SEF FINCA Project Company Description:    FK was established in 1995, with USAID finance.    It has a disbursed portfolio of over US$2 million with a repayment rate of 99% and serves nearly 20,000 active clients throughout Kyrgyz Republic.  FK is governed by FINCA''s Board of Directors.      From the outset, FK has adopted a commercial approach to microfinance.  It has 100% operational and financial self-sufficiency in recent years and some of the lowest levels of delinquency in the FINCA network, despite a difficult macroeconomic environment, while increasing the incomes of its borrowers.      Purpose of Project   :      In order to expand its outreach in the country and to institutionalize the activity on a more permanent basis, FK seeks to access commercial sources of funding.  To do so, the sponsor wants to convert FK into a regulated for-profit microfinance institution.  However, the legal framework for such an entity does not yet exist in Kyrgyz Republic.  An interim step is therefore proposed, whereby funding is put in place now on a commercial basis to expand FK''s activity without having to wait for the legal framework surrounding conversion to be addressed first.  Hence, IFC would make an equity investment of up to US$1 million to establish FINCA Microfinance Resource to support the lending operations of FINCA Kyrgyzstan during its transformation from a non-profit microfinance organization into a for-profit microfinance institution.  The Resource will be a closed-end, 3-year limited liability corporation, and will have a capital of up to US$2.5 million.  It will be managed by FINCA.  The funding would later be rolled into the equity of the new for-profit institution to provide part of its capital on its formation.       IFC Role and Development Impact:     During the last eighteen months, IFC and FINCA have explored various ways to support the conversion of FK into a commercial microfinance institution.  IFC provided technical assistance funding from IFC''s Trust Fund to support a market analysis that will be part of a detailed feasibility study for FK''s conversion.  Through this project, IFC in conjunction with FINCA, will provide FK with the necessary commercial funds as an interim step, in order to ensure that the expansion of the FINCA Kyrgyzstan''s program is not delayed.  During FK''s transformation,  IFC will play a catalytic role in facilitating communication with the Kyrgyz government authorities and the National Bank of Kyrgyzstan.    IFC expects to become a founding shareholder in the new microfinance institution, and expects to help provide a sound basis for the corporate governance of the new microfinance institution.  IFC will also seek to attract other investors into the equity of the new microfinance institution.     The proposed project will have a strong development impact as it supports the growth of a successful microfinance program, which aims at improving the standard of living of the poor.  As FINCA  has successful operations throughout the world, including extensive networks in Latin America and the NIS, the proposed project is expected to have a good replication potential to other commercially viable programs of FINCA, and have positive demonstration effect on other microfinance organizations.