Georgia and the European Bank for Reconstruction and Development (EBRD) have renewed a Memorandum of Understanding for lending to local small and medium-sized enterprises (SMEs) in local currency under a new EBRD facility.
As part of its commitment to economic reforms, Georgia remains determined to support access to affordable local currency funds for local private businesses. The reform programme aims to improve, broaden and deepen local currency and capital markets in Georgia. To achieve this goal the authorities are promoting a macroeconomic, regulatory and market environment that supports the development of the local capital market and local currency borrowing and lending under the framework of a detailed action plan.
The Memorandum of Understanding was signed in Tbilisi on Thursday by National Bank Governor Koba Gvenetadze, Georgia’s Minister of Finance, Nodar Khaduri, and Bruno Balvanera, EBRD Director for the Caucasus, Moldova and Belarus.
The signing also confirmed the EBRD’s commitment to provide affordable loans to Georgian banks, microfinance organisations and SMEs under the Bank’s SME Local Currency Programme. The Bank established this programme in its countries of operations to mitigate their exposure to exchange rate movements. The €500 million facility combines EBRD financing and donor resources to provide eligible borrowers with access to affordable funding. Donor funding is provided by the EBRD Early Transition Countries Fund, the Swiss State Secretariat for Economic Affairs and the US Treasury, as well as the EBRD Shareholder Special Fund.
Bruno Balvanera said: “SMEs are vulnerable to currency exchange fluctuations and this is why the availability of local currency financing is vital. It is crucial for the growth of local businesses by providing funds at affordable rates and manageable risks. This new framework combines investment, policy dialogue, technical assistance and donor support and builds on the successful local currency programmes the EBRD has developed over the years.”
Koba Gvenetadze commented: “The EBRD has been a pioneer among international financial institutions in providing SMEs with access to local currency and working on capital market development. We welcome this new initiative and recognise the overall stability of the banking and financial sectors, the development of capital markets and the improvement of financial intermediation in local currency in Georgia as priorities for our country.”
Nodar Khaduri said: “The EBRD has led the way among IFIs to issue local currency denominated securities with the aim of supporting the development of the capital market, thereby making local currency loans more affordable to domestic borrowers. We are committed to supporting the increased use of local currency in the national economy for the development of small and medium-sized enterprises.”
To date, the EBRD has provided access to local currency to some 300,000 SMEs in the countries where it invests. This number is expected to at least double in the next two years under the SME Local Currency Programme.
The EBRD’s Local Currency and Local Capital Markets Initiative, launched in May 2010, aims to enhance the macroeconomic, regulatory and market framework to ensure long-term, sustainable, liquid local currency markets. The initiative’s goal is to strengthen local capital markets and encourage the use of local currencies in the Bank’s countries of operations. Technical cooperation and donor support provide vital backup for the programme.
The EBRD is a leading institutional investor in Georgia. Since the start of its operations in the country, the Bank has invested over €2.7 billion in 195 projects in the financial, corporate, infrastructure and energy sectors, with 90 per cent of these investments in the private sector.
Strengthening economic resilience, promoting integration and addressing global and regional challenges are the EBRD’s key priorities under the Bank’s Strategic Implementation Plan for the period 2016-18.