PRIVATE ENTERPRISE P39540 ARTNERSHIP Partnership P E R S P E C T I V E THE F A L L - W I N T E R 2 0 0 5 R U S S I A IFC Improves Business Practices of SMEs in Russia's Far East The International Finance To extend the benefits to local communities from multimillion dollar Corporation (IFC) is a member of the Canadian investments in Russia's far northeast, IFC's Partnership World Bank Group. IFC works to works with small and medium-sized companies to raise the level of lo- reduce poverty and improve peo- cal management skills, improve business practices, and increase the ple's lives in emerging economies knowledge base. by enabling and promoting sustain- Fitness-class N-ERGO is an association of four female entrepreneurs who able private sector investment at the frontiers of economic develop- are advocating a healthy way of life and providing exercise classes to the lo- ment. IFC itself is the world's largest cal community in Magadan. multilateral investor in emerging Formed in January 2004, markets. N-ERGO today is the most popu- lar fitness center in the local market. The founders of Fitness-class Who We Are N-ERGO attribute a good part of IFC's Private Enterprise Partnership their venture's success to the ad- works to develop strong, self-sus- vice and support they have received taining economies in the former from the IFC Partnership's Russ- Soviet Union that serve all levels of ian Far-East Business society. Together with our donor Development Project. The project partners, we assist private compa- is funded by the Canadian Inter- nies and governments to: continued on page 7 N-ERGO founders · Attract private direct investment to all areas of the economies, Five More Years: PEP Pledges · Stimulate the growth of small and Continuity and Innovation medium-sized enterprises, and Interview with Mr. Christian Grossmann, Director of IFC's · Improve the business enabling Private Enterprise Partnership environment. This July IFC's Board of Directors approved the extension of the Countries we serve: Armenia, Azerbaijan, Belarus, Georgia, Partnership for another five years. That is a strong vote of confidence Kazakhstan, Kyrgyz Republic, in the program. What has the Partnership been able to achieve in its Mongolia, Russia, Tajikistan, first five years? Ukraine, and Uzbekistan. PEP has developed unique expertise in a number of areas of technical assis- We thank our donor partners for tance, from financial sector development (particularly leasing) to making our programs possible. strengthening corporate governance practices, developing communities and supply chains around large companies and projects, and improving the regu- latory environment for small businesses. We have developed and proved a number of "product models" for technical assistance, particularly in leasing In This Issue and corporate governance. PEP has replicated these models throughout the region, and there is growing demand for their export to other parts of the pg. 2 Interview with Mr. C. Grossmann world. pg. 3 Legislation Update: Ukraine We are also launching a number of new programs, which can become our Program Launch: Ukraine, Russia core technical assistance products in the future. They include development pg. 4 Program in Focus: of mortgage markets and rural finance. PEP Linkages Program The Partnership was established in 2000 to promote private sector in- pg. 6 Program Update: vestment, support the creation and growth of the private sector PEP Forestry Project (especially SMEs), and improve the business enabling environ- continued on page 2 pg. 7 Impact on the Ground: Ukraine 2 ment. Have its objectives changed market. IFC has invested USD 240 million to support over the years? housing finance programs at a number of institutions: Ab- solut Bank, Delta Credit Bank, Moscow Credit Bank, The overall, strategic objectives have not Banque Societe Generale Vostok, and Raiffeisenbank Aus- changed. All PEP projects target at least tria. IFC's comparative advantage in this sector is clear: we one, and usually two or all three of these know the market and have significant expertise in this sec- objectives. But there are four additional tor. The point of our technical assistance project is to criteria which shape our projects: country increase development impact of our investments. We are need and potential development impact, supporting improvements to legislation, which will help the investment activity, IFC's core compe- housing market to grow, and we are helping banks to de- Mr. Christian Grossmann tence in a given sector, and donor support. velop mortgage products, which make mortgage financing Director of IFC's Private Naturally, the focus of our projects changes affordable to more Russians. Enterprise Partnership with time. For example, we began our The Energy Efficiency Program also addresses an urgent SME program by conducting surveys of need. Russia has one of the highest levels