Key challenges

Access to credit for SMEs became more challenging following the 2009 financial crisis as banks were struggling with high levels of non-performing loans – reaching between 10 and 20 per cent in most countries. As a result, SMEs were disproportionally affected. Even though most banking sectors are now in recovery and lending is picking up, the SME segment is still largely underserved despite banks now holding excess liquidity. Alternatives to bank financing – such as leasing, factoring or even equity – are severely underdeveloped, which means that many firms have to rely on internally generated cash or informal sources of finance.

Beyond access to finance, small and medium-sized firms could also benefit from a more favourable business environment. In many countries, informality is a major problem which results in an uneven playing field among firms and can hinder their growth and development.

Helping SMEs access finance and know-how

In 2018, we provided over €125 million through partner financial institutions and signed three direct financing deals with SME/SBI clients (of which two were co-financing), for a combined value of €22 million.

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For our direct and co-financing business in the region, we use our local presence and detailed understanding of these markets t. 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 allow them to stand out.

The EBRD also enables SMEs from different industries to obtain business advice. By working with local consultants and international advisers in areas such as strategy, financial management, information and communications technology (ICT), marketing, export, quality management and international certification, our clients improve their performance, become more competitive and grow. In total, we undertook 367 advisory projects in the region during 2018.

 

Western Balkans Enterprise Development Investment Facility

One of our partners is the Western Balkans Enterprise Development and Innovation Facility (WB EDIF), a platform that provides a comprehensive set of measures to foster economic development through improved access to finance and advisory services for SMEs.

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The platform consists of four different pillars designed to offer a mix of complementary financial and advisory instruments, addressing the entire range of SME needs in the region. The EBRD manages the Enterprise Expansion Fund (ENEF), which is one of the investment pillars of the WB EDIF and supports established SMEs in the Western Balkans and Croatia that have a high potential to grow and further expand. The EBRD has also invested in the Enterprise Innovation Fund for start-ups, and provides advisory services and policy dialogue support. In 2017, we led the creation of new EDIF programmes that provide finance and advisory support to SMEs under a newly created lending pillar.

Through the 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 2018, two additional transactions were signed in the region, bringing the number of ENEF investee companies to 11 in total. The ENEF is one of the largest such funds in the region with €48.5 million in investment. This is matched with EBRD direct resources to make the total close to €100 million.

 

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, which has been the first region to pilot the programme.

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Under Blue Ribbon, the EBRD 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. By the end of 2018, 13 companies from the region had joined Blue Ribbon – five of which had signed a loan with the EBRD, while four others are in the approvals process to receive financing.

 

Supporting agribusiness in Albania

The EBRD is committed to supporting access to finance for Albanian agribusiness. This is a vital sector of the economy which has historically been underserved by financial institutions, with loans to agribusiness accounting for only around 2 per cent of total lending to the economy.

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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 (PFIs). In addition to funds, the EBRD has made substantial technical assistance available to help introduce international best practice in the agribusiness sector and the financial institutions lending to it. To date, four out of five partner financial institutions are part of the AASF, with around €30 million of finance provided to these Albanian businesses until September 2018 under this facility. Some 47 agribusinesses have benefited from the technical assistance of the EBRD’s Advice for Small Businesses (ASB) since the start of the facility, with 16 having received financing from the partner banks.