Access to credit in the Western Balkans has become more challenging in the wake of the global financial crisis, but levels have slowly started to recover. Efforts to reduce high levels of non-performing loans – between 10 and 20 per cent in most of these countries – are starting to take hold. However, levels remain high in several countries and as a result, SMEs are being affected more than other firms.
These firms could also benefit from improvements in financial management to enhance their creditworthiness. For instance, financial literacy (a proxy for investment readiness) remains relatively low in most Western Balkans countries. In a 2014 survey by S&P, the percentage of financially literate adults ranged from less than 22 per cent in Albania, FYR Macedonia and Kosovo to 48 per cent in Montenegro, compared with 53 per cent in the EU. While the majority of these countries have now adopted the simplified International Financial Reporting Standards for accounting, small firms in Albania, FYR Macedonia and Kosovo still struggle to present audited financial statements and less than 25 per cent of SMEs have done so.
Helping SMEs access finance and know-how
In 2016, we provided over €87 million through partner financial institutions and have signed 10 direct financing deals with SME clients, for a combined value of €16.4 million.Expand to read more
For our direct and co-financing business in the region we use our local presence and detailed understanding of these markets to seek out leading SMEs that would otherwise not have access to finance or the know-how to grow. In addition to tailoring this finance to their needs, we help strengthen the companies by promoting good corporate governance, financial management and other standards that help them to stand out.
The EBRD also enables SMEs to obtain business advice. By working with local consultants and international advisers in areas such as strategy, financial management, quality management and international certification, our clients improve their performance, become more competitive and grow. In total, we undertook 389 advisory projects in the region during 2017.
Western Balkans Enterprise Development Investment Facility
We are active in the Western Balkans Enterprise Development and Innovation Facility (WB EDIF), a platform that provides a comprehensive set of measures to improve access to finance for SMEs and fosters economic development.Expand to read more
The platform consists of five different pillars designed to offer complementary financial instruments addressing the entire range of SME financing needs in the region. The EBRD manages and the Enterprise Expansion Fund (ENEF), which is one of the investment pillars of EDIF and supports established SMEs with a high potential to grow and further expand. The EBRD also has invested into the Enterprise Innovation Fund for start-ups, and provides advisory services and policy dialogue support. In 2017, we spearheaded the creation of new EDIF programmes that provide finance and advisory support to SMEs under a newly created lending pillar.
Through ENEF we provide direct financing, primarily through equity and quasi-equity investments, to SMEs with high growth potential. As an investment adviser to the Fund, the EBRD works to develop the portfolio and project pipeline. In 2017, four transactions were signed including the first project in Albania. This brought the total ENEF portfolio to €48.5 million, making it one of the largest such funds in the region.
A partnership for growth: Blue Ribbon
For a targeted group of high-growth SMEs, we have been successfully implementing our Blue Ribbon initiative in the Western Balkans.Expand to read more
This initiative engages SMEs in a five-year partnership, tailoring specific advisory and financing products to help them reach their full growth potential and create lasting impact. In 2017, we already have our eight members of the Blue Ribbon in the region, with a Blue Ribbon client from Kosovo signing a loan agreement with the EBRD—the first Blue Ribbon client reaching this stage of engagement.
Promoting women’s entrepreneurship
The EBRD’s Women in Business programmes promote women’s participation in business by enabling SMEs led by women to access the finance and know-how they need to grow.Expand to read more
Our programme in the Western Balkans was launched in 2015 and has since provided €29.5 million in finance to partner financial institutions for on-lending to women-led SMEs. We have also helped over 2,000 such firms to access business advice, and provided mentoring, our online diagnostic tool Business Lens, training and networking opportunities.
Supporting agribusiness in Albania
EBRD is committed to supporting access to finance for Albanian agribusiness. This is a vital sector of the economy which has historically been under-served by financial institutions with loans to agribusiness accounting for only 2 per cent of total lending to the economy.Expand to read more
The Albanian Agribusiness Support Facility (AASF) launched by the EBRD and the Government of Albania, is addressing this challenge by improving access to finance for local agribusinesses through dedicated credit lines or by sharing the risk of lending with participating financial institutions. The government has committed to make available up to €36 million over three years to support the Facility and the EBRD is providing up to €100 million in funding and risk sharing facilities, which will enable an additional €80 million of investment by the six participating financial institutions (PFI). In addition to funds, the EBRD has made available substantial technical assistance to help introduce international best practice in the agribusiness sector and the financial institutions lending to it. To date, five PFIs have joined AASF, with €11 million of finance signed in 2017.
