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Medium enterprises and financial institutions: Keeping up with sector growth

The EBRD is training bankers and providing financing to local companies to advance both sectors

What happens when successful medium-sized enterprises in transition countries start to outgrow the financial sector in which they operate?

When it’s time to move to the next business level, access to substantial, long-term loans is key. However, limited lending capacity, credit concentration risks and lack of expertise can prevent local banks from providing the long-term financing required for local companies’ success.

Banks are subject to prudential limits, which make it difficult for them to assist growing companies requiring larger-sized loans.

Enter the Medium Sized Co-Financing Facility (MCFF)

To overcome this impasse, the EBRD has designed the Medium Sized Co-Financing Facility (MCFF). This highly additional* financing programme aims to help local companies to achieve their growth plans and local banks to increase loan size and, at the same time, to reduce their credit risks. Since 2004, through the MCFF, the EBRD has co-financed loans extended by partner banks to selected enterprises and shares at up to 50 per cent of their risk. Today, two dozen MCFF partner banks across 16 countries of operations can extend loans of an average size of around US$ 4 million in US dollars, euro and local currencies.

Improving partner banks’ skills

In order to increase MCFF lending to enterprises, 17 bankers from Armenia, Azerbaijan, Georgia and Mongolia took part in financial modelling training at the EBRD’s headquarters in 2012.

Funded by the Early Transition Countries (ETC) Fund, the training strengthened partner banks’ financial modelling capacity according to international standards, a skill in need of development in many ETCs. Compiling clients’ financial statements has become a more efficient and less time-consuming task which improves the overall performance of MCFF partner banks.

Over the coming months, with the continuous support of the ETC Fund, the Bank will extend the financial modelling training to more MCFF partner banks in the region.

* The programme is ‘additional’ in that it complements rather than displaces private sector finance. The Bank does not finance projects that can be funded on equivalent terms by the private sector.

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