The European Bank for Reconstruction and Development (EBRD), a multilateral development institution that fosters private sector investment in 27 countries in Central Europe and Central Asia, has supported the microfinance sector through its Micro, Small and Medium Business Program since its establishment in 1991. In the last two years alone, EBRD has provided over USD 1 billion – through debt, equity facilities and technical assistance – to microfinance programs throughout the region.
EBRD supports existing financial intermediaries for micro and small enterprise (MSE) lending in the region, and establishes “greenfield” microfinance banks, by providing finance and building capacity. Since its inception, EBRD has supported over 100 financial institutions to facilitate over EUR 17 billion (USD 22.7 billion) in loans to MSEs in 19 countries.
Support for microfinance is provided through several products including senior and subordinated debt, equity investments, and technical assistance in the form of staff training and advisory services on operations, borrower analysis, and integration of MSE lending into mainstream operations. In addition to working with microfinance banks and commercial banks with a strategic focus on MSE finance, the EBRD also works with non-bank MFIs to provide financing and assist in the transformation to deposit-taking entities. EBRD also supports MSE-focused equity funds and is looking into local currency financing, microleasing, risk-sharing and securitization, and credit scoring.
While EBRD provides a comprehensive list of its small business finance projects on its website, composite information is only available through the end of 2006 and includes small and medium enterprise (SME) projects. This article aims to provide a review of EBRD’s involvement in the microfinance sector, through MSE projects, from 2007 until the present.
EBRD has established several financial sector framework facilities to improve operational efficiency in the provision of products and increase the amount of financing available to partner financial institutions. The US/EBRD SME Finance Facility and the EU/EBRD SME Finance Facility provide financing for financial intermediaries throughout the region, while other frameworks focus on particular countries or regions.
The Russia Small Business Fund, established in 1994 with pledges from EBRD and donor countries, was the Bank’s first initiative in MSE finance, and the model has since been replicated in many of EBRD’s countries of operation. One of the oldest participants in the program, NBD Bank, raised its first purely international syndicated loan in December 2007, with USD 5 million from EBRD.
Under the Micro, Small and Medium Sized Enterprises Finance Framework for the Western Balkans and Croatia, EBRD has supported several MFIs in Bosnia and Herzegovina (BiH). This financing assists MFIs in BiH in the mandatory transition to the commercial sector following an August 2007 law which placed MFIs under the umbrella of banking supervision. To this end, EBRD provided two loans totaling EUR 7 million (USD 9.4 million) to Mikrokreditna Organizacija Sunrise, two loans totaling EUR 18 million (USD 24.1 million) to Mikrokreditna Fondacija Partner, and two loans totaling EUR 6 million (USD 8 million) to Mikrokreditna Organizacija MI-BOSPO. As part of this framework, the EBRD provided a loan of EUR 4 million (USD 5.4 million) to Mikrokreditna Organizacija Prizma, and a second loan of EUR 6 million (USD 8 million) to Mikrokreditna Organizacija EKI to expand lending activities and develop the organization. Also under the Micro, Small and Medium Sized Enterprises Finance Framework for the Western Balkans and Croatia, EBRD extended a second loan of EUR 4 million (USD 5.4 million) to the Kosovo Enterprise Programme (KEP), an MFI established by the Geneva-based NGO International Catholic Migration Commission. These loans were accompanied by approximately EUR 2.4 million (USD 3.2 million) in technical assistance from the EBRD and donor countries under the EBRD-Western Balkans Fund and the newly-created EBRD Shareholder Special Fund.
Several of EBRD’s investments fall under the Non-bank Microfinance Institutions Framework for Early Transition Countries (ETC), a program which aims to strengthen MFIs in Armenia, Azerbaijan, Georgia, the Kyrgyz Republic, Moldova, Mongolia, Tajikistan and Uzbekistan. Under this framework, EBRD provided USD 1 million loans to both IMON, an MFI in Tajikistan, and the Moldovan MFI Microinvest. EBRD also offered a USD 2 million guarantee for local currency loans for Bai Tushum, an MFI in the Kyrgyz Republic. Support for MSEs in Azerbaijan was bolstered through the provision of two loans to CredAgro and SOA Kredit, of USD 1 million and USD 2 million respectively. Also part of the EBRD’s Early Transition Countries Initiative (ETCI), the Bank arranged a USD 15 million syndicated loan with TaiwanICDF and Citigroup, of which EBRD offered USD 8 million, for ProCredit Bank Georgia (PCBG), a development-oriented commercial bank.
