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 and Belarus 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 (EBRD-World Bank BEEPS V). SMEs in the region would benefit from improvements to business standards and higher levels of international certification, which can facilitate exports.
Helping SMEs access finance and know-how
In 2017, we provided €163 million for on-lending through partner financial institutions and signed 11 direct financing deals with SME clients, for a combined finance value of €67.2 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.Expand to read more
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 and EEC. In 2017, Azerbaijan and Belarus joined the programme after signing Memorandums of Understanding with the EBRD. Now, unhedged SME borrowers in all the countries in the region have an alternative of a more affordable local currency loans. In 2017 there were 16 local currency operations signed in the region equivalent to US$ 79.6 million. A particular highlight of 2017 was the EBRD’s first loan to a commercial bank in Ukraine denominated in the local currency hryvnia.
We also enable SMEs to access business advice across all countries in the EEC 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 490 advisory projects in the region during 2017.
And, under the auspices of the Investment Councils in Armenia, Georgia and Moldova, for which we provide assistance to the secretariats, 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 has partnered with the EU4Business initiative to provide better support to local SMEs through both finance and business advice.Expand to read more
With the help of the EU funding in Ukraine, we created a network of 15 business support centres in 2017 in order to increase SMEs’ awareness of the available opportunities and to provide contact points for small businesses throughout the country. The funding also allowed the EBRD to open a representative office in Odessa, the EBRD’s fourth after Kiev, Lviv and Kharkiv. The office will serve as a regional hub for the southern regions of Ukraine and mostly target SMEs. In December 2017 the EU and the EBRD signed a four-year programme to enhance the competitiveness of SMEs in Belarus: thanks to the €6 million of new funds under the EU4Business SMEs will benefit from the expert advice and know-how available through the EBRD’s Advice for Small Business (ASB) programme.
The EBRD is assisting SMEs in Georgia, Moldova and Ukraine to take advantage of the Deep and Comprehensive Free Trade Area (DCFTA) established between each of these countries and the EU. 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.
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.Expand to read more
Our programmes cover all six countries in the region. To date, we have provided €33 million in finance to partner financial institutions in Armenia, Belarus and Georgia for on-lending to women-led SMEs. We have also helped almost 1,000 such businesses to access advice in all six countries, alongside providing female entrepreneurs with mentoring, our online diagnostic Business Lens, training and networking opportunities. In 2017, there was a launch event for the EBRD’s Women in Business programme in Armenia, and new partner financial institutions joined the programme in countries like Belarus to further extend dedicated on-lending to women-led SMEs.
Taking a women-led business in Belarus to the next level
Gofrobum in Belarus is an SME led by women that produces a wide range of paper goods, from newsprint paper to thermal paper and cash register tape. Under our Women in Business programme in the Eastern Partnership, funded by the European Union and Sweden, we helped to redevelop the company’s website. We also provided longer-term coaching support to the company, enabling the business to broaden the scope of its marketing instruments and expand its client base.
Gofrobum knew that it was losing clients through its limited marketing tools. With our support, the company connected with a marketing consultant who brought a whole new design to the company’s website. As a result, the number of customers increased from 180 to 250 a month – with approximately 40% of orders coming through the website.
Then, to help the company manage its change, Gofrobum embarked on a coaching project with us, where a local consultant worked with the company for a year, looking in depth at the areas of marketing, organisation and strategy. A clearer strategic vision and a broader scope of marketing instruments were some of the main benefits that resulted.
Gofrobum also applied to one of the partner banks under the Women in Business programme, receiving a loan to help them further develop the business. With this boost, the company doesn’t plan to stop now!
DCFTA: Supporting renewable energy in northern Georgia
We are teaming up with TBC Bank in Georgia to jointly provide a US$ 14.25 million loan to local Rustavi Group LLC to finance the construction of the Lukhuni 2 HPP, a medium-size hydroelectric power plant on the Lukhuni River in northern Georgia.
The EU is supporting this transaction through a risk-sharing facility, which aims to help businesses to fully benefit from the Deep and Comprehensive Free Trade Area (DCFTA) between the EU and Georgia.
This project also aims to step up the development of the Racha region in northern Georgia, both in terms of energy supply and job creation. During the summer months, Lukhuni 2 HPP will operate fully in the competitive market and will be eligible to export electricity to Turkey. In winter, it will play a key role in providing electricity to the region.
With our financing, the company will be able to implement EU standards in the construction of the plant and introduce more efficient and quality-oriented management practices, thus creating a successful benchmark for the industry.
annual generation capacity
with TBC Bank
Cutting emissions in Ukraine
The Khask Group is a Ukrainian manufacturer of flexible plastic packaging materials. As part of our portfolio risk sharing approach with a local bank, possible thanks to donor funding from the United States, we provided a €1.4 million loan to the company that enabled them to reduce their greenhouse gas emissions.
With the loan, Khask purchased a solvent recuperation system which, along with their other energy efficiency measures, will help the company save up to 350,000 m3 of natural gas per year and avoid annual emissions equivalent to up to 2,900 tonnes of CO2.
To help maximise the impact of the project, we also helped the company to work with an international adviser, who looked in particular at their potential to move into new markets and increase exports. And we assisted the company to receive an energy audit that formed the basis of their investment, itself supported by a grant. All of this was supported by funding from a wide range of donors.
Khask is now more energy efficient and greener!