of energy con- small businesses to assess barriers to investment in a number of sumption per unit of GDP in the world, and this isn't just countries in our region. The surveys revealed key obstacles to SME because of the cold climate. Making industrial processes development, and we have designed our subsequent SME Policy more energy efficient would increase productivity, improve projects around their results. For example, in Uzbekistan we focus product quality, and reduce spending on energy and other on streamlining business inspection practices and in Ukraine on im- raw materials. That would have the double impact of mak- proving issuance of business permits. To take another case, after ing Russian industry more competitive and improving the implementing PEP's corporate governance program in Russia and ecological situation in heavily industrialized areas. Ukraine we added a specific program for the banking sector, because banking has special need for corporate governance improvement. Many energy efficiency projects are too small for IFC di- rect investments, although the total market for this type of Will the focus of PEP programs in par- investment is huge. IFC has ticular countries change? Since 2000, the Partnership's projects have: therefore chosen an approach This depends on how the countries will enabled USD 865 million in investments, including which continues our strategy evolve, what their needs will be, and of USD 148 million by IFC of deepening Russian financial course on donor support for particular ini- markets by enabling Russian tiatives. Russia is an interesting example. helped establish 86 new businesses banks to enter new market seg- Flying into Moscow, you may get the im- ments. IFC will provide local reached 17,017 clients with trainings/consultations pression that Russia is a fairly wealthy banks and leasing companies on sustainable business practices country with little need for technical assis- with credit lines and partial tance. But the situation is dramatically credit portfolio guarantees for provided in-depth assistance to 470 clients different in the regions. For instance, PEP energy efficiency projects. We is currently working on building entrepre- contributed to passage of 125 legislative acts will also provide technical as- neurship in the Magadan region, a remote sistance to build energy trained/advised 2,320 of government officials and isolated part of the Russian Far East. efficiency finance expertise in In winter the temperature can reach -40 degrees and the only access the financial sector and among potential clients. is by air. Nevertheless, the region is rich in natural resources, the Financing energy efficient technologies is currently per- population has been holding steady, and there is much scope for de- ceived as risky and complex by Russian financial institutions, velopment. It is important to reach people in such parts of Russia and potential clients have limited experience in preparing and the amount of work still to be done in the regions is often stag- project proposals that meet bank requirements. So the gering. It is also true that while the Moscow region has seen strong challenge in the Energy Efficiency Program is to make development, several aspects of its private sector, and particularly fi- more long-term capital available for financing energy-effi- nancial services, still require assistance. The mortgage market in the cient technologies. The Program is supported by the Global Russian capital is a clear example. Environment Facility together with donors from Finland, Russia is also a good place to develop and test innovative technical Denmark and the Free State of Saxony, and IFC's Sustain- assistance project models, before rolling them out in countries with able Financial Markets Facility. less developed market infrastructure. For example, PEP tested and IFC has approved funding for a five-year extension of proved our leasing portfolio in Russia in the late 1990s and then ap- the Partnership. Nevertheless, donor funding remains plied it successfully in other countries starting from 2002. We the key to the Partnership's activities. How do you see recently launched two new project models from our current finan- relations between the Partnership and its donors evolv- cial markets portfolio in Russia, dealing with housing finance and ing in the coming period? energy efficiency, and if they are successful we will take them to other countries in the region in coming years. PEP has always had a strong relationship with its donors which has further strengthened over the last year. Over As for the other countries where we work, donors have shown par- time we have developed a customized approach to each ticular interest in Ukraine. This year, we started three agribusiness donor based on their regional strategies and particular ob- projects in the southern part of the country and are currently