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About financial institutions

Role of Financial Institutions

  • Promote continued development of market-based financial institutions and contribute to institution building
  • Support private and entrepreneurial initiatives, working with local and international investors
  • Engage in policy dialogue to strengthen regulatory/legislative frameworks
  • Focus on corporate governance and institution building.

Strategy

One of the EBRD's key policy objectives is to support the development and creation of a financial sector which is based on sound banking principles, provides high quality services to the corporate and retail sectors of the economy and operates on principles of transparency and good corporate governance. The key goals are to:

  • Support development of financial systems in all countries of operations
  • Increase diversity of institutions and promote healthy competition
  • Strengthen corporate governance
  • Increase the diversity of financial products and services
  • Support privatisation and restructuring
  • Promote lending to small and medium sized enterprises
  • Strengthen commercial orientation of state owned financial institutions

The EBRD seeks to achieve these goals mainly through project focused work with financial institutions using a variety of financing instruments. Our products reflect the need to meet the requirements of our partners, who are from all areas of business in private and public sectors, and the environment in which they operate. In addition, there is focus on policy dialogue with governments and authorities on institutional frameworks and investment climate. Key themes are financial sector reform, privatisation, corporate governance, business climate, regulation and supervision, money laundering and legal reform.

Country profile

The Bank provides a diverse range of products that address the different stages of transition and the development level of particular financial sectors.

  • Projects in more advanced transition countries tend to be larger and more complex.
  • Projects in the early/intermediate transition countries and in Russia tend to be smaller, reflecting countries capacities to absorb private sector finance.
  • The Trade Facilitation Programme has had significant impact in countries of early and intermediate transition.
  • Countries with more developed financial sectors are now looking to develop new areas of finance such as mortgage lending, consumer leasing and risk sharing with commercial banks.

Small and medium enterprises

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 EBRD TAM and BAS Programmes are complementary schemes aiming to help enterprises adapt to the demands of a market economy.

The future

The EBRD will continue to contribute to transition by actively supporting projects in the financial sector. It has demonstrated that sound banking principles, good corporate governance and institution-building efforts translate into profitable operations. Financially successful projects are important to demonstrate that well run institutions and good corporate governance are the bases for sustained growth and financial success.


Last updated 28 June 2010

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