Kyrgyz Republic Secures $170M for Green MSME Finance in Landmark Deal

The project, which will run through December 2030, aims to expand access to finance for MSMEs engaged in environmentally sustainable activities.

In a major step toward advancing sustainable economic development in Central Asia, the World Bank’s Board of Executive Directors has approved a $120 million package for the Kyrgyz Republic to support the development of a Sustainable Finance Market for Micro, Small, and Medium Enterprises (MSMEs). This groundbreaking initiative will be co-financed by a $50 million loan from the Asian Infrastructure Investment Bank (AIIB), bringing the total funding to $170 million.

The project, which will run through December 2030, aims to expand access to finance for MSMEs engaged in environmentally sustainable activities. It is a central pillar in the World Bank Group’s Country Partnership Framework with the Kyrgyz Republic, which emphasizes private sector-led job creation, climate resilience, and inclusive economic growth.

Green Financing to Boost MSME Sector

The financing will be channeled through two major components:

1. Sustainable Finance for MSMEs

This component will enhance the capacity of local financial institutions to provide green loans. Wholesale financing will be provided through Participating Financial Institutions (PFIs), which will on-lend to MSMEs investing in energy-efficient technologies, renewable energy solutions, waste reduction, and other environmentally sustainable practices. Special attention will be given to sectors like agriculture, construction, and manufacturing—areas where green practices can significantly reduce environmental footprints.

In parallel, the project will support the creation of a Green Finance Fund, a strategic initiative by the Kyrgyz government to catalyze long-term financing for sustainable development. The fund is expected to work closely with international climate finance mechanisms and private investors.

2. Green Guarantee Mechanism

To address one of the biggest hurdles for MSMEs—limited collateral and perceived high risk—the project will establish a Green Guarantee Mechanism under the country's existing Guarantee Fund. This mechanism will offer partial credit guarantees to reduce the risk exposure for financial institutions, thus encouraging them to increase lending to MSMEs pursuing green projects.

Leveraging Private Sector Capital

One of the key expected outcomes of the project is the mobilization of up to $148 million in private sector investments over the next five years. This will be achieved through a combination of public-sector financing, risk mitigation tools, and technical support aimed at crowding in private capital.

The project also represents a transition from post-pandemic recovery to long-term sustainability. It builds on the successful Emergency Support for MSMEs Project, which provided critical financial relief to businesses during and after the COVID-19 crisis.

Stakeholder Collaboration and Implementation

Implementation will be carried out in close coordination with the Ministry of Finance of the Kyrgyz Republic, the State Development Bank, the Guarantee Fund, and various development partners. The project will be held to high international standards in procurement, financial management, and anti-corruption safeguards, ensuring transparency and accountability throughout the process.

According to Hugh Riddell, World Bank Group Country Manager for the Kyrgyz Republic, “Increased private sector-led job creation is a key pillar of our engagement in the country. This project will not only strengthen financial institutions and support green innovation but also create thousands of jobs across diverse sectors.”

Emiko Todoroki, World Bank Senior Financial Sector Specialist and Project Task Team Leader, highlighted the significance of building on past successes. “We look forward to working with our partners to create a robust financial ecosystem that supports innovation and inclusive growth,” she said.

IDA Financing Terms

The World Bank’s contribution will be made through the International Development Association (IDA), the Bank’s concessional lending arm. The financing includes a zero-interest, shorter-maturity loan with repayments spread over six years. The favorable terms reflect the Bank’s commitment to helping low-income countries like the Kyrgyz Republic pursue long-term development goals without overburdening their public finances.

Broader World Bank Engagement

This project forms part of a broader World Bank portfolio in the Kyrgyz Republic, which currently includes 23 active projects with a combined commitment of $1.2 billion. These projects span key sectors such as education, health, infrastructure, digital development, agriculture, and climate resilience.

The World Bank Group continues to prioritize initiatives that align with its overarching mission: to end extreme poverty and promote shared prosperity on a livable planet. The Sustainable Finance Market for MSMEs project is a strong example of this mission in action, merging economic opportunity with environmental stewardship.

As the Kyrgyz Republic continues on its path to sustainable development, this landmark initiative stands out as a model for how global partnerships, local leadership, and financial innovation can drive inclusive and green growth.