The International Finance Corporation, the private sector arm of the World Bank Group, will provide a credit line of €5mn to Bulgaria’s Unionbank, Sofia. The loan is for on-lending to the country’s small and medium enterprises.

This is IFC’s second loan to Unionbank. In 2002, the corporation provided a credit line of US$5mn, also for on-lending to Bulgaria’s locally-owned small businesses to spearhead Unionbank’s SME lending activities.

Founded in 1994, Unionbank has developed a strong franchise by providing banking services to small and medium enterprises. Headquartered in the capital, Sofia, it has has 19 branches in key Bulgarian cities. As of May 31, 2005 , Unionbank’s assets and capital amounted to Lv425.9mn and Lv56.8mn, respectively.

IFC’s financing will help extend the maturity of Unionbank’s funding base and will be used as a source of term funding for smaller businesses. Lending in Bulgaria is heavily concentrated toward large corporates and the public sector. Small and medium businesses remain underserved, and the availability of term finance for such enterprises is scarce. IFC’s credit line is aimed at addressing this gap.

Khosrow Zamani, IFC’s director for Southern Europe and Central Asia, says: “Stimulating financial intermediation is of particular importance for IFC, especially to the small and medium enterprise sector, which is expected to drive Bulgaria’s future economic growth and generate significant employment. The investment is also a signal of IFC’s continued commitment to develop the private sector and work with locally-owned financial institutions.”

Ivan Radev, chairman of the management board and chief executive officer of Unionbank, says: “IFC’s investment will allow Unionbank to strengthen its position as a leader in banking services to small and medium enterprises. This credit line will also supplement our current activity with smaller businesses, helping us expand our range of credit products and improve our services for the benefit of our clients.”

Jyrki Koskelo, IFC’s director for global financial markets, notes: “This investment underscores IFC’s strategy for Bulgaria. We support financial intermediation to accelerate private sector development and improve access to finance for smaller local enterprises.”