Home >  advice European grants >  List of interviews on European grants >  EBRD increases lending for SME

EBRD increases lending for SME

Teresa Godwin Coombs, SME facility manager,EBRD

What gave birth to the EU/EBRD SME Finance Facility?

The EBRD’s mandate is to foster the establishment of market-based, competitive and sound economies and it was always clear to us that an indispensable element for this is a healthy SME sector. The idea for the establishment of an EC supported SME Finance Facility dates back to 1997 when the Facility was designed as an instrument to achieve the common objectives of the EBRD and the European Commission, to remedy market imperfections in order to support the growth and development of private SMEs in the EU accession countries of central and eastern Europe . Access to finance is seen as a key success factor for the development of the SME segment so the focus of the Facility is to assist the financial sector (banks and leasing companies) to increase capacity to provide appropriate financing to SMEs on a sustainable basis.

While the EU/EBRD SME Finance Facility, which combines EUR 1.3 billion of EBRD financing with EUR 190 million of EC grants, is one of the cornerstones of the EBRD’s support for SMEs, our activities in the sector go well beyond this. Since 1991, the EBRD has invested €6.5 billion into the SME sector, including micro-enterprises, with restricted purpose loans and equity provided in 26 of our 30 countries of operations through, and into, more than 200 financial intermediaries. The biggest share, 33 percent, of this amount is in South Eastern Europe, followed by Russia (23 percent) and Central and Eastern Europe with 18 percent. In Central Asia we are particularly focused on micro financing in accordance with local needs and circumstances.




What type of grants do you award?


The SME activities of EBRD are generously supported by our donors and technical cooperation funds, with the European Commission being the largest institutional donor. Donor grants form an integral part of our SME activities, ensuring that the impact of EBRD’s investments goes well beyond the provision of finance. A key aspect of our SME programmes involves technical assistance provided to financial institutions to encourage institution building with a focus on sustainable and responsible lending to SMEs (improving credit assessment, product development, marketing/outreach to SMEs, improved corporate governance, staff training and development, improved technology etc).



In additional the EBRD implements technical assistance programmes targeting advisory services directly to the SMEs, for example under the TAM/BAS programmes , thereby nurturing entrepreneurship and helping to build stronger, more competitive enterprises. Areas of specific focus are energy efficiency and preparing SMEs for the implementation of the EU acquis, for example in the area of environmental standards.



Donor grants may also be used to provide financial incentives to the financial intermediaries and/or to the SMEs in order to overcome specific barriers to the behaviours and investments needed to achieve the SME development objectives.



The SME activities in the context of economical crisis


The current crisis has hit the SME sector in the EBRD region hard. Those enterprises who have established themselves as highly specialised suppliers to large export-oriented companies are now suffering from the downturn in export demand, most importantly in the West. Other local SMEs which are focused rather on domestic demand are also hit because here the crisis has its impact too. The situation is aggravated by the crisis in the financial sector which has lead to a drying up of or more difficult access to much-needed credit. Therefore the EBRD has designed a crisis response package which is tailor-made for the most pressing needs of the SME sector. We continue to provide loans and equity – and are witnessing high demand in Central and Eastern Europe where we had thought our mission was close to accomplished -, but also working capital, leasing finance, and other innovative instruments such as quasi equity or mezzanine finance. In response to the crisis the volume of SME lending has increased - the EBRD has invested EUR 880 million in support of the SME segment in the first 10 months of 2009, compared to some EUR 710 million in full year 2008 – and there has been a geographical shift, with more funds being provided in central Europe than in recent years. In addition, the EBRD is using its technical assistance programmes to assist our partner banks to adjust their lending policies and practices to the new economic landscape, so that they can recommence lending to the SME segment, ensuring that the financing is truly reaching the real economy.