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EBRD steams ahead with Russia Small Business Fund
The Russia Small Business Fund (RSBF), which has disbursed almost 1000 loans to small businesses through Russian banks, received a vote of confidence last week from the European Bank for Reconstruction and Development (EBRD)’s Board of Directors, when they approved the full US$ 300 million programme.
Jacques de Larosière, President of the EBRD, said: “The Russia Small Business Fund, which lies at the heart of the EBRD’s mandate, is visibly encouraging the growth and development of an entrepreneurial society and the ability of Russian banks to profitably service the needs of the private sector.”
US$ 150 million is grant funding, provided by eight countries (G7 and Switzerland), with the remainder coming from the EBRD.
EBRD funded experts have been working very closely with local bank management and loan officers to analyse applications and monitor loans. Eleven Russian partner banks are now involved with the RSBF, which had its first pilot in June 1994, in nine cities throughout the Russian Federation. Eight hundred micro loans and 114 small loans have been disbursed. Loan sizes range from US$30 to US$75,000. The full programme will reach over 100,000 micro and small companies over the next few years.
In Nizhny Novgorod, the Fund has made four equity investments, averaging US$ 89,000. A further 15-20 are expected by the end of the year. The four investments are for a construction materials company, a dairy and meat processing company, a TV and film animation studio, and a computer assembly and office equipment sales firm. The equity facility will be expanded to cover St Petersburg.
Micro credits have been primarily granted to trading companies for working capital purposes, though production firms have also received such loans. Many of these companies are acquiring their first capital and have reinvested in production and services. A large number of borrowers are engineers. Small loans are exclusively intended for production and services companies, and are usually used to buy capital equipment to expand or diversify a business. Examples to date have been extremely broad and include bakeries, mini-photo laboratories, dentists, printing companies, laser technology firms, furniture manufacturers, restaurants, food processing and specialist steel production companies.
The nine cities currently covered by the programme are: Tula, Nizhny Novgorod, Tomsk, Novosibirsk, Samara-Togliatti, St. Petersburg, Yekaterinburg, Kemerovo and Moscow. Plans are to expand to Vladivostok, Krasnodar and Kaliningrad in the next six months.
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