EBRD’s Advice for Small Businesses: expansion, integration and the road ahead

By Anna  Wilson

EBRD’s Advice for Small Businesses: expansion, integration and the road ahead

More than 2,000 SMEs benefit every year from the EBRD’s advice

The EBRD’s support for small businesses with expert advice can be traced back to 1995 when it was tasked by the international community with lending to small and medium-sized enterprises (SMEs) as part of a Nordic effort to promote transition in the Baltic states.

The EBRD at this time was already active in 26 former centrally planned economies, providing finance to help those countries transition to a market-based economy, so the Bank’s expertise was much valued.

Under this Nordic effort, known as the Baltic Investment Programme, the Bank proposed a new model that used both advisory services and finance, a combination demonstrating the Bank’s understanding of regional business needs.

This programme became known as the EBRD’s Business Advisory Services, or BAS.  After decades of central planning, the spirit of entrepreneurship had endured and members of the younger generation in their 20s and 30s were ready to step forward, eager to launch businesses in the new market economy, but often without knowing what it took to succeed.

“At the beginning of the programme in the mid-1990s, many potential entrepreneurs came to us saying ‘I have an idea and a building, all I need is some funding’.  Our job was to show them that a sound business proposal would attract financing only if there was a credible marketing plan, an accounting system and more,” remembers Michael Ayre, the founder of BAS.

The innovative approach combined advisory services, delivered by local and international consultants to complement more established complex expertise, with local knowledge. Michel Cramer, a French consultant in development economics, was the brain behind the easy-to-implement and inexpensive business support model.

The EBRD decided to contract these business advisory projects to qualified local consultants, who knew the local market, and pay a subsidy to the enterprise as an incentive once the project had been completed. It wasn’t an easy process, though, as the vast majority of SMEs had never worked with professional consultants before and did not believe such expertise could bring concrete benefits.

“We helped rural tourism, publishing houses, food processing companies and even customs brokers. In fact, one of our first projects in Latvia was helping Laima, a leading chocolate producer. We put Laima in contact with a local adviser who prepared a marketing strategy,” explains Roland Repsa, Team Co-ordinator, EBRD Advice for Small Businesses, at the time in charge of BAS Latvia. “These were the first successful steps for the EBRD in providing advisory services.”

Expansion

The successful programme soon drew interest and expanded eastwards from the Baltic states, opening offices in far-flung locations at the EBRD’s frontier. It expanded first into Russia’s St Petersburg, then to Central Asia, Slovenia and Croatia, offering a wide range of advisory services to SMEs across the EBRD region, including the southern and eastern Mediterranean region from 2012.

In 2016, 177 advisory projects engaging international advisers and more than 2,200 projects engaging local consultants were launched. With the help of donor funding from multilateral donors such as the European Union and individual governments and multi-donor funds, the EBRD’s advice to SMEs continues to make an impact. From 2014-16, 74 per cent of advisory clients increased their turnover within a year of completing an advisory project, by an average of 30 per cent. And more than 24,500 new jobs were created in the firms the EBRD advised during this period.

Integration

The EBRD stepped up its SME support in 2015 under the Small Business Initiative (SBI), a strategic approach promoting the conditions in which firms can flourish.

Atlant Telekom, an internet service provider in Belarus, is a great example of how, under the SBI, the Bank can leverage its different skills to offer something unique to the market. In 2011 the EBRD made an equity investment in the company, followed by two advisory projects to complement the investment and support the Bank’s subsequent exit. Since then the company has become the leading privately owned fixed-line operator in Belarus, growing revenues three-fold and EBITDA five-fold.

Another example of this integrated approach in practice is the Women in Business programme, which came to life in 2014 as a comprehensive package to support women entrepreneurs.

Under the Women in Business programme in Egypt, the EBRD helped Special Foods International, a women-led Egyptian olive producer, to get in touch with a local consultant who helped them to adopt international standards for harvesting and processing its products, improving the quality and food safety, receiving certification and boosting sales abroad, in a project funded by the EBRD, the European Union, the Middle East and North Africa Transition Fund and the SEMED Multi-Donor Account.

The road ahead

While the SME sector is traditionally agile and dynamic, it is also particularly vulnerable to changes in the economic environment, and currency fluctuation remains a challenge. The hurdles of transitioning to a well-functioning market economy – one that is competitive, well-governed, green, inclusive, resilient and integrated – are far from overcome. And so businesses’ need for professional expertise as well as finance also remains.

Find out more about the EBRD’s advisory support for SMEs and the Small Business Initiative.