The EBRD is establishing a new credit line for on-lending to small businesses in Moldova in response to the effects of the global credit crisis on the Moldovan banking sector.
As a result of the global credit crisis, Moldovan banks have significantly limited their lending activities – a fact that particularly affected small and medium-sized companies (SMEs). In this context, the Bank provided a €15 million loan to C. B. Moldindconbank (MICB) to support the development of its portfolio of SME credits.
“This is a very good example of a crisis response of the Bank in the early transition countries (ETCs),” says Alex Tanase, the project’s operational leader. “Moldovan banks have become very prudent in extending new loans to their SME clients, especially since November 2008, so it was important for the Bank to react.”
The new credit line consists of medium to long-term foreign and domestic currency loans worth up to €1 million and serves to provide external financing to Moldovan private-sector SMEs in the current tight credit market.
Long-term financial and institutional benefits
“The transaction demonstrates our commitment to support the real economy in Moldova,” says Mr Tanase. “More concretely, the project has created some tangible results and 14 projects have already benefited from the first tranche of the Bank’s loan to MICB. An additional five SME projects will receive funds under the first tranche of the extended credit line in January 2010.”
The loan played an important role from both a purely financial point of view as well as an institutional one. The project helped modernise MICB’s charter and led to significant changes to MICB’s capital structure by abolishing a legacy class of preferential shares. MICB also increased its share capital twice during the implementation of the project. Finally, the shareholder structure became more transparent and key shareholders transferred their shareholdings in MICB to on-shore structures in Moldova and Ukraine.
MICB benefits from an extensive network of branches and is well connected to SMEs, which has provided a good basis for successfully implementing the project. Overall, the company is the fourth largest bank in Moldova by assets and third by gross loans and total deposits, holding approximately 11 per cent of domestic market share.
To date the EBRD has committed approximately €350 million in various sectors of the Moldovan economy and mobilised additional investments in excess of €240 million.