The EBRD today announced it has agreed to lend up to 300 million roubles (equivalent of €7.2 million) to Bystrobank, a regional bank with headquarters in the Republic of Udmurtiya, one of Russia’s 83 regions.
The three-year loan is for on-lending to local small and micro businesses to support job creation and raise local living standards by encouraging diversification in what is still a fragile economic environment in Russia.
Bystrobank thus becomes the 18th Russian bank to join the country’s oldest and most successful grass-roots lending programme, the EBRD’s Russia Small Business Fund(RSBF). The RSBF has, since its launch in 1994, disbursed a cumulative total equivalent to over US$ 9 billion to 600,000 micro, small and medium sized businesses. More than 95 per cent of its loans are denominated in roubles.
Insufficient access to bank funding has long been a structural problem for this sector which accounts for an estimated 22 per cent of all jobs in Russia and groups 86 per cent of all the country’s private firms. Its share of GNP, however, remains low, varying in estimates from as little as 12 per cent to as much as 21 per cent of total output.
The RSBF operates in 340 Russian cities and towns and 90 per cent of the loans in its credit portfolio have been extended to borrowers outside Moscow and St Petersburg, a statistic which underlines the fund’s regional commitment and outreach.
Bystrobank, founded in 1992 and re-branded with a new name in 2008, is the largest locally based private bank in Udmurtiya with a staff of 700, but also operates in other parts of Russia’s Volga and Urals Federal Districts. Half of the town and cities where it operates have populations of less than 100,000.
Nearly half of Bystrobank’s loans target small and medium-sized businesses. In 2009 it also started lending to micro businesses. It now positions itself as a regional retail bank focusing on micro and small business lending for the middle class.
Apart from diversifying Bystrobank’s funding base, the EBRD loan will also support the creation of a separate department in the bank focusing on lending to micro and small businesses and developing a model for a sustainable lending programme for the sector.
This transaction is the EBRD’s first-ever loan in Udmurtiya, an industrialised region 1,000 km east of Moscow with a population of just over 1.5 million.