding the personal character of the farmers and the viability of their plans. These items, willingness and ability to repay, form the foundation of any sound lending decisions. AK+ utilizes this as a core input to its lending process.

– Ensure Use of Proceeds for Intended Purpose and Quality of Inputs• Farmers purchase inputs from recognized (AAK) vendors.• Loan payments disbursed directly to vendors.• Purchases planned and reviewed by extension agents for conformance to

growing plan.– Focus on Social Group Lending

• Reduces risk of non-payment through group pressure. Important given non-collateralized and concentrated (geographic and industry) nature of lending.

• Creates a larger orders for inputs and thus possibilities for quantity discounts.• Reduces paperwork.

– Strive for Sustainability of Clients and Lender• Minimize overhead costs.• Charge rates that do not subsidize the farmer and that allow the lending

organization long-term viability.

AK+ Mission

The mission of AK+ is to serve the Kyrgyz agricultural community and improve the well-being and prosperity of its clients by offering them financial services that will help them to succeed in their undertakings.

Current Regions of Activity

• Osh oblast

• Batken oblast

• Jalalabat oblast

Authorized Lending Sectors

• Agricultural Production• Ag Processing• Other Agribusiness• Other Businesses

Client Types

• Groups

(Social Group Lending)

• Individuals

• Cooperatives and Other Legal Entities

Current Loan Products

• Production Agriculture – Crop Growing– Livestock– Nursery/Gardening

• Agribusiness– Ag inputs Supply– Ag Product Processing

Lending Focus

• Social group lending to small farmers has been, and will continue to be, the primary focus of AK+. We believe that this best serves our mission and that there continues to be a large, unmet demand.

• Other lending is primarily a way to utilize funds during periods of low seasonal farmer demand.

• Group loans normally represent greater than 90% of the AK+ loan portfolio.

Extension Services Agent

Ag Input Suppliers

Farmer Group

Farmers and Agent Jointly Develop Production Plan

Farmers Negotiate with Supplier of Their Choice for Inputs

with Support of Extension Agent

Copy of Negotiated Contract Submitted to AK+

Contracted Inputs Validated with Extension Agent

Funds Transferred to Input Supplier

Delivery of Inputs to Farmers

AgroKredit Plus

Group Lending Process

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23

4

5

6

12

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Collaboration with Extension Services Organizations

• TES Centre (Osh, Batken)• Rural Advisory Services (Jalalabat)• Agro Foundation for Development (Osh)• DCCA – (Osh, Jalalabat)• NGO “Chernobylci of Nookat in XXI century” (Osh)

AK+ currently Collaborates with the Following Extension Services Providers:

Selected Statistics: Lending

2005 2006 2007 30.06.2008Number of Loans Disbursed 469 911 1 148 1 203

Amount Disbursed: KGS '000 3 381 9 862 16 950 24 580Number of First-Time Clients 422 596 848 684

Number of Outstanding Loans: Period-End 107 185 628 1 331Number of Loans <USD$1,000: Period-End 107 182 619 1 268

Number of Loans to Women: Period-End 34 65 313 594Percentage Women Clients: Period-End 32% 35% 50% 45%

Percentage Loans in Rural Areas 100% 100% 96% 97%Value of Loans Written-Off 0 0 0 0

Value of Loans Restructured 0 0 0 185 016Percentage Loans Overdue < 30 Days 17% 0% 9% 5%

Percentage Loans Overdue 31-90 Days 0% 2% 4% 2%Percentage Loans Overdue > 90 Days 0% 1% 1% 1%

Total Staff 3 6 6 10Credit Staff 2 3 3 5

Operational Efficiency Indicators

Notes: 1. All Figures in KGS2. 2008 Figures Annualized Where Applicable

2005 2006 2007 6/30/2008Loans Disbursed Per Employee 156 152 191 144

Payroll Expenses Per Loan Disbursed 144 387 574 715Other Overhead Expenses Per Loan Disbursed 385 264 979 1,571

Total Payroll & Overhead Expenses Per Loan Disbursed 530 651 1,553 2,286Payroll Expenses / Period-End Outstanding Loans 4% 9% 6% 8%

Other Overhead Expenses / Period-End Outstanding Loans 12% 6% 11% 17%Total Payroll & Overhead Expenses / Period-End

Outstanding Loans 17% 15% 18% 24%

Lending Programs and Financing Received: 2005-Present

Donors and creditors Amout in KGS Amout in USD (approx.)

