The European Bank for Reconstruction and Development (EBRD) is boosting the small business sectors in Romania and Russia by making new credit lines available to local banks within both countries. The investments are a continuation of the EBRD’s broad response to the difficult economic environment throughout the countries in which it operates.
As such, the EBRD has granted a €100mn credit line to Romania’s Banca Comerciala Romana (BCR) for on-lending to small and medium-sized enterprises.
This follows a similar loan to bolster the small business sector in Romania made in December 2008. The financing agreement was signed on March 30, in Bucharest.
The EBRD credit line is dedicated to financing companies with a maximum of up to 249 employees, turnover of up to €50mn and balance sheet of maximum €43mn. Individual sub-loans in the framework of this credit line will be for no more than €1.5mn.
The BCR transaction comes in the context of the Joint International Financial Institutions (IFI) action plan, under which the EBRD joined forces with the World Bank Group and the European Investment Bank with the aim of investing a total of €24.5bn in SMEs via the banking sectors in Eastern Europe over the next two years.
In Russia, the EBRD has agreed on a five-year loan of US$150mn to VTB24, a subsidiary of Russia’s VTB banking group, in order to stimulate lending to Russia’s small businesses.
The EBRD’s funding will allow VTB24 to offer the longer maturities small business clients need and find it difficult to access in Russia, particularly since the onset of the crisis.
VTB24 will use the new funding to make loans of up to US$200,000 in cities with a population of less than 1 million.
This is the second EBRD loan to VTB24 targeted at this business segment. In December 2006, the EBRD raised a US$200mn loan for VTB24 to on-lend to Russian small businesses. Half of this sum was syndicated to international banks.
This new EBRD loan will be supported by an EU-funded training programme, known as the North Caucasus micro, small and medium-sized enterprises development initiative, aimed at increasing lending to small businesses in the North Caucasus, where VTB24 recently opened branches in the two regional capitals of Vladikavkaz and Nalchik.
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