Economic context

The environment for SMEs in Eastern Europe and the Caucasus (EEC) has been challenging in recent years. This is reflected in the relatively low contribution of SMEs to GDP: below 30 per cent in Armenia, Azerbaijan, Belarus and Georgia, compared with close to 60 per cent in the EU. On average, small and medium-sized firms here have experienced some of the highest levels of credit constraints in the EBRD region. In Azerbaijan and Ukraine, in particular, around three-quarters of SMEs needing a bank loan could not obtain one.[1] SMEs in the region would benefit from improvements to business standards and higher levels of international certification, which can facilitate exports.

[1] See the fifth EBRD-World Bank Business Environment and Enterprise Performance Survey (BEEPS V).

Helping SMEs access finance and know-how

In 2016, we provided €107 million for on-lending through partner financial institutions and signed 12 direct financing deals with SME clients, for a combined finance value of €47.2 million. Our direct finance matches the needs of fast-growing SMEs in the region – businesses we believe have great potential to drive employment, innovation and growth. Risk-sharing with our donors often enables us to achieve more than would otherwise be possible for these firms. Moreover, we help strengthen companies as they implement the investments, by promoting good corporate governance, enhanced financial management and other standards that enable these enterprises to stand out.

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Access to finance in local currency is also important. It protects SMEs from the risk of foreign exchange fluctuations that can make it difficult to repay their loans. In January 2016, we launched the SME Local Currency Programme, building on longstanding experience in Central Asia, Eastern Europe and the Caucasus. In 2016, the Programme signed 24 local currency operations equivalent to US$ 44.5 million. Of these operations, 42 per cent were in Armenia, Georgia and Moldova. During 2016, we also completed a project with the Armenian government to introduce a new law providing for the enforceability of derivatives transactions. And in Georgia, a similar project is under way to develop the country’s derivatives market.

We also enable SMEs to access business advice across all countries in the region. By working with local consultants and international advisers in areas such as strategy, financial management, marketing and quality management, our clients improve their operations and performance, become more competitive and grow. In total, we undertook 535 advisory projects in the region during 2016.

And, under the auspices of the Investment Councils in Armenia, Georgia and Moldova, for which we provide assistance to the secretariat, we can support our regional network of clients and local stakeholders as they make their voice heard on the obstacles they face to doing business.

Readying SMEs to strengthen trade with the EU

The EBRD is assisting SMEs in Georgia, Moldova and Ukraine to take full advantage of the Deep and Comprehensive Free Trade Area (DCFTA) established between each of these countries and the EU.

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We combine indirect and direct lending with technical assistance, investment incentives and risk-sharing activities to help SMEs access finance and know-how to modernise their production, meet international standards and improve their competitiveness at home and abroad.

In Ukraine, we are also creating a network of 15 business support centres that will help SMEs across the country to identify and connect with the tools available to support them, as well as providing training and sector-specific resources. The programme started activities in late 2016 and is working to build the capacity of the 15 centres.

Promoting women’s entrepreneurship

The EBRD’s Women in Business programmes promote women’s entrepreneurship and participation in business by enabling women-led SMEs to access the finance and know-how they need.

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Our programmes cover all six countries in the region. To date, we have provided €21 million in finance to partner financial institutions in Armenia, Belarus and Georgia for on-lending to women-led SMEs. We have also helped over 750 such businesses to access advice in all six countries, alongside providing female entrepreneurs with mentoring, our online diagnostic Business Lens, training and networking opportunities.