Note

Winrock International 4,599,004 127,750 Loan-to-Grant

ICCO 10,023,079 278,419 Grant

TES-centre 200,000 5,556 Grant

JICA through TES-centre 1,231,771 34,216 Loan-to-Grant

MLC “Frontiers” 16,000,000 444,444 Interest Bearing Loan

Winrock International 407,400 11,317 Zero Interest Loan

PF “DCCA” 261,000 7,250 Zero Interest Loan

MCA “Initiative-Ug” 270,000 7,500 Interest Bearing Loan

TES-centre 80,000 2,222 Zero Interest Loan

Total 33,072,254 918,674

Financial StatementsASSETS 2005 2006 2007 6/30/2008Cash and Bank Current Accounts 647,699 3,832,472 1,505,243 5,124,841Short Term Investments/Interest Bearing Deposits 0 0 0 2,000,000Gross Loans Outstanding 1,505,127 3,980,791 10,156,088 27,058,981(Loan Loss Reserve) -75,256 -104,249 -371,656 -854,746Net Loans Outstanding 1,429,871 3,876,542 9,784,432 26,204,235Other Current Assets 83 10,756 113,677 485,581Total Current Assets 2,077,653 7,719,770 11,403,352 33,814,657Long Term Investments 0 0 0 0Fixed Assets: Property and Equipment Costs 110,200 140,074 360,662 922,273(Accumulated Depreciation) -21,654 -59,110 -110,409 -169,456Net Property and Equipment/Net Fixed Assets 88,546 80,964 250,253 752,817Total Long Term Assets 88,546 80,964 250,253 752,817Total Assets 2,166,199 7,800,734 11,653,605 34,567,473

LIABILITIESClient Savings and Time Deposits 0 0 0 0Other Deposits 0 0 0 0

Short Term Borrowings (Commercial Rate) 0 0 0 7,000,000Total Current Liabilities 0 0 0 7,000,000Long Term Debt (Commerical Rate) 0 0 0 9,000,000Long Term Debt (Concessional Rate) 0 0 0 0Other Liabilities 2,089,207 7,564,560 2,994,835 4,156,069Total Liabilities 2,089,207 7,564,560 2,994,835 20,156,069

EQUITYPaid-in Equity (Shareholders) 0 0 0 0Donated Equity (Loan Fund) 200,000 200,000 8,159,934 14,073,683Donated Equity (Cumulative Grants for Operations) 0 0 515,128 1,027,679Retained Net Profit/(Loss) - Prior Years 0 -123,008 236,175 -148,966Net Profit/(Loss) - Current Period -123,008 159,183 -252,466 -540,991Total Equity 76,992 236,175 8,658,770 14,411,405

Balance SheetAll Figures in KGS

Financial StatementsINCOME 2005 2006 2007 6/30/2008Interest on Loans 191,107.00 653,211.87 2,007,858.50 1,975,746.22Interest on Investments 0.00 0.00 0.00 500.00Loan Fees 12,664.00 144,657.20 51,809.81 269,742.73Total Financial Income 203,771 797,869 2,059,668 2,245,989

