The environment for SMEs in Eastern Europe and the Caucasus has been challenging. On average, SMEs have experienced some of the highest levels of credit constraints1 in the EBRD regions, in particular Azerbaijan and Ukraine where around three quarters of SMEs needing a bank loan could not access one, according to the latest BEEPS V survey.
SMEs in eastern Europe and the Caucasus could benefit from improvements to business standards more generally.
The share of SMEs with international certification is low, at around 15 per cent (compared to 30 per cent in central and south-eastern Europe), which is an important obstacle in exporting, for example, to the EU. The difficult environment is also reflected in a relatively low contribution of SMEs to GDP – ranging from only 3 to 27 per cent in Armenia, Azerbaijan, Belarus and Georgia, compared to close to 60 per cent in the EU.
Helping SMEs access finance and know-how
In 2018, we provided €203 million for on-lending through partner financial institutions and signed 21 direct and Risk Sharing Facility (RSF) financing deals with SME clients, for a combined finance value of €85 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 via first-loss instruments also allows us to do more for SMEs. In addition, we provided assistance in such areas as corporate governance, enhanced financial management and other standards to help companies grow.Expand to read more
Access to finance in local currency is also important. It protects SMEs from foreign exchange fluctuations that can make it difficult to repay their loans. In January 2016, we launched the SME Local Currency Programme, building on our long-standing experience in Central Asia and eastern Europe and the Caucasus. In 2018, we signed first local currency loans in Azerbaijan and Belarus – where 23 local currency loans equivalent to US$ 88.9 million were signed in both countries that year.
With delivery through local and international consultants, we provide SMEs with advice in such areas as strategy, financial management, marketing and quality management – so that these enterprises can improve their operations and performance, become more competitive and grow. In 2018, we undertook 518 advisory projects in the region.
We also work to build the capacity of competent consultants, as a competitive market requires a wide variety of advisory services and qualified consultants offering business advice. In 2018, we trained over 270 consultants in the region. In some countries such as Belarus, we narrowed our focus to expanding the supply of advisory services available outside the major cities and used innovative training technologies to cover and train more regional consultants.
Preparing SMEs to trade with the EU
The EBRD has partnered with the European Union (EU) under the EU4Business initiative to provide better support to local SMEs through both finance and business advice. In 2018, we continued to build the capacity of a network of 15 business support centres across Ukraine, created to increase SME awareness and to provide contact points for small businesses throughout the country. We also helped launch Ukraine’s export brand and pilot it at the China International Import Exhibition 2018.Expand to read more
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.
Under the Blue Ribbon programme, we offer market leaders in the region advice and financing as well as networking opportunities that help them to grow and develop. In Ukraine, our first Blue Ribbon client was acquired by an Austrian strategic investor and so becomes the first alumni to leave the programme through a merger and acquisition transaction event.
Promoting women’s entrepreneurship
The EBRD’s Women in Business programme promotes 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 programme covers 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 over 1,000 such businesses to access mentoring, training and networking opportunities, while 325 women analysed their businesses using our online diagnostic Business Lens.
In 2018, we continued organising joint seminars with our partner financial institutions to further promote financial assistance to women-led SMEs. In Moldova, we signed a new donor agreement with Sweden to further boost the EBRD’s Women in Business programme. We also organised a conference on innovation in business which brought together more than 100 businesswomen, along with national and international experts, to share their insights on digital and financial innovations.