The Romania Micro Credit Facility was launched by EBRD, the EU and the Romanian government in 2006 and aims to provide lending to non-bank MFIs and commercial banks servicing the MSE sector in Romania. Through the program, EBRD provided a EUR 6 million (USD 8 million) syndicated loan to Banca Transilvania, the largest locally-owned Romanian bank, and a EUR 2.25 million (USD 3 million) loan to Express Finance. EBRD also made a EUR 15 million (USD 20.1 million) loan to ProCredit Bank Romania, a EUR 10 million (USD 13.4 million) loan to Casa de Economii si Consemnatiuni SA (CEC) to promote private-sector growth in rural areas, and extended a EUR 10 million (USD 13.4 million) credit line to Bank Leumi Romania (BLR). An additional EUR 2.3 million (USD 3.1 million) in technical assistance funds are provided alongside the credit facilities.
The Armenia Multi-bank Framework Facility II provides funds to local banks for lending to commercial customers in Armenia. Under this program, the EBRD established a partnership with Araratbank, a privately-owned Armenian bank previously called Haykap Bank, first extending a USD 5 million credit line and later acquiring a 25% plus one stake in Araratbank to support its plans for further expansion. To provide additional support to MSEs in Armenia, the EBRD provided a USD 10 million loan to VTB Bank Armenia, a EUR 5 million (USD 6.7 million) credit line to Anelik Bank, and a USD 17.5 million syndicated loan to ACBA Credit Agricole Bank for MSE lending. The EBRD also made a USD 3.2 million equity investment in Procredit Bank Armenia, alongside a senior loan of USD 7 million.
Through its Azeri Financial Sector Framework, the EBRD works with eight commercial banks and to date has lent over USD 80 million in support of MSEs in Azerbaijan. In the past two years, the EBRD extended a USD 1 million loan to Norwegian Microcredit LLC (Normicro), which has been operating in Azerbaijan since 1998, offered an USD 8 million credit line to Azerigazbank, and provided a USD 10 million credit line to Azerdemiryolbank earmarked for lending to local MSEs. The EBRD also provided two syndicated loans of USD 10 million and USD 5 million to AccessBank, formerly known as the Microfinance Bank of Azerbaijan.
Under the Tajikistan Micro and Small Enterprise Finance Facility (TMSEFF), established in 2003 and expanded in 2006, the EBRD provided a USD 4 million loan and technical assistance funds to The First MicroFinanceBank (FMFB) in Tajikistan.
In October 2007, EBRD, along with seven other shareholders, founded the Belarusian Bank for Small Business (BBSB). EBRD contributed EUR 2.5 million (USD 3.4 million) in founding equity, as well as offering a senior loan of EUR 10 million (USD 13.4 million). EBRD continued to invest in other commercial banks in Belarus, not only providing a USD 3 million loan to JSC Reconversion and Development Bank (RDB), but later acquiring a 25 percent plus one share stake in the private lender. EBRD also provided a USD 40 million senior loan for Belgazprombank and a USD 4 million loan for Belrosbank, controlled by Russia’s Rosbank, earmarked for making sub-loans to MSEs. In addition, EBRD offered a USD 15 million credit line and USD 17 million syndicated loan to Priorbank.
As part of a new financial sector framework in Mongolia, which aims to provide USD 50 million in financing to local commercial banks, leasing, insurance and consumer finance institutions, pension companies and non-bank micro finance institutions, the EBRD offered Khan Bank a USD 10 million loan.
Additional financing for the MSE sector includes a USD 5 million loan to Hamkor Bank, a private bank in Uzbekistan, a USD 1 million loan to Frontiers LLC, an MFI set up by the US-based non-profit ACDI/VOCA which works in the Kyrgyz Republic and Tajikistan, two loans of approximately USD 60 million to Bank Caspian in Kazakhstan, a USD 50 million loan to Bank Center Credit in Kazakhstan, a USD 20 million loan to ProCredit Ukraine, a USD 20 million loan to ProCredit Bulgaria, and a loan of USD 10 million to Bank Republic in Georgia, a subsidiary of Societe Generale, to support the development of MSEs.
