To bridge a gap in finance in rural areas of the EU accession countries, the EU and the EBRD are setting up a Eu60mn programme under their joint small and medium-sized finance facility. The EBRD is providing Eu50mn for loans to bank and leasing companies to finance SMEs in rural areas, while the European Commission is contributing Eu10mn for training and institution building.
The inability of many agricultural businesses and rural enterprises to obtain adequate short or long-term finance is a key barrier to economic development. The new ‘Rural Sub-Window’ should go some way towards addressing the problem. It will extend loans to local banks, which will in turn make loans to agricultural and other small enterprises that are based in rural areas. The EBRD’s objective is to support the rural economy by financing agriculture as well as alternative means of employment. Available finance will be short-term working capital loans, medium-term investment loans and leases for equipment finance.
Kurt Geiger, EBRD Director of Financial Institutions, says the rural sub-window will enable the bank to build on the successful experience of the SME Facility in combining EBRD finance with institution building for local intermediaries, supported by the EU. Hans Christian Jacobsen, EBRD Director of Agribusiness, adds that the new facility will provide incentives to local participating banks and leasing companies to finance small and medium enterprises in the rural sector where transition still lags behind and where the agriculture sector plays an important role. Financing of rural areas will create jobs and facilitate the transition from agriculture to industry and services, Jacobsen points out.
The EU/EBRD SME Finance Facility, established in 1999, is a major provider of funds to SMEs in Bulgaria, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovak Republic and Slovenia through commercial banks and leasing companies.
More than 26,500 subloans and leases amounting to more than Eu610mn have been disbursed. Together with the Rural Sub-Window the EBRD board approved a fifth extension of the facility of up to Eu150mn. The EC has committed Eu130mn in grant financing and for technical assistance since the facility’s launch in 1999.
The EU’s contribution comes under the Phare programme, one of the instruments financed by the European Commission to assist the candidate countries of central and eastern Europe in their preparations for joining the European Union.
In 2000-06, Phare is providing some Eu11bn of co-financing for projects in the EU accession countries.
For further information, visit http://europa.eu.int/comm/enlargement/