The European Bank for Reconstruction and Development (EBRD), pursuing its goal of stimulating grass roots economic growth in Russia, has lent US$20mn to two Moscow-based banks so that their small and medium-sized business clients can gain much needed access to longer-term investment funding.

The Credit Bank of Moscow, which operates in the capital and in the surrounding region, received a five-year loan of US$10mn, while a four-year loan of another US$10mn has gone to the Moscow-registered Transcapitalbank, which has always had a strong base in the Perm region of the Urals east of Moscow and is expanding its regional branch network even further.

These credit lines will increase the availability of much needed long-term finance to SMEs, both in Moscow and in the regions, and will help the two banks compete in this segment with state-owned and larger private banks, says Jean-Marc Peterschmitt, director of bank debt at the EBRD.

Last year in the same line of lending, the EBRD provided 10 Russian banks a total of US$131mn earmarked for on-lending to medium, small, and in some cases micro, businesses. Over half of this was targeted at banks whose client base is outside Moscow and St Petersburg.

This targeted lending runs parallel to the efforts of the EBRD’s Russia Small Business Fund, thanks to whose money 246,000 small and micro Russian businesses have received loans totaling US$2bn since the fund was launched in 1994 with money provided in part by the G7 group of leading industrialised nations and Switzerland.

The total lent to or invested in the Russian financial sector by the EBRD in 2004 was €374mn. Overall EBRD commitments to Russia last year amounted to €1.24bn.

The EBRD loan to Transcapitalbank comes with extra financing from the European Union which is providing up to €300,000 under its Russian Regional Bank Credit Strengthening and Institutional Building Programme to bolster various aspects of the bank’s business, including its corporate governance.