EBRD supports Bosnian economy with loans of €45 million

By Anthony Williams
@ebrdtony

The EBRD’s Board of Directors has approved two loans worth a total of €45 million to financial institutions in Bosnia and Herzegovina to support the Bosnian economy in response to the global economic crisis.
 
The loans aim to provide a continued flow of finance to the small and medium-sized enterprises in Bosnia at a time of scarce alternative commercial funding.
 
Subject to the conclusion of legal documentation, the Bank would provide one loan of €30 million to UniCredit Bank Mostar and another of €15 million to UniCredit Leasing d.o.o. Sarajevo. Both are subsidiaries of the Italian banking group UniCredit and the proceeds will be used for on-lending to small and medium-sized enterprises.
 
The credit to UniCredit Bank Mostar is a reaction to the current demand from the private SME sector in Bosnia and Herzegovina for short, medium and long-term financing during the financial crisis when most major banks have curtailed lending to new SME clients.
 
It will also allow the bank to achieve a better matching between its sources and uses of funding by giving it access to funds with a longer maturity.
 
The loan to UniCredit Leasing acknowledges the importance of leasing as an alternative form of financing for smaller businesses that do not have the resources to buy capital intensive equipment outright. In the current liquidity crisis, channelling long-term funding through leasing companies provides much-needed support to the real economy.
 
“These projects are an important contribution to supporting the real economy in Bosnia and Herzegovina while funding levels remain low,” said Giulio Moreno, the EBRD’s Head of Office in Sarajevo.
 
"I am very pleased to see that our long-term partnership with the EBRD has been strengthened even further. Thanks to this cooperation we can enhance the support of our local economy, which currently experiences challenging times, in a sustainable way and therefore provide significant contribution in appeasing economic crisis in Bosnia and Herzegovina”, said Berislav Kutle, CEO of UniCredit Bank Bosnia Herzegovina.
 
Both of these credits are part of a joint initiative with the UniCredit group to continue investing in eastern Europe and so keep funding open to the real economy.
The EBRD is making investments worth a total of €432.4 million in UniCredit subsidiaries across eight eastern European countries, as part of a joint effort to tackle the impact of the global economic crisis on the region. The aim is to provide medium and long-term debt and equtiy financing through UniCredit subsidiaries in support of SMEs, lease finance and energy efficiency projects.
 
UniCredit is the largest banking group in the central and eastern European region, with over 4,000 branches in 19 countries. The group has invested around €10 billion of equity in central and eastern Europe and has around €85 billion of total customers loans in the region. Beside its own funding programs to its subsidiaries, it cooperates with international institutions including the EBRD in order to ensure continuing support to the local economies during these challenging times.
 
The EBRD investment is part of the joint pledge by the EBRD, the World Bank Group and the European Investment Bank (EIB) to provide over €24 billion in support of the banking sectors in the region and to fund lending to businesses hit by the global crisis.
The International Financial Institutions (IFIs) are working with key banking groups active in eastern Europe to deliver a rapid response to the financing requirements of individual subsidiaries and complementing the funding plans of the parents. This project with UniCredit is expected to be followed by similar investments in the eastern subsidiaries of other banking groups.
 
In response to the crisis, the EBRD has increased its planned investments in the financial sector by 50 percent to €3 billion this year. It has also announced a doubling of its funding to support important cross border commerce via its Trade Facilitation Programme.

In the first quarter of this year, the EBRD had made investments of €1.1 billion, a rise of 64 percent from the same period in 2008. Total investments of €7 billion are expected this year, up over 30 percent from 2008.
 
The individual components of the €432.4 million investment facility are the following:
 
UniCredit (UC) Bank Hungary
SME lending
€50 million
Bulbank ( Bulgaria )
SME lending
€50 million
Zagrebacka Banka( Croatia )
SME lending
€50 million
UC Bank Serbia
SME lending
€30 million
UC Bank Bosnia
SME lending
€30 million
UC Leasing Serbia
Leasing
€15 million
UC Leasing Bosnia
Leasing
€15 million
UC Leasing Ukraine
Leasing
$25 million
ATF (Kazakhstan)
SME lending
$70 million
ATF ( Kazakhstan )
Energy Efficiency
$30 million
Ukrsotsbank (Ukraine)
Tier 2 capital
$100 million
ATFBank-Kyrgyzstan
SME lending
$20 million
 
About UniCredit:
 
UniCredit is a major international financial institution with strong roots in 22 European countries as well as representative offices in 27 other markets, with over 10,200 branches, approximately 174,000 employees at 31 December 2008. In the CEE region UniCredit operates the largest international banking network with over 4,000 branches and outlets in 19 countries. For further information, visit: www.unicreditgroup.eu