Key challenges

According to the BEEPS V survey, access to finance is one of the most important obstacles to doing business in a majority of countries in the region. More than half of the SMEs in Kazakhstan, the Kyrgyz Republic and Tajikistan that reported needing a loan have been unable to access one. In addition, non-bank financial instruments such as leasing or factoring are severely underdeveloped. This picture coincides with low levels of financial literacy, at an average of around 30 per cent of the population. Accounting standards are also lacking, which further constrains access to finance.

Apart from better financial management, improved business standards could help companies become more competitive and better able to access new markets. However, the level of international certification, for instance, remains low among small firms at around 15 per cent. The business environment can also be challenging, with many companies competing with informal businesses and suffering disruptions to electricity supply, thus leading to substantial financial losses.

Promoting financial inclusion

In 2018, we provided €127 million through partner financial institutions and signed 26 direct financing deals with SME clients, for a combined finance value of €42.4 million. We support national and regional leaders from the SME sector that have the potential for robust growth and innovation, especially where these companies cannot find financing tailored to their needs in their local capital markets.

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Through our indirect, direct and co-financing, small businesses can access the finance they need. Our work includes a strong element of financial inclusion – by working with microfinance institutions, particularly in Tajikistan and the Kyrgyz Republic, we improve the ability of microenterprises to obtain finance.

Specifically, under the EU’s Investment Facility for Central Asia (IFCA), we provide indirect and direct financing supported by credit enhancement mechanisms and technical assistance to SMEs. This helps them prepare for investment and enables us to provide the longer-term financing they require. Under this facility, the EBRD has provided more than €73.8 million in financing directly to 48 SMEs in the Kyrgyz Republic, Tajikistan and Turkmenistan. In 2018, based on the successful implementation of the programme, a second phase of funding was approved to extend financing and advisory support to the region.

Our wide network of regional offices helps us reach SMEs beyond major cities. Moreover, under the auspices of the Investment Councils in the Kyrgyz Republic and Tajikistan, for which we provide assistance to the secretariats, we can engage clients and local stakeholders to help address the issues they face.

 

Improving access to local currency financing

Access to finance in local currency protects SMEs from the risk of foreign exchange fluctuations.

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In January 2016, we launched the SME Local Currency Programme, building on our longstanding experience in Central Asia, Eastern Europe and the Caucasus. In 2018, the programme signed 43 local currency operations equivalent to US$ 137.5 million (€120 million). Of these, 37 per cent were in Central Asia. As part of the programme, we also work with governments to improve local capital markets.

 

Helping SMEs get the know-how to grow their businesses

We enable SMEs to obtain business advice across all countries in the region. Working with local consultants and international advisers in areas such as strategy, financial management, marketing and quality management, we help SMEs improve their performance, become more competitive and grow.

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In 2018, we undertook a total of 549 advisory projects in Central Asia. Eight companies joined the Blue Ribbon programme, which offers a combination of business advice, technical assistance and financing to a carefully selected group of high-potential SMEs.

 

Supporting women and young entrepreneurs

The EBRD’s Women in Business programme promotes women entrepreneurship, enabling women-led SMEs to access the finance and know-how they need to grow. Launched in 2015, our Women in Business programme in Kazakhstan was the first of its kind in Central Asia.

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With funding from the EBRD Small Business Impact Fund (SBIF), we also launched the Women in Business programme in Tajikistan in 2017, extending the reach of this innovative and integrated product to a new market in Central Asia.

To date, we have provided over €47 million in finance to partner financial institutions in support of women-led SMEs in Kazakhstan and Tajikistan. Over 1,800 SMEs in these two countries got access to business advice, mentoring, our online diagnostic tool Business Lens and training.

 

Re-engaging with SMEs in Uzbekistan

Following a decade-long hold of EBRD operations in the country, we relaunched our activities in Uzbekistan starting with our advice for small businesses programme with funding from the EBRD Shareholder Special Fund and the EBRD Small Business Impact Fund.

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SMEs are playing an increasingly important role in Uzbekistan’s economy. SMEs generate nearly 60 per cent of the country’s GDP (up from less than 30 per cent a few years ago) and provide more than 78 per cent of total jobs. The EBRD has started offering a combination of finance and advice to promising small and medium-sized businesses with an ambition to expand, grow further and become market leaders.

A comprehensive approach to obtaining finance in Mongolia

In Mongolia, we continued to implement a programme funded by the EU's Asia Investment Facility (AIF), that includes credit lines, direct lending and co-financing/risk-sharing with local financial institutions, as well as business advice and policy dialogue activities . It aims to improve access to finance for Mongolian SMEs outside the extractive industries, thus helping to diversify the country’s resource-driven economy. The EU provided €11 million in donor funding which has attracted more than €77 million of additional financing. In total, 176 SMEs have received business advice from local and international experts.

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