We recognise that the challenges facing small businesses are complex. For this reason, we go beyond our usual work with firms and financial institutions: interacting with policy-makers and sharing our economic and legal expertise through policy dialogue, in order to help improve the business environment across our countries of operations.
This country-based engagement complements and strengthens our financing and advisory activities. It might mean undertaking a large-scale business survey; helping to set up a registry of movable assets; or developing legal standards and principles for issues like collateral, venture capital, corporate governance and business licensing. It might even mean designing specific capital market instruments such as covered bonds to enable SME-oriented financial institutions to obtain financing.
By lowering the barriers that small businesses typically face and building sound institutions that support a vibrant SME sector, we promote systemic change so economies can thrive over the long term.
Making collateral less burdensome in the Slovak Republic
Reforming late can sometimes be an advantage. In 1999, the Slovak Republic was trying to catch up with its neighbors in the EU accession process. A new law on collateral was needed. This kind of reform would open up financing for smaller enterprises, which couldn’t provide the high levels of collateral that local banks were seeking. The Slovak Republic came to the EBRD for support in bringing about the changes they needed.
The EBRD assisted Slovak policy-makers in putting together a new legal regime for taking security, which provided more flexibility, certainty and transparency. This drastically reduced the cost of borrowing, for small businesses in particular. By encouraging banks to ask for less onerous terms or be more flexible in the collateral they required, businesses were able to borrow more and on better terms.