Case study: How Aiyl Bank identifies and works on strategic business opportunities to increase positive and reduce negative impacts
Aiyl Bank was established in 1996 by the Government of the Kyrgyz Republic with financial and technical support from the World Bank, aiming to offer loans to agricultural enterprises within the country. Over its 29 years of operation, Aiyl Bank has made notable progress in granting access to credit for a large portion of the Kyrgyz Republic’s rural population. Today, it stands as one of the leading financial institutions dedicated to developing the country’s agricultural sector and enhancing the well-being of its people by providing affordable, high-quality banking services utilizing modern technology. The bank operates through 169 branches across all regions of the Republic, including remote and hard-to-reach areas. Aiyl Bank is a signatory of the Principles for Responsible Banking (PRB) and is, accordingly, identifying and working on strategic business opportunities to increase positive and reduce negative impacts. Tweet This!
This case study is based on the 2024 PRB Responsible Banking Progress Statement by Aiyl Bank prepared in relation to its implementation of the PRB, that can be found at this link. Through all case studies we aim to demonstrate what ESG/ sustainability reporting done responsibly means. Essentially, it means: a) identifying a company’s most important impacts on the environment, economy and society, and b) measuring, managing and changing.
Which Principles for Responsible Banking have been addressed?
The Principles for Responsible Banking addressed in this case are:
- Principle 3: Clients and Customers
- Principle 4: Stakeholders
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- How Aiyl Bank proceeded with stakeholder identification and consultation, and
- How Aiyl Bank identified and worked on strategic business opportunities to increase positive and reduce negative impacts
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Stakeholder identification and consultation
Please describe which stakeholders (or groups/ types of stakeholders) you have identified, consulted, engaged, collaborated or partnered with for the purpose of implementing the Principles and improving your bank’s impacts. This should include a high-level overview of how your bank has identified relevant stakeholders, what issues were addressed/results achieved and how they fed into the action planning process.
Aiyl Bank actively seeks feedback from its stakeholders and is committed to responding to their concerns promptly and accurately. The bank believes that this engagement provides valuable insights, aids in managing risks and opportunities, and is vital for its long-term sustainability.
Engagement with Clients
Aiyl Bank is dedicated to placing its clients at the core of all its activities. The bank’s complaint management system enables it to swiftly identify and resolve issues, reinforcing its commitment to customer satisfaction and consumer protection.
Interaction with Institutional and Regulatory Bodies
In 2024, Aiyl Bank proactively engaged with regulators and government entities to promote sustainable finance in the Kyrgyz Republic. The bank contributed to discussions on establishing a framework that supports the transition to a low-carbon economy. This included participating in the development of the Kyrgyz Republic’s Green taxonomy and a Roadmap for sustainable finance, as well as implementing ESG principles within the banking sector to meet the needs of all stakeholders.
Engagement with Investors
Recognizing the growing emphasis on environmental, social, and governance (ESG) factors among investors, Aiyl Bank has strengthened its relationships with external analysts and ESG rating agencies. The bank understands that strong ESG ratings and scores are essential for attracting sustainable investments and shaping investment strategies.
How did Aiyl Bank identify and work on strategic business opportunities to increase positive and reduce negative impacts?
In its 2024 PRB Responsible Banking Progress Statement Aiyl Bank reports that it identified and worked on strategic business opportunities to increase positive and reduce negative impacts as follows:
Aiyl Bank is dedicated to generating a positive social impact. As a social actor, Aiyl Bank supports its clients and communities in building a more sustainable, inclusive, and equitable society. To date, the bank’s green portfolio amounts to $11 million, with plans to expand it further by establishing specific ESG targets for its lending activities, investment products, and sustainable bonds. Beyond providing financing, Aiyl Bank is planning to educate clients and stakeholders on ESG topics and their role in environmental protection.
To preserve and enhance the environment, as well as to offer financial support to entrepreneurs engaged in producing environmentally friendly products and processing raw materials without harming nature, Aiyl Bank allocated KGS 1 billion (USD 11.5 million) for the “Green Technology Financing” loan product.
Purpose of the loan:
- Green transportation
- Renewable energy
- Energy efficiency, reduction of energy consumption and/or technical losses
- Green buildings
- Improvement of air quality
- Sustainable water use and waste management
- Sustainable agriculture
The KGS 1 billion allocation represents only about 2% of the bank’s total portfolio. Many previous loans can be verified as ‘green’ loans, including investments in stable nursing systems, purchase of pedigree animals, drip irrigation systems, and other agricultural initiatives. However, the lack of an internal verification system and the absence of a national green taxonomy in 2024 made it challenging to determine the exact size of the green portfolio. Aiyl Bank plans to verify its green portfolio by engaging third-party evaluators.
The “Green Technology Financing” product was developed based on the internal green taxonomy of the State Development Bank of the Kyrgyz Republic.
UN Principles for Responsible Banking: Accelerating a positive global transition for people and the planet
With over 300 signatory banks representing almost half of the global banking industry, the Principles for Responsible Banking are the world’s foremost sustainable banking framework. Through these Principles, the banking community takes action to align core strategies, decision-making, lending and investment with the UN Sustainable Development Goals and international agreements such as the Paris Climate Agreement.
FBRH Principles for Responsible Banking (PRB) Assurance:
First class PRB assurance services: The result of solid, hands-on ESG/ Sustainability experience
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- FBRH is a GRI Certified Training Partner (Global), ISEP Training Centre and a member of CPD.
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- FBRH possesses a unique skill set that combines ESG/sustainability certified training, experience in advisory services and report preparation, and ESG/sustainability report assurance.
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The combination of all the above empowers FBRH to provide first class Principles for Responsible Banking (PRB) assurance services.
References:
This case study is based on published information by Aiyl Bank, located at the link below. For the sake of readability, we did not use brackets or ellipses. However, we made sure that the extra or missing words did not change the report’s meaning. If you would like to quote these written sources from the original please revert to the following link:
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