dis- jectives. Our relationship with donors is a true partnership, cussing several other projects. We are also planning to further and we have an on-going dialog concerning projects and expand our programs in the Caucasus and Central Asia. future plans. I would like to welcome once again the new You mentioned two new programs in Russia - the Russia Pri- donors, who have joined the PEP program this year: Den- mary Mortgage Market Development Project and Russia mark, the European Commission, the Free State of Saxony Sustainable Energy Efficiency Finance Program. Why IFC and and Iceland. We are currently developing these new rela- why these programs? tionships to turn them into longer-term partnerships for sustainable development. IFC is the leading international investor in the Russian mortgage thePartnershipPerspective Fall - Winter 2005 LegislationUpdate 3 U K R A I N E Ukraine Adopts Law on Business Permits In September, Ukraine's Parliament, the Verkhovna Rada, simplify the procedures for obtaining permits for business adopted the Law on the System of Permits for Business activities that do not pose heightened risk to society or Activities, which was drafted by the State Committee for the environment. Regulatory Policy and Entrepreneurship in cooperation Through its fundamental provisions, the new law: with the Partnership's Ukraine SME Policy Development Project. The project is funded by the European Commis- prohibits issuance of permits that are not directly es- sion. tablished by laws of Ukraine; The adoption of this law is a first important step in re- introduces the application principle for issuance of per- forming the permit system and reducing the barriers to mits, making issuance nearly automatic for business launching and operating a business in Ukraine. The cur- activities that do not pose heightened risk; rent system is in dire need of comprehensive reform: renders permit issuing agencies responsible for any vi- there are more than 1,200 types of business permits, while olations of the laws governing their operations. their issuance is regulated by 167 statutes, 150 regulations The President of Ukraine, Viktor Yushchenko, designated of the Cabinet of Ministers, and more than 1,500 norma- adoption of the law on permits as a priority for the coun- tive acts issued by municipalities and state regulatory try's parliament. In his opening remarks at a recent forum, agencies. "Regulatory Policy - Guaranteeing the Openness and The new law will significantly decrease the number of Transparency of Power," he underlined that upon the permits required for business activities in Ukraine. It will adoption of this law over 1,000 unnecessary regulatory also diminish the scope for government agencies and documents would lose their force in a single day. other institutions to create new permits and will greatly ProgramLaunch U K R A I N E IFC Supports Farm Business in Southern Ukraine In September 2005, the Partnership launched its South- Ukraine is a country of priority for Swedish development ern Ukraine Vegetable Supply Chain Development cooperation. Sweden plans to double its cooperation with Project. The three-year initiative will work with farms in Ukraine by the year 2008. Current annual support the Mykolayiv Region of southern Ukraine to help them amounts to approximately USD 9.0 million to fund ex- improve access to markets and finance and in this way pert assistance in democracy, social development, improve the long-term viability of their operations. The economic development, security and environment. project is funded by the Swedish International Develop- ment Agency (Sida). The project mentors farms that pro- duce vegetables on business management, product quality, mod- ern sales and marketing techniques in order to help them become consistent suppliers to food processors and other markets in the region. Sandora Juice Company, Ukraine's number one pro- ducer of fruit juices and nectars, and an IFC investment client, is a key partner in the project. The project also provides legal support to farms in resolving land tenure and ownership issues, and in structuring supply con- tracts with markets. PrograminFocus 4 R U S S I A IFC to Help Develop Russian Mortgage Market In October, IFC officially launched its three-year initiative also deliver trainings and consultations to financial institu- to spur development of the Russian mortgage market. tions and mortgage-related service providers on modern The Russia Primary Mortgage Market Development Pro- practices of housing finance, including borrower-oriented ject is funded by governments of the Netherlands, programs and standards. Another important aspect of the Switzerland, and by IFC. project will be work with Russian government agencies The project will work closely with pilot banks in Moscow and active involvement in the regulatory and legislative and other regions to implement standardized, world-class