DEG returns to Russia

DEG has invested $3m in Moscow-based KMB, a vehicle which manages the loan portfolios of Russian banks affected by the 1998 crisis.

Deutsche Investitions und Entwicklungsgesellschaft (DEG), a private investment arm of the German government, has made its first move into Russia since the 1998 financial crisis with a $3m investment in KMB, the Moscow-based micro-finance bank.

KBM manages the loan portfolios of Russian banks affected by the 1998 financial crisis. It grants micro and small business credit to of approximately $3,000 – $40,000 for up to 36 months. The bank has an equity capital of $13m. Its headquarters are in Moscow and three other branches throughout Russia at present.

The bank was set up by a group of investors including DEG, The European Bank for Reconstruction and Development (EBRD), Open Society, a foundation of the Soros Group, and Dutch group Tridos Doen. It has been based on The Russia Project Finance Bank, which had also been affected by the crisis. IPC-International Project Consult/GmbH, a company which specialises in commercial micro-finance, manages the bank.

Speaking about events in 1998, Dr Stephen Kinnemann, managing director of DEG, said: “Even DEG suffered great losses in its Russian portfolio as a result of the financial crisis in Russia. Nevertheless, we are willing to carry out future projects in Russia, provided that they – like KMB – have a convincing business concept, professional management and a solid finance and shareholder structure.”

The Moscow Times reports that at the time DEG made a loss of 80 per cent of its loan portfolio which was worth DM40m ($22m).

DEG aims to promote growth in developing and transition countries through private sector development.