Speeding up productivity in Serbia
With funding from the European Union, we helped Milanovic Inzenjering, a manufacturer of high-speed train components from Kragujevac in central Serbia, to optimise its production layout and improve its processes, organisation and productivity.
Milanovic Inzenjering is a growing family business focused on design, engineering and manufacturing of industrial tools. Since 2007, the company has been producing components for high-speed trains for Siemens. However, their production facility wasn’t adequate for the high-precision aluminium required by their client. As the partnership prospered, Milanovic Inzenjering’s needed to build its own production plant in line with the latest industry standards.
We put them in touch with an expert who helped the company to comply with the strict technical requirements, establishing the layout of the new factory based on lean manufacturing principles and advising on the right production planning and scheduling tools. Two production plants were built and new machines incorporated, for a total investment of €3 million, cutting delivery times significantly. As a result, Milanovic Inzenjering has seen dramatic growth in all areas of its business, including a turnover increase of 250% and a productivity increase of 80%.
Next up for Milanovic Inzenjering? Potentially becoming an EBRD Blue Ribbon candidate!
Enabling a local bank to better serve women entrepreneurs in Kosovo
TEB Kosovo was one of the first banks to join our Women in Business programme in the Western Balkans, funded by Italy, Luxembourg, Sweden and the EBRD Shareholder Special Fund. The bank had already begun investing in the idea that supporting women entrepreneurs would contribute to economic and social gains in Kosovo – and had launched their own “Women Entrepreneurship Programme” in 2014.
We provided a €3 million loan for TEB Kosovo in 2015 to on-lend to women-led SMEs in the country. With the support of banking and gender specialists provided under the programme, TEB Kosovo also used these funds partially to develop a new loan product for start-up women entrepreneurs.
The first client for this start-up loan was Flake Hajdani, who has started a business manufacturing hygienic masks and show covers. She used the loan to purchase the equipment needed to start production. After fully repaying the loan, on time, as a form of recognition for her successful start-up, TEB Kosovo reimbursed part of the interest cost on the loan. In October 2016, Flake received a second loan, which allowed her to buy raw materials and additional machinery and equipment to expand her business.
TEB Kosovo has already supported over 200 women entrepreneurs under the Women in Business programme. With more to come!
disbursed under the programme
in Business loans
Improving efficiency in Bosnian baked goods
Founded in 1995 as a small bakery shop located in the family house of a newly married couple, 20 years later Krajina Klas is a leading producer of bakery and confectionery products in Bosnia and Herzegovina, with around €10 million in turnover and employing 480 people.
We provided a €2 million loan through the Enterprise Expansion Fund (ENEF) to the company to support production capacity increases and new retail store openings.
The EBRD has been supporting the business since 2011, when we provided the company with an industry expert to help create new, innovative products and improve the company’s production and distribution processes, growing market share and profitability.
Then, in an evolving market, the company’s management structure and distribution of responsibilities needed to be adjusted. We helped them work with a further international adviser who helped them introduce more comprehensive management structures for their retail stores on a regional level. Krajina Klas also implemented an internal promotion and reward system for employees at individual store level, which is yielding excellent results!
Following the provision of the loan, the Bank has continued to support Krajina in its transition from an owner-managed business to one with professional corporate governance, including:
- preparing the company for its first ever financial audit
- drafting a Value Creation Plan to define the strategic goals and improvement areas of the company as well as an action plan and key responsibilities
- engaging an external shadow CFO to support the implementation of best practices of corporate finance and transfer knowledge to the existing accounting/finance team
- setting up an Advisory Board with an EBRD representative and CFO to share experience with the company.
Through this support, we’re helping keep Krajina Klas on track for a bright future!