process. The outcome should be creation of a modern res- practices in mortgage origination, underwriting, portfolio idential mortgage lending infrastructure and growth of the analytics, risk management, and servicing. The project will Russian mortgage market. Building Business Partnership IFC's Private Enterprise Parthership of these opportunities because of in- technical standards, and produc- is implementing programs in four adequate product quality, a lack of tivity skills, and improve core areas: management and production know- environmental practices and cus- how, and limited access to market tomer service in order to reach 1. Improving the regulatory envi- information and financing. The re- investors' standards and form busi- ronment for small and quirement to work with local partners ness partnerships. medium-sized businesses (SMEs) whose product quality does not meet Broker long-term contracts be- 2. Building business partnership investor standards increases the risk tween investors and local between small and large compa- of projects and could discourage in- businesses. nies vestors from working in these Increase local businesses' access to 3. Developing financial markets markets. market information by working 4. Improving corporate governance with large companies to make their practices and regulations. IFC's Solution procurement requirements for In the last issue of the Partnership To help local communities and com- products and services more acces- Perspective we began to review these panies benefit from new business sible and transparent. program areas in detail starting with opportunities and to promote invest- Establish financial intermediaries our SME Policy program. In this is- ment, IFC builds local small and and work with local financial in- sue we are reviewing the Partnership's medium companies and farms into stitutions to fund new production linkages and supply chain technical competitive and reliable businesses. equipment, technologies, and assistance work. It also links them to investors and working capital for local compa- partners who can help them expand nies and farms. and strengthen their businesses. We: The Challenge Work with local consultants Work in partnership with existing throughout the life of a project to Direct investment, both foreign and or potential investors to identify provide them with hands-on train- domestic, can have a powerful posi- their local supply and product ing and build local capacity. tive impact on local communities and needs. economies. Large investment proj- Distribute training materials to ects create business opportunities for Survey local companies to identify help local companies introduce companies up and down the supply those best positioned to become improvements. and distribution chains, as well as reliable business partners to larger Disseminate case studies on qual- jobs for local communities. To en- companies and outside investors. ity improvements to illustrate the sure greater benefits for local Conduct thorough reviews of the benefits local companies stand to economies, the governments of the business and management prac- gain by investing in product qual- CIS countries are increasingly adopt- tices of selected local companies ity. ing policies that require investors to to identify the main factors pre- Work with local government au- have a high level of local content in venting them from attracting thorities to remove systemic the production process and to source business partners. constraints to business develop- services locally. Often, however, local Help selected local companies in- ment and investment. small and medium businesses are troduce modern quality systems, poorly positioned to take advantage thePartnershipPerspective Fall - Winter 2005 PrograminFocus 5 The Result to help them develop and expand quirements of international business their rural credit programs. As a re- partners and investors by improving IFC's program to build business links sult, Hromada started lending to software development process qual- has transformed local companies into farmers for the first time; its agribusi- ity, strengthening project more successful enterprises, laid the ness portfolio now amounts to USD management, and improving certifi- foundation for increased investment, 470,000. Ukrsotsbank's rural credit cation procedures. IFC's project and brought economic benefits to lo- portfolio grew more than tenfold, facilitated two commercial contracts cal communities. For example, IFC from USD 1.5 million to USD 18 between Finnish and Russian compa- has: million. IFC has also trained and ad- nies. More contracts are under Facilitated Investment vised farmers and banks on discussion. In addition, we created a In the forestry sector, IFC works with agribusiness risk management and database of over 400 Russian soft- European investors to match them helped both parties understand