The EBRD has also invested over USD 71 million to become a shareholder in the Currency Exchange Fund N.V., an investment fund sponsored by the Netherlands Development Finance Company (FMO). The EBRD will use the Fund’s services to offer synthetic local currency loans to clients in some of its less developed countries of operations.
In 2009, EBRD has continued its activity in the microfinance sector, with a EUR 3 million (USD 4 million) loan to Inicjatywa Mikro in Poland, a credit line of EUR 100 million (USD 134.2 million) granted to BCR in Romania, a USD 8 million (USD 10.7 million) equity investment in ProCredit Ukraine, and a USD 150 million senior loan for VTB-24 and a USD 75 million loan to Small Business Credit Bank (KMB) in Russia.
In total, EBRD has invested at least USD 1 billion in micro and small enterprise initiatives since 2007. In response to the global financial crisis, the Bank plans to increase its overall investments in 2009, which may to lead to even higher levels of investment in the microfinance sector in the coming years.
By Jaclyn Berfond, Research Assistant
List of EBRD Microfinance Activity:
- VTB Bank Armenia: USD 10 million
- Cascade Bank, Armenia: USD 5 million
- Anelik Bank, Armenia: USD 6.7 million
- ACBA Credit Agricole Bank, Armenia: USD 17.5 million
- Araratbank, Armenia: USD 5 million, 25 percent plus one stake
- Procredit Bank Armenia: USD 10.2 million
- Norwegian Microcredit LLC (Normicro), Azerbaijan: USD 1 million
- Azerigazbank: Azerbaijan: USD 8 million
- Azerdemiryolbank, Azerbaijan: USD 10 million
- AccessBank, Azerbaijan: USD 15 million
- CredAgro, Azerbaijan: USD 1 million
- SOA Kredit, Azerbaijan: USD 2 million
- Belarusian Bank for Small Business (BBSB): USD 16.6 million
- JSC Reconversion and Development Bank (RDB), Belarus: USD 3 million, 25 percent plus one
- Belgazprombank, Belarus: USD 40 million
- Belrosbank, Belarus: USD 4 million
- Priorbank, Belarus: USD 32 million
- Mikrokreditna Organizacija Sunrise, BiH: USD 9.4 million
- Mikrokreditna Fondacija Partner, BiH: USD 24.1 million
- Mikrokreditna Organizacija MI-BOSPO, BiH: USD 8 million
- Mikrokreditna Organizacija Prizma, BiH: USD 5.4 million
- Mikrokreditna organizacija EKI, BiH: USD 8 million
- ProCredit Bulgaria, USD 20 million
- Bank Republic in Georgia: USD 10 million
- ProCredit Bank Georgia (PCBG): USD 8 million
- Bank Caspian, Kazakhstan: USD 120 million
- Bank Center Credit, Kazakhstan: USD 50 million
- Kosovo Enterprise Programme (KEP): USD 5.4 million
- Frontiers LLC, Kyrgyz Republic and Tajikistan: USD 1 million
- Bai Tushum, Kyrgyz Republic: USD 2 million
- Microinvest, Moldova: USD 1 million
- Khan Bank, Mongolia:USD 10 million loan.
- Currency Exchange Fund N.V., Netherlands: USD 71 million
- Inicjatywa Mikro, Poland: USD 4 million
- BCR, Romania: USD 134.2 million
- Banca Transilvania, Romania: USD 8 million
- Express Finance, Romania: USD 3 million
- ProCredit Bank Romania: USD 20.1 million
- Casa de Economii si Consemnatiuni SA (CEC), Romania: USD 13.4 million
- Bank Leumi Romania (BLR): USD 13.4 million
- VTB-24, Russia: USD 150 million
- Small Business Credit Bank (KMB), Russia: USD 75 million
- NBD Bank, Russia: USD 5 million
- IMON, Tajikistan: USD 1 million
- The First MicroFinanceBank, Tajikistan: USD 4 million
- ProCredit Ukraine, USD 28 million
- Hamkor Bank, Uzbekistan: USD 5 million
- Technical Assistance: USD 6.3 million
Additional Resources:
EBRD: Micro, Small and Medium Business Page
EBRD: Small Business Fact Sheet
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