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Success Story
Innovative Financing Funds Growth
| USAID helps provide more financing opportunities to businesses in the regions |
Constantin Manole, the general director of Maviprim-Com, an agribusiness trading company in the city of Balti in northern Moldova, needed additional financing to expand his business. His suppliers had plenty of wheat, sunflower seeds, and other items to meet the flood of orders that he was receiving from cereal and sunflower processing companies, but without sufficient short-term capital, Mr. Manole had no way to increase his purchases and sales.
Moldovan banks tend to offer mainly traditional loans, which require fixed assets as collateral and are not adjusted to the length of time each specific company may need the money. This kept Mr. Manole from purchasing additional agricultural crops from Moldovan farmers even though he had lined up guaranteed buyers. As a loyal client of Fincombank’s Balti branch for two years, he was interested in a new product that the bank was launching with USAID’s assistance. Mr. Manole was convinced that purchase order financing (POF), a trade finance product through which banks provide loans based on purchase orders and using liquid instruments as collateral, could solve his short-term financing needs.
In eight months, he has taken out seven POF loans totaling $1.35 million. Moreover, it took only two days for Mr. Manole to get the financing he needed, without having to pledge any fixed assets as collateral. As a result of this financing, he was able to move forward with buying small quantities of grains from nearly 1,800 Moldovan farmers and fulfilling the orders for larger quantities from more than 300 buyers, both locally and abroad, resulting in sales of $1.5 million.
In constant pursuit of the next opportunity, Mr. Manole is now looking for new ways to expand his business, but he stresses that it is virtually impossible to do this without outside financing. “I am looking forward to seeing Moldovan banks provide more innovative loan products to meet companies’ specific needs,” says Mr. Manole. With the help of USAID, Fincombank has already approved 22 POF loans, totaling $2.8 million, and they are working on introducing an additional trade finance loan product.
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PHOTO: GINGER ELSEA / USAID CEED PROJECT |
“I didn’t believe I could receive the financing I needed in such a short period of time, without having to pledge fixed assets as collateral. Now I know from my own experience that it is possible, and it really makes a difference.”
— Constantin Manole, Director, Maviprim-Com
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Financing that Fuels Competitiveness
| New loan product gives small firms the agility to meet market demand quickly |
For Moldovan companies like rug maker Moldabella obtaining credit used to take several weeks and required hard collateral, limiting their ability to quickly fill new orders. Moldovan companies required greater access to finance to grow and compete.
To help businesses succeed, a new financial product, Purchase Order Finance (POF), was introduced with the assistance of USAID and was recently launched at two Moldovan banks, Fincombank and Mobiasbanca. USAID project experts assisted the banks to implement the new form of finance by providing full support during product development and marketing, and offering hands-on training for the banks’ loan officers and management.
The purchase order contract serves as part or all of the collateral in a POF loan, reducing the need for businesses to pledge real estate or other fixed assets. POF loans allow businesses to buy raw materials, packaging, and inputs needed to fill larger or more frequent orders. The term and interest rate of the loan are adjusted to the transaction cycle, which reduces the risk for the lender and interest for the borrower.
In less than four months, USAID assistance facilitated eight pilot loans that injected more than $850,000 worth of essential working capital into reliable businesses, proving that alternative loans can be a profitable new market for banks. Moldabella was one of the first companies to benefit. In a very short time and without hard assets, Moldabella secured a loan worth $200,000 that enabled the firm to fulfill a large order from a key Russian customer.
POF is expanding to more Moldovan banks to increase access to finance for a greater number of Moldovan companies. “POF is a flexible tool for reliable businesses, a key for development, and an impetus for new accomplishments. Together we can achieve more!” says Mrs. Polisciuc from Fincombank. |
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PHOTO: ANDREI SEDELKOV / USAID CEED PROJECT
Larisa Iodco, Fincombank Credit Section Senior Specialist, and Petru Babenco, Moldabella Financial Director, discuss the advantages of the new finance product for Moldovan banks and enterprises. |
| With the support of USAID, a new loan product has been launched in Moldova. “The POF loan offered our company an advantage in comparison to competitors: to expand Moldovan products on the Russian market,” says Petru Babenco, Moldabella Financial Director. |
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