each ware development companies to with Russian partners. For example, other's requirements. The project facilitate their search for potential Botnia, one of the largest forest in- helped nearly 400 farmers in the partners. This database was created dustrial companies in Europe, is Kherson region in southern Ukraine in partnership with a Russian infor- building a 50 million sawmill in obtain over USD 3.4 million in loans mation technologies association Podporozhie, Leningrad region. Re- from local banks. RUSSOFT, which now maintains the cently Botnia announced plans to database. Introduced International Quality Stan- invest 1.7 billion in construction of dards to Local Firms In the automotive sector, IFC con- a new pulp and paper mill in the Eu- IFC worked with Russian manufac- ducted a survey of Russian ropean part of Russia. turers of automotive components to manufacturers of spare parts to iden- IFC worked with 18 Russian farms to improve their quality to meet inter- tify those who are in the best position help them introduce modern technical national standards. Two of the to become partners with outside in- and management know-how to boost companies have signed long-term vestors. Over 1,300 copies of the the quality and quantity of their milk supply contracts worth over USD 1.5 survey's findings were distributed production. The improvements in million annually with the Ford as- globally to manufacturers of automo- the farms' operations laid the ground- sembly plant outside of St. biles and auto components. work for a USD 50 million investment Petersburg. IFC trained Russian con- Extended Benefits of Multimillion In- in a dairy plant south of Moscow, op- sultants on quality certifications vestments to Local Communities erated by Campina, a Dutch dairy issues. These consultants now work In Russia's remote region of Maga- processor. IFC helped finance the with other local manufacturers of plant with a 9.4 million loan. This dan, which is heavily dependant on spare parts for the automotive indus- mining to drive its economy, we have new factory created dozens of jobs, try. Additionally, IFC produced an been working with 46 small busi- and Russian farmers concluded long- educational film on the Kaizen nesses to help them benefit from term supply contracts with Campina methodology to improve production opportunities stemming from IFC- and other dairy processors. quality at enterprises. Over 40 Russ- backed investments in the local gold Increased Access to Financing for Farms ian producers of auto components extraction industry. Five of these IFC purchased the film. The joint project with Campina led partner companies improved their to the creation of the Agri-Industrial Matched Local Companies with Business operations to the point of being able Finance Company, the only commer- Partners to win supply contracts with the re- cial leasing company in the country We worked with Russian information gion's mines. The annual sales of that lends to the primary agricultural and communications technologies these five companies have increased sector. It was established with techni- companies to help them meet the re- by more than USD 640,000 due to cal assistance from IFC and financed the new cooperation. by IFC, Rabobank, and the Nether- lands Development Finance Company (FMO). After the first year of operation, the company's lease portfolio reached USD 7 million in outstanding and approved leases. IFC continues to provide technical assistance to Russian farms-the com- pany's existing and potential clients-on increasing productivity and quality. In Ukraine, IFC worked with Ukr- sotsbank and Hromada Credit Union ProgramUpdate 6 R U S S I A IFC Project Brings Finnish Investments to Russian Forest Industry There can be few more obvious its 50 million sawmill at Pestovo matches between foreign direct in- in Novgorod region last year. The vestment and local potential than in project successfully sourced the re- Northwest Russia, where timber re- quired inputs of high-quality spruce sources stretch for thousands of logs ("a challenging task" as UPM's kilometers just a stone's throw from deputy CEO described it). The proj- Finland, which is home to some of ect team surveyed huge areas of the world's best forest-product com- Northwest Russia for the Finnish panies. But Finnish investors, who company and provided a list of suit- want to produce on the other side able suppliers and details of their in companies providing outsourced of the border, have been challenged capacity. Pestovo sawmill is now up services. to find in Russia ongoing timber and running with 100 employees. supplies of required quality and Another 50 million green-field Mr. Erkki Varis, Managing Director quantity. of Botnia, emphasized at the roof- sawmill held its roofing ceremony at ing ceremony that the present mill The Northwest Russia Forest In- Podporozhie in Leningrad region in is only