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. Last Updated: 07/27/2016

USAID, Bank to Start Loan Guarantee Plan

The U.S. Agency for International Development announced Wednesday it had teamed up witSBS-Agro Bank to launch its first loan guarantee program in Russia to boost private sector lending to small businesses.

"The loan guarantee program can be a significant catalyst for banks to develop small business lending portfolios, which in Russia should be becoming an increasingly more profitable and attractive area for banks," Janet Ballantyne, director of USAID's Moscow office, said at a news conference.

Under the five-year program, USAID will guarantee loans of up to $150,000 to small businesses through SBS-Agro branches initially in the Novgorod region and the Far East's Primorsky and Khabarovsky regions. USAID will assume the risk for 50 percent of the principle of each loan, while SBS-Agro will be responsible for the rest, plus interest.

"The importance of the small-business sector for promoting economic growth cannot be overemphasized," said Ballantyne, citing figures that more than a million small businesses are operating in Russia today.

USAID has structured the program so that other national, regional and local banks can apply to take part in the loan guarantee facility, she said, adding that up to three banks per region are likely to be included. Ballantyne said SBS-Agro, which will select the loan participants, had been chosen due to its wide network of branches throughout Russia and its strong financial position.

"SBS-Agro is emphasizing regional policies in the areas of credit and investment. For that reason, the USAID program matches fully our development strategy," said Alexei Rasskazov, chairman of the board at Agroprombank, a part of SBS-Agro. "The program provides us with help in managing credit risk."

Ballantyne declined to say how much USAID money was being set aside for the program, but said it would be cost-effective. USAID operates similar loan guarantee programs in more than 20 countries.