€162 million in donor funding provides more access to finance and business advice for SMEs
Successful small and medium-sized enterprises (SMEs) help create employment, increase economic productivity and bring innovation, which are key elements for competitive and inclusive markets.
The EBRD and donors have been focussing for decades on boosting this sector in our regions. Through the Small Business Initiative, they offer finance and business advice in parallel with policy reform to improve SMEs’ capacity to play their economic role to full potential.
In 2016, over €160 million from the European Union, the largest donor, Albania, the EBRD Shareholder Special Fund, Switzerland, Japan, the USA, Italy, TaiwanBusiness-EBRD Technical Cooperation Fund, the Western Balkans Investment Fund, Korea, and Shell were made available to support small businesses across the EBRD regions.
The impact of this work is substantial. In 2016 alone, SMEs benefitted from over €1.2 billion of EBRD finance and over 2,300 small entrepreneurs obtained expert advice to overcome specific challenges and ensure they are well-governed.
Between 2014-16, over half of the firms that the EBRD helped via local and international consultants have employed more staff, creating cumulatively 24,500 new jobs. Over 70 per cent of the companies that received business advice also reported an increase in turnover, by an average of 30 per cent, within a year of the advisory project being concluded.
Supporting small enterprises helps also to promote greater economic and social inclusion. For this reason, the EBRD in 2016 incorporated an SME focus in its refugee response plan to boost Jordan and Turkey’s resilience in light of economic challenges from large scale population flows from Syria and elsewhere in the region.
For example, with support from the EU for a business advisory programme, a Syrian sanitary paper producer employing 45 people that had relocated to Jordan in 2012 because of the conflict in their home country is now aiming to acquire an ISO certification required to enter new markets such as Turkey and the United Arab Emirates and boost their exports.
Different circumstances bring new opportunities for SMEs in other regions where the EBRD is active. In Georgia, Moldova and Ukraine, the Deep and Comprehensive Free Trade Agreements (DCFTA) provide SMEs with access to the EU single market.
EBRD programmes are assisting firms that want to invest to be more competitive and adapt to EU product, safety and environmental standards. DCFTA-related business advice and finance activities are supported by more than €35 million in grant funding from the EU under its EU4Business initiative for risk mitigation, investment incentives and technical assistance.
In 2016, we provided the first loans to partner banks, with a US$ 50 million credit line signed with Bank of Georgia and €10 million signed with Mobiasbanca – Group Société Générale in Moldova.
In the regions where the EBRD operates one of the most common obstacles for small businesses’ growth is access to finance.
The high level of dollarisation, for example, makes any loan riskier for a small company operating in local currency only. The EBRD has a programme to lend to SMEs in local currency in Armenia, Georgia, the Kyrgyz Republic, Moldova, Mongolia, Tajikistan, Tunisia and Ukraine.
In 2016, 31 per cent of the total volume of EBRD loans (equivalent to €52 million) to SMEs was in local currency. The EU, US, Switzerland, Japan, Korea and the TaiwanBusiness-EBRD Technical Cooperation Fund are among the donors contributing to the SME Local Currency Fund, which take provides first loss risk cover under the programme.
Furthermore, in order to support women’s entrepreneurship, the Bank’s Women in Business programmes in 16 countries strengthen skills and provides finance through credit lines to local banks, supporting over 20,000 women entrepreneurs to date.
Partner banks also receive technical assistance to enable them to offer financial products that better meet the needs of women-led businesses. The programmes, which have provided over €380 million in finance through 27 local financial institutions, are supported by over €62 million in donor funding from the European Union, Italy, Kazakhstan, Luxembourg, Sweden, Turkey, the TaiwanBusiness-EBRD Technical Cooperation Fund, the Early Transition Countries Fund and the EBRD Shareholder Special Fund.
Charlotte Ruhe, EBRD Director for Financial Products, SME Finance and Development group, said: “A thriving SME sector is vital for economic growth. SMEs are important for innovation, economic integration and regional development. SMEs also contribute considerably to employment, in particular in regions where there are not large corporations.
“But in many of the countries where the EBRD works, the SME sector is not reaching its full potential. The contribution to GDP made by SMEs lags behind OECD averages and individual businesses are stifled because they cannot access the tools they need to develop and grow. That why the work we do with support from our donors remains so important”.