Funder

The European Bank for Reconstruction and Development was established in 1991 when communism was crumbling in central and eastern Europe and ex-soviet countries needed support to nurture a new private sector in a democratic environment. Today the EBRD uses the tools of investment to help build market economies and democracies in 29 countries from central Europe to central Asia. The EBRD is the largest single investor in the region and mobilises significant foreign direct investment beyond its own financing. It is owned by 61 countries and two intergovernmental institutions. But despite its public sector shareholders, it invests mainly in private enterprises, usually together with commercial partners.

The EBRD is committed to the promotion of SMEs and support of this sector is a cornerstone of the work of the Financial Institutions group. Through local banks, the EBRD mobilises funding for projects that are too small for it handle directly. Providing access to finance for SMEs is a crucial part of the Bank's efforts to strengthen private sector development and to stimulate competition in the enterprise sector. In addition, these facilities support the development of the banking sector by helping to improve banks' credit appraisal procedures of new projects.

A variety of financing instruments are used, from supporting SME orientated banks with equity investments to providing financing through SME and micro credit focused programmes. These include the Russia Small Business Programme and the EU/EBRD Financing facilities in the accession countries.

The approach is country specific depending upon the needs of the financial sector. In countries with less advanced economies or dominant state banks, the Bank's micro-lending programmes have been a successful tool for reaching small businesses. SME credit lines targeted at a wider range of borrowers have been successful in countries with more developed private sectors. The Bank's participation in leasing companies is another approach to reach SMEs. Innovative products are being developed and implemented such as the co-financing risk participation agreement with IKB, a leading German Bank, allowing IKB to further expand its financing activities in the region in support of small business.

Private equity funds are also a significant source of equity financing for SMEs. Private equity funds have been effective at mobilising additional sources of financing from investors. The second stage of mobilisation takes place at the investee company level as the EBRD sponsored equity investment enables investee companies to obtain additional local debt and/or equity financing.

Other programmes not exclusive to SMEs such as the Trade Facilitation Programme are also important financing vehicles for SMEs.

The Group for Small Business supports Micro and Small Enterprise (MSE) programmes through financial intermediaries. These programmes enable small businesses to access formal finance, which is often an obstacle in the Bank's countries of operations. In addition to working with existing banks, the EBRD helps establish microfinance banks and non-bank micro finance institutions.

Long-term sustainability of MSE activities is ensured through institution building and training on appropriate lending procedures. Hence, the programmes support economic development as well as social stability.

The EBRD provides lending partners with innovative products by responding to changing market conditions and client needs. The strong portfolio of micro and small enterprises (MSE) finance products helps the EBRD retain its position as one of the most successful MSE investors in the region. To maximise the leverage of its funding, the Bank also provides technical assistance which focuses in institution building and creating MSE lending expertise.

Strategic priorities:
- Provide sustainable finance to micro and small businesses
- Support institution building in commercial banks and non-bank micro finance institutions
- Encourage competition within the financial sector catering to micro and small enterprises
- Regional focus and emphasis on previously underserved markets

For further information, please see http://www.ebrd.com/country/sector/fi/small/index.htm























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