Small municipalities across Romania will benefit from more access to finance following a Lei72.2mn (€20mn) loan from the EBRD to Alpha Bank Romania (ABR). It is the first time the bank is lending in local currency.

The loan will enable ABR to on-lend long-term loans of up to 15 years to municipalities with fewer than 150,000 inhabitants in projects that improve, for example, roads, sewerage, district heating and urban transport. Small municipalities are underserved by the local Romanian banks, especially with longer-term loans.

Jean-Marc Peterschmitt, EBRD director for bank lending, says municipal lending is rapidly growing in Romania, but the financial resources available locally for the sector are very limited. The EBRD, working with innovative banks like ABR, is helping to fill that gap to make crucial long-term loans available to small municipalities, says Peterschmitt.

Furthermore, this loan should act as a demonstration effect to other local banks of the benefits of successfully lending to financially stable small local towns and cities, he adds.

The loan is provided under a €175mn EU/EBRD Municipal Finance Facility, an EBRD and EC initiative to stimulate commercial bank lending to small and medium-sized municipalities in the EU accession countries.
The facility aims to address the chronic shortage of long-term finance available to small cities and towns. The European Union, through the Phare Programme, is also providing technical cooperation funds to help ABR kick-start the project and help, for example, to promote staff training and establish modern credit procedures. A portion of the funds will also help municipalities to start projects.

Jonathan Scheele, head of the delegation of the European Commission to Romania, says: “Local municipalities are and will be in need of co-financing for the pre-accession and future structural funds. As their local budgets are limited, loan arrangements could be one solution to this issue. The best example is the Samtid programme, which helps the rehabilitation of water supply systems in small towns. The EBRD and European Investment Bank have been very active in this programme, co-financing 50% of each investment project.”

Established in 1994, ABR is one of Romania’s largest private banks. With its headquarters in Bucharest, the bank reaches over 250,000 clients through a network of 26 units across Romania.