Micro and small business products and strategy

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

Products

Debt

The Bank grants senior and subordinated debt to commercial banks and non-bank micro finance institutions for on-lending to MSEs. Amounts range from €20 to €200,000.  

Equity

The Bank purchases ordinary or preference shares in microfinance banks and institutions, or existing commercial banks with a strategic focus on MSE finance.

Technical assistance

Technical assistance focuses on institution building and creating MSE lending expertise. 

Such measures are important to ensure that EBRD's partners have the necessary capacity to enter the MSE finance market and to continue providing loans long after Bank assistance and investment have ceased.

This assistance, which is generously supported by EBRD's donor programmes, focuses on:

• Staff training
• Streamlining of processes and procedures
• Implementation of best practice borrower analysis
• Integration of MSE lending into the partner banks' mainstream operations

Non-bank micro finance institutions

Non-bank micro finance institutions (MFIs) is a new and important delivery mechanism for the EBRD. The Bank provides leading regulated non-bank MFIs with senior debt for on-lending to micro borrowers. The Bank aims to support these financial intermediaries, particularly in their transformation to deposit-taking entities, and will consider future equity investments.

MSE focused equity funds

EBRD can invest in or alongside the increasing number of funds which have been created to invest in financial institutions with a strategic commitment to the MSEs in the Bank’s countries of operation. 

New initiatives

Local currency financing

The Bank is exploring ways to meet the high demand for microfinance in local currency by using standby credit lines and issuing securities, the proceeds of which would be provided to partner institutions for on-lending to MSEs. The Bank has already engaged in local currency financing through programmes in Hungary, Kazakhstan and Russia.

Microleasing

It can be difficult for MSE entrepreneurs to obtain asset finance. Products available from MFIs are often short-maturity and those available from leasing companies are often too expensive. Leasing can provide a solution to the problem of lack of collateral faced by smaller businesses in the production sector. The EBRD is looking at how to downscale existing leasing operations to amounts that could benefit MSE clients. Another approach is to help financial intermediaries develop this product. 

Risk sharing and securitisation

The Bank is exploring risk-sharing products to share the risk of the MSE portfolios of its partners. It is also considering securitising loan portfolios. 

Credit scoring

Credit scoring mechanisms help partners enhance the profitability and sustainability of their lending programmes. New initiatives in this domain would build on the experience gained by EBRD in Central and Eastern Europe.