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EBRD and Baltic Special Fund support development of micro and small businesses in Estonia
The European Bank for Reconstruction and Development (EBRD) and Eesti Uhispank have signed a €6 million credit agreement that will allow the Estonian bank to increase its lending to local micro and small enterprises (MSEs). The loan is being extended under a framework agreement with the Baltic Investment Special Fund (BISF), which is providing half of the total financing (€3 million).
"Uhispank and the EBRD are working together to increase term lending for micro and small borrowers in Estonia," said Elizabeth Wallace, Co Director for EBRD’s Financial Institutions Team. "Uhispank offers a range of products to its clients, including corporate finance, trade finance, mortgage lending, etc. Building on its universal product range, over the past few years, Uhispank has given increasing emphasis to developing lending to smaller firms. This loan will help Uhispank reach the very small end of the sector. The framework brings together both technical advice and essential financing for MSE borrowers. Importantly, at least 50 per cent of the total borrowing should finance MSEs outside the capital city of Tallinn."
With a five-year maturity, the €6 million credit line will allow Uhispank to incorporate lending to MSEs into its ongoing business. At the same time, the Baltic Technical Assistance Special Fund will provide technical cooperation funding to further enhance Uhispank’s MSE lending policies and procedures.
Uhispank was founded in 1992 and provides universal banking services to more than 323,000 private individuals and 36,000 businesses. The bank is responsible for approximately one-third of Estonian banking assets; its total assets were EEK 15 billion (€1 billion) at the end of 1999. It is listed on the Tallinn Stock Exchange, and is traded on Helsinki, Munich and Frankfurt exchanges. At the end of 1999, SEB, a leading Scandinavian commercial bank, became the majority shareholder of Uhispank. At that time, share capital reached EEK 666 million (€43 million) and shareholders’ funds were over EEK 2 billion (€128 million).
Administered by the EBRD, the BISF is one of the five funds established under the Baltic Investment Programme representing the joint Baltic commitment of the Nordic countries. It promotes private sector development through small end medium-sized enterprises in Estonia, Latvia and Lithuania.
The EBRD has stated a strategic objective of supporting micro and small enterprises in all of its countries of operations. As of June 30, 2000, micro-finance facilities have granted over 60,000 loans for a total of just under US$ 600 million, with an average loan size of just under US$ 10,000. Another significant share of the Bank’s lending to local banks is utilised to support small businesses (i.e., sub-loans slightly larger than under the micro facilities). Under such programs, another 5,000 loans have been provided, involving approximately US$ 1 billion.
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