TOKYO -- Japan's Sumitomo Mitsui Banking and the Japan Bank for International Cooperation will jointly launch a new scheme to provide loans for small to midsize Russian businesses via Alfa-Bank. Japanese export credit agency Nippon Export and Investment Insurance (NEXI) will back up the creditworthiness of the Russian lender.
Despite being a major private lender in Russia, Alfa bank's credit profile, including total asset size, is much lower than state-backed lenders. NEXI will provide guarantees in order for Japanese banks to avoid the risk of possible bad loans.
NEXI and the banks plan to exchange a memorandum of understanding with Alfa-Bank on the scheme during Russian President Vladimir Putin's visit to Japan on Thursday through Friday this week. The total loan amount is expected to reach hundreds of millions of dollars. The parties plan to start the service sometime next year after finalizing the details.
Through the so-called "two-step loan" scheme, Japanese lenders will provide loans to Alfa-Bank who in turn lend to the end user. The loans will help small to midsize Russian businesses buy products from Japan.
It is hoped the new scheme will promote transactions between Japanese and small to midsize Russian companies, for whom Japanese banks often find it difficult to obtain adequate credit information.
In the past, Japanese lenders partnered with Russian state banks for two-step loan programs. But transactions have been suspended since the U.S. banned deals with state banks in Russia in 2014 as part of economic sanctions. Breaching the ban could lead to significant fines. Alfa-Bank, however, falls outside the restrictions.