The financial strategic goal of the programme is to reach a USD1 billion in loan portfolio by the end of 2008, operational – increase the availability of loans for small and medium enterprises in Russia through applying flexible approach to working with clients. In November 2005 MDM Bank started preparing to launch the new programme – Programme of Lending to Small and Medium enterprises. For the purpose of project implementation the bank established Department for SME lending, developed financial and strategic plan with horizon up to 2008, the bank has prepared a marketing plan and the distribution model, has developed a diversified product line. The widescale launch of the programme took place in 38 branches of MDM Bank in early summer 2006.

Main advantages:

• The client’s requirements and specifics of his business are of primary importance which allows to design flexible and appealing products for small and medium business.
• Wide range of products, comprising nine types of loans and two types of deposits.
• Flexible terms for loans, stipulating different forms of granting (non-installment loan, credit line, overdraft, guarantee, LC) and flexible repayment schemes.
• Flexible approach to collateral allows to offer clients uncollateralized loans, loans against collateral of the acquired property (cars, equipment, real estate) and to accept as collateral personal and business property.
• The application of modern scoring technologies allows to offer clients optimal terms on loans with fast approval period, of 1-5 business days. Technologies and available resources allow to finance the clients’ business for the period of up to 7 years.
• Regional network comprising 38 branches and over 100 offices allows to deliver loan disbursement and repayment facilities.
• Fee structure and interest rates. Flexible lending terms allow us to maintain competitive rates and fees in line with the market. No hidden fees.

Main products of MDM Bank for small and medium businesses:

Universal loans, designed to finance working capital and investment needs. These products differ in amounts, maturity and approach to collateral:

• «MDM-Express» 
• «MDM-Micro»
• «MDM-Small»

Special purpose and niche loans designed for special business tasks:

• «MDM-Auto» for purchase of cars and specialty equipment 
• «MDM-Resource» - for purchase of commercial real estate and equipment
• «MDM-Line», allowing for continuous working capital financing and designed mainly for wholesalers
• «MDM-Autodealer» - loan for official car dealers against collateral of inventory
• «MDM-Simplified» - loan with simplified system for borrower’s appraisal on the basis of official financials only
• Leasing – financial lease. The service is available through LeasingPromHold leasing company.

Deposits for money saving and accrual:

• «MDM-Comfort» 
• «MDM-Income»

In November 2006 for the clients’ convenience we opened a 24-hour toll-free information line for small and medium business with the unified federal number 8-800-333-0-800 for all regions.

Results of year 2006 allow to say with confidence that the chosen strategy is successful as well as feasible. MDM Bank rapidly became a leader in SME portfolio growth rate, number of Clients grew from 400 in May up to 2700 as at December 1st 2006. MDM Bank SME loan portfolio as at beginning of December amounted to about USD 150 million, which is ahead of the business plan KPI planned by the end of December 2006.

Cooperation with international and Russian organizations for small business support. Department of SME lending of MDM Bank works in close cooperation with international organizations and local authorities: The Bank joined the loan programme of Russian Small Business Fund (EBRD). As a result of this work we obtained the first tranche in the amount of USD 50 million. Next year partnership with EBRD and other credit organizations will be developing. It is planned to obtain USD300-350 million that will be used to fund lending programmes for small business. In 2006 MDM Bank signed a Cooperation agreement with Department to support small business at the Moscow government and Agreement with the Fund to promote lending to small businesses of Moscow on providing guarantees against loans to SMEs.

Social responsibility

Today for small businesses MDM Bank is a serious partner having accessible resources, with good awareness of the specifics of this business, ready to support at all the stages of development. The bank is interested in long-term cooperation and continuous growth of its clients, since the successful growth of client portfolio is the key to the bank’s success as well as the development of the Russian economy on the whole.

MDM Bank develops the Programme on the basis of principles followed by EBRD, IFC and other international institutions financing small business. This is expressed in compliance with the code of ethics that restricts financing to certain kinds of business. We do not finance companies producing tobacco and alcohol, military goods, gambling and show business, production that is harmful to environment and other certain types of business.

Plans and outlook of the Programme development

According to market analyst the next 5-7 years will see the boom in small business lending sector, market size will grow 11 times. By the end of this period the market will have a clearly formed structure and permanent leaders.

MDM Bank specialists took into account the analysts’ estimates when developing the financial and strategic plan of the Programme development. According to the plan, by year 2009 MDM Bank investments in small business in Russia will amount to USD1 billion, and by the end of year 2010 the bank’s loan portfolio will exceed USD1,5 billion. By this time MDM Bank aims to become a top-3 bank, SME lender. For the purpose of implementing these tasks in 2007 it is planned to increase the number of the Department staff 3 times. Extending the product range and opening offices in new locations will also contribute to achieving such ambitious goals.