a first step. Botnia's planned vestment Project was launched in August 2005. The project proposed investments in wood processing in 2001 by the IFC with funding from Podporozhie to Botnia - Europe's Russia, possibly at Podporozhie, in- the government of Finland to ad- second largest pulp producer - as a cluding construction of a pulp and dress the problem, and three years suitable location due to good spruce of studies have borne fruit. Suppli- log resources and presence of a large paper mill, will total 1.7 billion. In September the Northwest Russia ers for the sawmills opened by local wood harvesting company. Now Forest Investment Project began Finnish companies in 2004-2005 in the project is helping Botnia to scanning huge forested areas of Eu- Novgorod and Leningrad regions arrange timber supplies. ropean Russia to locate supplies for were located with IFC help, and the The project also assessed and veri- the future mill. project is now beginning supply stud- fied operational data given by Botnia ies for a massive new pulp mill The Project has facilitated about to the Leningrad regional adminis- facility, to be built with Finnish USD 184 million of investments in tration in support of an application money. Russia to date, far exceeding the ini- for investment privileges, which were tial target of USD 50 million. UPM-Kymmene, the second largest granted. The sawmill will employ forest company in Europe, opened 120 people and create 40 more jobs thePartnershipPerspective Fall - Winter 2005 ImpactOntheGround 7 R U S S I A IFC Improves Business Practices of SMEs in Russia's Far East continued from page 1 national Development Agency dented in the case of a start- (CIDA). up company in the area-was The founders did not have any busi- prepared to extend a bank ness experience, but possessed loan to N-ERGO, after re- professional skills and considerable viewing its business plan. vocational training. N-ERGO's rela- With IFC support, N- tionship with IFC dates to April 2004, ERGO performed a market when its founders requested the Part- survey of the availability of nership's help in developing the local fitness services. Follow- company strategy to raise external fi- ing an IFC recommendation, nancing and attract new clients. the company changed its As a result of a program tailored by pricing policy, resulting in IFC for the company, N-ERGO raised an increase in clients. nearly USD 10,000 from an angel in- The Partnership helped N-ERGO or- signed contracts and bought member- vestor at an annual rate of 3 percent ganize a presentation aimed at the ship for their employees. (far lower than the prevailing bank corporate sector. Several companies rate of 23 percent) to purchase new Since IFC's Partnership started working in Magadan in April 2002, the project has provided over 300 equipment. If not for the angel in- consultations to local SMEs not involved in the mining supply chain, to improve their business vestor, a local bank, Bank practices and knowledge base. The SMEs have received more than USD 440,000 from local banks and Vozhrozhdeniye-in a move unprece- the non-banking sector. U K R A I N E IFC Shows that Farming is Good Business for Banks in Ukraine IFC's ability to work with all key or experience of operating in a com- educating farmers on new production players in the agribusiness supply petitive economy, skills and technologies and market opportunities. chain has helped to change percep- technologies were outdated, and there This soon progressed to assistance in tions, improve risk management, was little or no access to finance. preparing investment plans. The IFC and enable farmers to access bank The IFC project, funded by Swedish project thus demonstrated to local financing. The result has been a Sida and Canadian CIDA, worked with banks that agriculture could offer vi- substantial increase in bank loans to local farms and sought out key players able business opportunities to financing agriculture in Kherson Region of in the region who saw the potential for institutions. Ukraine. developing farm businesses. These in- Working with Ukrsotsbank, IFC initi- Agriculture is traditionally an impor- cluded: Chumak, a new Swedish ated a pilot program to develop effective tant part of the economy in Ukraine investment in vegetable processing; procedures for financing farmers. The and a significant source of rural em- agricultural input suppliers keen to scheme brought together four parties: ployment. Following privatization in grow their business in the region; and Ukrsotsbank as financier, Chumak as a the 1990s the sector has however pre- a progressive regional branch of com- reliable market, agricultural input sup- sented relatively few opportunities for mercial bank, Ukrsotsbank. pliers, and Kherson farmers. commercial bank lending because of All saw the opportunity presented by New drip irrigation equipment, vital perceived high risks. emerging