|                                                                                                                                                             |  | TUSRIF   LENDS   TO KRASNODAR  SMALL BUSINESSES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       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|**BISNISHome PageSearchBISNISEmbassyReportsCountryReportsIndustryReportsPublicationsSourcesof FinanceLeadsand EventsExchangeRatesState ExportsOtherSources** |  | April 1998by James Cook & David CiagneWhen entrepreneur Victor Solodovnichko decided to start a company making refrigerated display
cases, he took advantage of a new opportunity for small businesses in Russia's Krasnodar Krai. 
Only a few weeks after submitting his application, Solodovnichko received a loan through the
"Bank Partner Program" (BPP) at Krasnodar Bank.  The BPP, a partnership between  Russian
banks and the U.S. Russian Investment Fund (TUSRIF), provides financing for small businesses
throughout Russia for terms of up to two years.  BPP financing can be an important resource for
U.S. firms working with partners in Krasnodar and elsewhere to finance the export of U.S.
equipment and materials.Over the past year, the U.S. Russia Investment Fund has invested more than $1 million in
Krasnodar Krai and up to $2.5 million in Southwestern Russia.  Investment in Southwestern
Russia accounts for more than 22 percent of the fund's commitments to small business
development and is the fastest growing area of investment by the Fund.  The Fund currently
works with two banks in Krasnodar, Mosbusinessbank and Krasnodar Bank.Loans in Krasnodar
In Krasnodar Krai, the fund has financed projects in the cities of Krasnodar, Novorossiisk,
Tuapse, Belorechensk, Ust-Labinsk, and Viselki.  Loans have ranged from financing a mist
irrigation system for agriculture to new equipment for a growing photo lab.  Other projects have
included a dental clinic, a soft drink company, a construction firm, and several gas stations."We believe that this area has vast untapped potential, particularly the Black Sea coast and the
city of Krasnodar," commented Victoria Khabliouk, Fund Representative in Krasnodar.  "We're
starting to see a greater acceptance by regional banks to lend to small businesses.  This is
uncharted territory for these banks, but they can see for themselves that lending to small
businesses is a good business strategy."Krasnodar Krai is located in the center of Russia's agriculture belt, bordering the Black Sea to the
west, the Sea of Azov to the northwest, and the Republic of Georgia to the south.  The region is
dominated by agriculture, light manufacturing, tobacco, transportation, and services.  The krai's
southern coast provides a wealth of opportunity for tourism.  When Ukraine became an
independent country, the Krasnodar coast became Russia's only resort area on the Black Sea. 
New hotels and service businesses are starting up all along the Black Sea coast.Results
The fund's work in this region is already starting to show significant results.  Last summer, a trip
to local bread stores in the coastal town of Tuapse would have revealed row after row of empty
shelves during the middle of the day.  The mammoth state-owned bakery was known for
unreliable and infrequent deliveries and mediocre quality.  A local store owner, Anatoli
Dondokov, decided that it was time to take matters into his own hands and started Aelita. 
Through a TUSRIF small business loan from his local bank, he purchased the equipment
necessary to supply fresh-baked bread to local merchants and tourists.  Faced with the challenge
of competing against the long-established and much larger bakery, Aelita focused on dependable
morning deliveries, customer service, and improved quality.  As a result, Aelita has exceeded its
original sales projections.  It now supplies more than 4,000 loaves of bread per day and is
continuing to grow.At Belomoloko, a local dairy serving the city of Belorechensk, the boiler room for the
pasteurization of milk was outdated and inefficient.  Through a TUSRIF loan, Belomoloko was
able to finance the renovation of the boilers to save energy and cut waste.  "With the Fund's
financing, we were able to accomplish in six months what would have taken us two years to
complete," commented Vladimir Tirtisni, Director of Belomoloko.  He added, "We're saving
almost $2,500 a month in energy.  This extra savings has allowed us to expand and diversify our
product line into mustard, mineral water, baked goods, and strawberry jams."Expansion Plans
Plans are underway to expand the Bank Partner Program to Novorossiisk, one of Russia's few
deep-water ports on the Black Sea.  TUSRIF is currently working with the local administration of
Novorossiisk to help identify and target small businesses in need of financing.  Both Krasnodar
Bank and Mosbusinessbank have branch offices in the area and a third bank is joining the
program.  The addition of the well-capitalized Mosbusinessbank to the region and the BPP has
produced additional loans including a growing chain of hamburger kiosks, a fruit drink
manufacturer, a chromatography company, a cosmetics company, and a window and door frame
store.Other efforts by TUSRIF in the region include the recent expansion of the Bank Partner Program
to Krasnodar Bank's seven affiliate branches throughout the krai.  "Four branch managers
attended TUSRIF's Bank Partner Training Program last fall and enthusiasm for the program is
high," commented Yelena Shamshina, Head of the Investment Department at Krasnodar Bank. 
TUSRIF looks forward to continuing to play a role in helping fulfill the region's growth
prospects. For more information on TUSRIF, contact the fund's U.S. office at 212-818-0444, or its Moscow office, at 011 7 (501) 960-3132.James Cook and David Ciagne work for TUSRIF in Moscow and New York, respectively.This report is provided courtesy of the Business Information Service for the Newly
Independent States (BISNIS)