The European Bank for Reconstruction and Development (EBRD has provided a US$200mn syndicated loan to enable Russia’s VTB 24 (Vneshtorgbank Retail Financial Services) to offer credit to micro, small and medium-sized enterprises across the country.

VTB 24 thus joins nine other banks in Russia and over 90 financial intermediaries in the EBRD’s countries of operation with which the bank is working to support microfinance.

The EBRD is taking up to US$150mn of this loan for its own account. The remaining US$50mn will be syndicated to international banks under an EBRD A/B loan structure.

Barclays Capital, the investment banking division of Barclays Bank, is acting as mandated lead arranger, bookrunner and underwriter of the US$50mn EBRD B loan.

This new partnership with VTB 24 will significantly increase the reach of the EBRD’s small business lending programme, adding 39  Russian regions or republics where EBRD-supported credits will be available for small enterprises to improve their businesses, thus helping to diversify the economy and creating sustainable growth from the ground up.

The main instrument of the EBRD’s efforts in this sector has been the Russia Small Business Fund (RSBF), thanks to whose funding Russian partner banks have been able to make nearly 350,000 small, micro and medium-sized loans for a cumulative total of US$3.3bn since the RSBF was launched with the backing of the G-7 and Switzerland in 1994.

EBRD President Jean Lemierre says supporting small businesses lies at the heart of the bank ‘s mission, but that much more work needed to be done to help create a thriving sector which could multiply jobs and give ordinary people the chance to improve their lives. In Russia alone, aggregate demand for this type of credit was estimated at US$20-30bn and the funding shortage was one of the biggest impediments to growth for small businesses.

VTB 24 president Mikhail Zadornov adds that small business lending was a priority for his bank and that working with the EBRD in this sphere was very important. “Our small business lending programme is one of the leading ones on the Russian market and our loan portfolio already exceeds US$700mn,” Zadornov says.

VTB 24’s expanding network gives the EBRD a means to reach out to large swathes of the population which have never benefited from a bank loan before. A key component of the Bank ‘s cooperation with VTB 24 will be a programme funded by the EU to train loan officers in small business lending techniques in the Russia’s Southern Federal District, part of a bid to foster the economic revival of the northern Caucasus.