private farms, but it was ap- for improving crop yields, was partly IFC's Ukraine Agribusiness Develop- parent that no one could take on this collateralized, and Ukrsotsbank ac- ment Project started work in Kherson development alone. Coordinated ef- cepted the future harvest of vegetables Region of southern Ukraine in 2001. forts were needed, and the IFC took contracted to Chumak as collateral. Conditions for vegetable cultivation the role of impartial broker, helping This mechanism was critically impor- are exceptionally good in Kherson, but the parties to understand and manage tant, as most private farmers did not the situation on farms there when the the risks and potential inherent in the have adequate collateral of their own, project first began was typical for coun- region's agriculture. and Ukrainian law did not allow use of tries of the former Soviet Union: supply The project started work with private land as collateral. Finally, the input chains had collapsed; private farmers farms, developing business plans and suppliers provided support to farmers were emerging, but lacked knowledge on utilizing new technologies, creating ImpactOntheGround 8 U K R A I N E IFC Shows that Farming is Good Business for Banks in Ukraine continued from page 1 an additional and effective monitoring sotsbank used its experience with IFC system for the bank. in Kherson to implement new proce- dures in its branches throughout The IFC project, with help from Cana- Ukraine. Overall, IFC trained 70 ac- dian and Swedish banking specialists, count managers from Ukrsotsbank and subsequently developed a comprehen- reached over 1,000 farmers through 25 sive training program for banks on seminars and training sessions. farm financing, including farm busi- ness analysis and risk assessment. The IFC also conducted similar training training was followed by development courses for other banks in the region, of new bank credit procedures. as a result of which the new practices were implemented by Aval, Nadra and The central concept of IFC's approach Raiffeisenbank. The major impact of was that a farm's creditworthiness this technical assistance is improved should be assessed on the basis of busi- understanding by banks of farming ness fundamentals, and not only on business and risks, and effective proce- cies have also improved significantly. available security. dures for farm credit risk assessment, Production costs at several farms have Ukrsotsbank's first successful customer farm business analysis, farm loan mon- dropped from around 8 to 10 cents to was Estem farm, which took a loan of itoring and management. 3 to 5 cents per kilogram of tomatoes USD 5,000 to purchase a vehicle for as new drip irrigation leads to higher Access to finance has enabled Kherson transporting vegetables. Estem farm is yields and higher productivity. farmers to boost output and efficiency. now one of the bank's most successful Tomato supply to Chumak increased The pilot initiative built around Ukr- clients, and has switched from borrow- by over 50% between 2001 and 2004, sotsbank benefited other participants, ing from private individuals in the and productivity has risen significantly too. Training conducted by the proj- informal economy to an open com- thanks to new technologies financed ect, and one-on-one consultations with mercial relationship with the bank. For by bank credit: on progressive farms, farmers, improved management skills, the coming season in 2006 Estem plans average tomato yields in Kherson are agri-techniques, finance management, to borrow USD 40,000 to invest in currently 40 tons per hectare, com- and business planning. The project new greenhouses. pared with average yields in Ukraine also helped farmers to become better In the period from 2002 to 2005, Ukr- of 12 tons per hectare. Cost efficien- business partners and meet new quality demands of the market, and assisted them to clarify farm ownership and contractual structures. Most of all, the IFC project demon- strated that agriculture is good business for banks. The consequence has been growth in the overall portfolio of farm loans in Kherson region from USD 16 million in 2000 to almost USD 80 million in 2005. Improved risk man- agement and increased competition among banks for creditworthy farms has also led to halving of interest rates over the same period. The Partnership Perspective Editors: Irina Likhachova 36 Bldg. 1 Bolshaya 2121 Pennsylvania Avenue, NW is a publication of the IFC's Private Svetlana Pletneva Molchanovka St., 3 rd Floor Washington, DC 20433, USA Enterprise Partnership. Moscow 121069, Russia Tel.: + 1 (202) 458-0917 Contributors: Elena Bushuyeva Svetlana Pletneva Tel.: + 7 (495) 411-7555 Fax.: + 1 (202) 974-4312 Ekaterina Krevskaya Lyudmila Podakova Fax.: + 7 (495) 411-7556 Irina Likhachova Tamara Sukhenko Ian Luyt Oksana Varodi www.ifc.org/pep Dina Nicholas e-mail: ifcpep@ifc.org Fall - Winter 2005