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EBRD helps Montenegrin SMEs beat funding squeeze

By EBRD  Press Office

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The EBRD is making it easier for small and medium-sized companies in Montenegro to get the funding they need in order to grow by extending a €5 million credit line to Hipotekarna Banka and by boosting the Podgorica-based bank’s risk management procedures.

Due to the economic uncertainty caused by the Eurozone crisis, many banks in Montenegro are lending less to small and medium enterprises (SMEs) and are reluctant to provide longer than short-term loans to their corporate clients. A recent tightening of the criteria that Montenegrin companies have to satisfy to prove their creditworthiness has made the problem worse. As a result, many well-managed and healthy SMEs struggle to obtain the financing they require if they are to grow and contribute to Montenegro’s economic development.

Under the EBRD package, €5 million will be extended to Hipotekarna Banka for on-lending to SMEs – including companies outside the capital Podgorica – on a medium-term basis. In addition, technical cooperation (TC) funds provided by donors will be used to strengthen Hipotekarna’s credit assessment and risk management procedures. This will enable the bank to reach out to some SME clients whose risk profile would previously have been considered too difficult to manage.

“This is the EBRD’s first project in Montenegro’s financial sector since 2011 and will help address the demand among local SMEs for longer-term financing,” said Giulio Moreno, head of the EBRD’s office in Podgorica. “The credit line will also allow Hipotekarna Banka to increase its market share and consolidate its strategic position in SME lending in the country.”

Esad Zaimovic, CEO of Hipotekarna Banka, said: “We are pleased to work with the EBRD on meeting the needs of our SME clients and supporting the growth of the Montenegrin economy. This deal also provides us with a valuable opportunity to strengthen our position in the Montenegrin banking sector.”

The loan to Hipotekarna banka is being extended under the EBRD’s Western Balkans and Croatia Financing Framework, which was set up to provide financial institutions in the region with a full range of financial products, including senior debt facilities and SME financing. The total amount of the Framework is €250 million.

It is expected that the source of TC funding for the project will be the Western Balkans Fund and the EBRD Shareholder Special Fund.

Since the beginning of its operations in Montenegro, the EBRD has invested about €300 million in the country’s economy.

Hipotekarna Banka has its head office in Podgorica and a network of 16 regional branches. The bank offers a complete range of banking and financial services to retail, SME and corporate customers.

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