EXPENSESInterest on Debt 0.00 0.00 185,320.00 615,529.70Interest Paid on Deposits or Savings 0.00 0.00 0.00 0.00Total Financial Costs 0.00 0.00 185,320.00 615,529.70Gross Financial Margin 203,771.00 797,869.07 1,874,348.31 1,630,459.25Provision for Loan Losses 75,256.00 28,992.85 267,407.44 483,090.16Net Financial Margin 128,515.00 768,876.22 1,606,940.87 1,147,369.09OPERATING EXPENSES 0.00 0.00 0.00 0.00Salary and Benefit Expenses 67,694.70 352,608.80 659,376.80 513,465.85Administrative Expenses 105,683.50 126,140.70 903,108.18 734,805.97Other Expenses 75,026.93 114,138.84 220,766.71 392,908.94Total Operating Expenses 248,405.13 592,888.34 1,783,251.69 1,641,180.76Net Income from Operations before Taxes -119,890.13 175,987.88 -176,310.82 -493,811.67Taxes 3,118.00 16,805.59 76,155.40 47,179.53Net Operating Income after Taxes -123,008.13 159,182.29 -252,466.22 -540,991.20Donations/Grants for Operating Expenses 200,000.00 0.00 515,127.78 339,976.65Donations/Grants for Loan Capital 0.00 0.00 8,159,934.20 5,953,649.00Non Operational Expenses or Income 0.00 0.00 0.00 0.00Net Income 76,992 159,182 8,422,596 5,752,634

Income Statement

Notes: 1. All Figures in KGS2. Year 2005 began with Founding of AK+ in March3. Accounting for loan losses and reserves is to recognize expense at time

loan is disbursed and reverse when loan is paid-off, thus creating income volatility. Through June 2008, AK+ has not experienced any loan losses

Staffing

Position Name Years w/AK+Years Related

Experience Education

Executive Director Mametov Asananly Since Founding 12 Diploma in Economics (MA equivalent), Kyrgyz State National University, Bishkek

Financial Director Timur Jumashev Since Founding 7 Diploma in Finance & Credit (MA equivalent), Osh Technological Univ., Osh

Chief Accountant Umut Abdirahmanova Since Founding 2 Academy of Management under The President of The Kyrgyz Republic, MBA expected 2010

Senior Management

Senior credit officer

Credit officer

Financial director

Accountant-cashier

Chief accountant

Office manager

Cleaner

Guard

OutsourcedIT-specialist

Lawyer

Executive director

Supervisory Board

Credit Committee Audit Committee

Marketing specialist

Credit officer

Credit officer

Credit officer

For Potential Donors

• AK+ provides segregated and detailed reporting related to the application of funds received.• AK+ has experience working with donors to design and implement lending programs.

Programs can be targeted based upon characteristics such as:• Gender• Region• Ag Sector/Crop Type• Purpose (e.g. specific type of equipment)

• AK+ has a preference to undertake programs consistent with its mission and that help build its capabilities and ability to be self-sustainable. Thus, preference is given to programs that:

• Target the rural, agricultural community• Do not subsidize the recipient in a way that creates long-term economic dependence on

subsidized activities.• Allow AK+ to cover its related operational costs.• Build AK+ capital base as to grow its funds available for lending in a consistent manner.

This allows AK+ to:• Be a consistent provider of funds to its client community• Better manage its operations by avoiding excessive expansion and contraction of

activities and staff.• Since it is organized as a public foundation, capital of the organization must be used

consistently with its mission. In the event of liquidation, capital would be transferred to another public foundation that served a similar purpose.

AK+ welcomes the opportunity to work with donors who share our commitment to improve the lives of farmers and rural communities.

Example Programs

AK+ is very open to discussing custom designed programs that serve the specific objectives of donors. Some example of types of programs we have executed are described below.

1. Loan to Grant: General• Funds provided to AK+ for re-lending consistent with it mission• At end of specified period, all or part of funds convert to AK+

2. Loan to Grant: Specific• Funds provided to AK+ for re-lending consistent with donor specified objectives and

benchmarks• At end of specified period, all or part of funds convert to AK+ based upon AK+

meeting donor’s objectives and benchmarks3. Donations/Grants: Specified and General

• As earlier mentioned, donors receive full reporting on activities. Reporting requirements are defined upfront as to ensure donor needs.

• In the case of loans to AK+, an important consideration is our ability to cover operational costs associated with the related lending activity. Thus, these programs normally make use low interest rates, management fees or some combination thereof in order to achieve this objective. Again, AK+ can be very flexible in the design of a specific program.

Further Information

For further information or clarifications, please do not hesitate to contact us.

• Mamatov Asanaly• (+996 3222 ) 21640• (+996 3222 ) 21640• agrocredit@netmail.kg