The EBRD and the European Union are launching a new initiative to support micro and small enterprises (MSEs) gaining better access to finance with a first €10mn loan to Istrobanka, a mid-sized bank operating in the Slovak Republic.
The credit line, which will enable Istrobanka to increase its focus on micro and small enterprises, will be complemented by €750,000 from the European Commission for products development, staff training and to improve quality of services to MSEs.
Financial intermediation in the new EU member states is still low with an average ratio of domestic credit to GDP of 50% in 2004 compared to an average of 127% in the EU-15. Micro and small enterprises in particular are still facing significant credit constraints which limit their ability to invest and grow.
Under the EU/EBRD Preparatory Action Programme the EBRD will provide loans to banks and their leasing subsidiaries for on-lending to MSEs and offer risk-sharing arrangements to partner banks in the new EU countries. The EBRD will make funding of up to €40mn available and the European Commission will contribute €4mn in grants for technical assistance.
Under the new initiative, micro and small enterprises with less than 50 employees and a maximal annual turnover of €10mn will qualify for loans, the average size of which is expected to be around €25,000.
At the signing with Istrobanka, Alexander Auboeck, EBRD director for the Slovak Republic, said the new programme will be an important instrument for promoting financing for micro and small enterprises in the new financial environment following EU accession. By building confidence and enhancing capacities it will strengthen and deepen the MSE credit market.
Mag. Volker Pichler, chairman of the board and general manager of Istrobanka, said: “I am pleased to announce that Istrobanka is the first Slovak bank to offer local entrepreneurs fast and simple access to funds from this credit line. The new facility gives us a new opportunity to enhance and improve the financing of micro and small businesses and thus ensure our further growth in this market segment.”