Enhancing corporate governance

Robust corporate governance can make all the difference in helping a small business obtain finance. And it can also help make the most of that investment. In the majority of countries where the EBRD invests, SMEs face significant obstacles to sound corporate governance and business standards. These difficulties prevent many small firms from growing and becoming more dynamic, particularly on a global scale. Indeed, there is a significant need for stronger business skills, including financial literacy and business planning, particularly in regions such as Central Asia, Eastern Europe and the Caucasus.

Improving corporate governance is a key priority of the EBRD’s Small Business Initiative. The Bank has a comprehensive toolkit for tackling the challenges that SMEs encounter in this area. It helps them improve their financial transparency, streamline their legal and management structures and improve diversity in the workplace.

Boosting financial literacy and entrepreneurial skills

Sound corporate governance goes hand in hand with strong business skills and financial literacy. In 2017, we helped 68 SMEs get the right business advice in these areas by working with local consultants through our Accounting Improvement Programme. We also launched a complementary Financial Management Enhancement Programme that helps small businesses look at their broader financial management.

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Corporate governance and the setting of business standards also play an important role in many of the programmes we have been implementing in 2017. These include a programme in Ukraine in partnership with the EU4Business initiative. Its central focus is on improving the competitiveness of SMEs, including by strengthening corporate governance and business standards. As part of the programme, an online portal and helpdesk are being developed to supply industry data and information on best practices. Training will also be available for entrepreneurs and managers on technical regulations and standards with regard to the Deep and Comprehensive Free Trade Area with the European Union.

Promoting role models

In 2017, we continued to roll out a programme to provide longer-term growth support for leading SMEs across our region of operations. The Blue Ribbon initiative offers a combination of the Bank’s advisory and financing products to a carefully selected group of SMEs.

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These firms have potential for vigorous growth and can create demonstration effects for the private sector in their region. Improvements to corporate governance are part of this programme, alongside other outcomes that create value and long-term competitiveness. With pilot programmes progressing well in the Western Balkans, Croatia and Turkey last year, we also launched new Blue Ribbon initiatives across SEMED and the Eastern Partnership. In 2018, other countries are due to join from Central Asia.

Integrating structural efficiencies with direct finance

We promote corporate governance enhancements through our direct financing for SMEs. Our technical cooperation projects are designed to provide SMEs with pre- and post-investment support.

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They add value to investee companies through intensified monitoring, implementation of plans to create value, and advisory services that address specific areas in each enterprise. As a financier – especially in the case of equity investments – the EBRD is well-placed to promote good practices in corporate governance and sound business conduct. We also foster compliance with applicable industry standards and financial transparency. In this way, we signal to the local private sector that these standards are valuable and lead to better performance and bankability.